VIS assigns ‘BBB-/A-2’ initial ratings to Agro Steel Industry

Apr 10, 2020: VIS Credit Rating Company Limited has assigned initial entity ratings of triple B Minus/A-Two to Agro Steel Industry.

The medium to long-term rating of ‘BBB-’ denotes adequate credit quality with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. Outlook on the assigned rating is stable, said release on Friday.

ASI is a small-sized manufacturing and trading concern; managed and owned by family members. The ratings assigned take into account sustained profitability, supported by a steady demand of high carbon steel products in the local market. Sustained margins, adequate liquidity and low leverage indicators provide support to the financial profile and are among the key ratings drivers.

However, the ratings are constrained by limited scale of operations, presence of the firm in a sector characterized by steady, though limited demand, and small equity base. Furthermore, partnership structure implies additional element of volatility in the capital structure. The ratings also incorporate possible impact of currency fluctuation on the prices of imported raw material and any adverse changes in regulatory duties.

With the advent of coronavirus pandemic, leading to demand compression emerging from ongoing global crisis and continued lockdowns, has impacted various industries, while the full impact of which is yet uncertain. Hence, the ratings are dependent upon maintenance of financial parameters at an adequate level and any adverse change in the same will trigger a rating review.

APP