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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 17.00 | - | ACUITE A3 | Reaffirmed & Withdrawn |
| Bank Loan Ratings | 18.00 | ACUITE BBB- | Reaffirmed & Withdrawn | - |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 35.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed & withdrawn the long term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.35.00 Cr bank facilities of Swastika Steel and Allied Products Private Limited. The rating has been withdrawn on Acuite's policy of withdrawal of ratings. |
| About the Company |
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Incorporated in 2011, Swastika Steel and Allied Products Private Limited (SSAPPL), a West Bengal based company is engaged in manufacturing of structural steel, angles, channels wire rods etc. Currently, the company is headed by Mr Shiv Kumar Sharda and Mr. Sushil Kumar Sharda, who are promoter directors. The promoters had started their business activities in the form of a partnership firm in 1959 and the constitution was changed in 2011 under its current name. The company is an approved vendor for Power Grid Corporation of India Limited, NTPC Ltd and other electricity boards
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of SSAPPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
Established in 2011, Swastika Steel and Allied Products Private Limited has a long operational track record of around a decade in manufacturing of structural steel, angles, channels wire rods. The key promoters, Mr Shiv Kumar Sharda and Mr Sushil Kumar Sharda have been in the steel industry for over six decades through their erstwhile partnership concern. The promoters have also extended funding support to the company in the form of unsecured loans. Acuité derives comfort from the long experience of the promoters.
The revenue of the company stood healthy at Rs 155.15 Cr in FY2022 as compared to Rs 101.64 Cr in the previous year. The increase in the top line is on account of improved export and domestic business backed by an uptick in the steel demand and price escalation on steel products in FY2022. The revenue till first six months of FY2023 stood at Rs 83.52 Cr (Prov), out which exports accounts for around Rs 4.00 Cr. The operating margin of the company increased marginally to 5.14 Per cent in FY2022 as against 4.89 per cent in FY2021. Acuite believes that going forward, operating margin would remain under pressure due to export duty imposed by the government.
The company’s above average financial risk profile is marked by modest networth, comfortable gearing and moderate debt protection metrics. The tangible net worth of the company improved to Rs29.27 Cr as on March 31,2022 from Rs.24.28 Cr as on March 31, 2021 due to accretion to reserves. Acuité has considered unsecured loans to the tune of Rs.16.61 Cr as on March 31,2022 as part of networth as these loans are subordinated to bank debt. Gearing of the company stood comfortable at 0.79 times as on March 31,2022 as against 0.35 times as on March 31,2021. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood comfortable at 1.06 times as on March 31,2022 as against 0.59 times as on March 31,2021. The moderate debt protection metrics of the company is marked by Interest Coverage Ratio at 1.91 times as on March 31, 2022 and Debt Service Coverage Ratio at 1.71 times as on March 31, 2021. Net Cash Accruals/Total Debt (NCA/TD) stood comfortable at 0.13 times as on March 31,2022. Acuité believes that going forward the financial risk profile of the company will remain in similar level backed by steady accruals and no major debt funded capex plans.
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| Weaknesses |
The working capital intensive nature of operations of the company is marked by Gross Current Assets (GCA) of 134 days in FY2022 as compared to 131 days in FY2021. The high GCA days are mainly on account of high level of current assets due to balance with government authorities. The debtor period stood comfortable at 58 days as on 31st March 2022 as compared to 55 days as on 31st March 2021. Further, the inventory days stood at 62 days as on 31st March 2022 as compared to 68 days as on 31st March 2021. Acuité believes that the working capital operations of the firm will remain almost at the same levels as evident from efficient collection mechanism and moderate inventory levels over the medium term.
The industry remained heavily fragmented and unorganized. The company is exposed to intense competitive pressures from large number of organized and unorganized players along with its exposure to inherent cyclical nature of the steel industry. Additionally, prices of raw materials and products are highly volatile in nature.
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| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
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The company’s liquidity is adequate marked by net cash accruals of Rs.2.90 Cr as on March 31,2022 as against no debt repayment. The current ratio stood comfortable at 2.02 times as on March 31,2022 as compared to 2.56 times as on March 31,2021. The fund-based limit remains utilised at 58 per cent over the eight months ended August, 2022. The company has neither availed loan moratorium, nor any additional covid loan. The cash and bank balances of the company stood at Rs.0.13 Cr as on March 31, 2022 as compared to Rs.0.21 Cr as on March 31,2021. However, the intensve working capital nature of operations of the company is marked by high Gross Current Assets (GCA) of 134 days as on March 31, 2022 as compared to 131 days as on March 31, 2021. Acuité believes that going forward the company will maintain adequate liquidity position due to steady accruals and no debt repayment obligations.
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| Outlook: Stable |
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Acuité believes the company’s outlook will remain 'stable' over the medium term on account of experience of the promoters, long track record of operations and healthy relationship with reputed customers and suppliers. The outlook may be revised to 'Positive' in case the company continues to register consistent growth in revenues while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of a decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile and liquidity position or deterioration in its working capital cycle
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 155.15 | 101.64 |
| PAT | Rs. Cr. | 2.06 | 1.30 |
| PAT Margin | (%) | 1.33 | 1.28 |
| Total Debt/Tangible Net Worth | Times | 0.79 | 0.35 |
| PBDIT/Interest | Times | 1.91 | 1.70 |
| Status of non-cooperation with previous CRA (if applicable) |
| CRISIL, vide its press release dated June 20, 2022 had denoted the rating of Swastika Steel & Allied Products Private Limited as 'CRISIL B/Stable/A4; ISSUER NOT COOPERATING’ |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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