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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 19.50 | ACUITE BB+ | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 0.50 | - | Not Applicable | Withdrawn |
| Total Outstanding | 0.00 | - | - |
| Total Withdrawn | 20.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed and withdrawn the long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.19.50 crore bank facilities of Dinesh Brothers Private Limited (DBPL).
Acuité has withdrawn its proposed short term rating on the Rs.0.50 crore of bank facilities of Dinesh Brothers Private Limited (DBPL) without assigning any rating as it is a proposed facility. The rating has been withdrawn on Acuite's policy of withdrawal of rating as applicable to the respective facility / instrument. The rating has been withdrawn on account of the request received from the company, and the No Objection Certificate received from the banker. Rationale for the reaffirmation The rating on group considers the healthy Net worth of the group, The rating also draws comfort from the experienced promoters and the group’s long track record in the industry. These strengths are however, offset by the working capital-intensive in nature of operations along with the intense competition and inherent cyclical nature of the steel industry. |
| About the Company |
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Incorporated in 1961, Dinesh Brothers Private Limited (DBPL), is a Kolkata based company involved in manufacturing, trading and exports of manhole covers, manhole sets, C.I castings, D.I castings etc. Over 90 percent of its sales are exports. In January 2021, the company has commenced its manufacturing unit of D.I. castings with an installed capacity of 12,000 MTPA. In FY22, the company generated around 35 per cent of its revenue from manufacturing and remaining from trading sales. Mr. Gaurav Seksaria and Mr. Dinesh Kumar Seksaria are the directors of the company.
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| About the Group |
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Incorporated in 1958, Govind Steel Company Limited (GSCL) is a Kolkata based company involved in manufacturing of manhole covers, manhole sets, C. I. castings, D. I. castings etc. Promoted by Mr. Dinesh Kumar Seksaria, its management includes Mr. Gaurav Seksaria and Mr. Chatar Singh Kathotia. The plant has an installed capacity of 18,000 tons per annum of foundry (C.I Castings) and 6,000 tons per annum of ductile furnaces (D.I Castings) in Rishra, West Bengal. GSCL sells around 60 per cent of its products to the local market and the remaining is exported.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profiles of Dinesh Brothers Private Limited (DBPL) and Govind Steel Company Limited (GSCL), hereby referred to as the Govind group, on account of common management, same line of business and strong operational linkages between the entities.
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| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations
The group is led by the second and third generation directors, Mr. Dinesh Kumar Seksaria, Mr. Chatar Singh Kathotia and Mr. Gaurav Seksaria, who hold experience of more than two decades in the iron and steel casting industry. The extensive experience of the promoters is reflected through the established relationship with its customers and suppliers. The key customers of the company have no major concentration in revenues. On the back of the stable and repeat orders by the various customers, the group has set up its second unit for manufacturing with a modern foundry in Jan’21. Acuité believes that going forward the vast experience of the management and long tracks record of operations will continue to support the business. Average financial risk profile The group has an average financial risk profile is marked by healthy net worth, comfortable gearing and healthy debt protection metrics. The tangible net worth has increased to Rs. 186.44 Cr. as on FY2024 (Prov.) as compared to Rs.284.07 Cr. as on FY2023 due to accretion of reserves. The gearing of the group stood at 0.86 times as on FY2024 (Prov.) as compared to 1.31 times as on FY2023. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood low at 1.00 times as on FY2024 (Prov.) as against 1.82 times as on FY2023. The debt protection metrics of the group marked by comfortable Interest Coverage Ratio (ICR) at Nil as on FY2024 (Prov.) as compared to 3.31 times as on FY2023 and Debt Service Coverage Ratio at 2.38 times as on FY2024 (Prov.) as compared to 1.16 times as on FY2023. Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.18 times as on FY2024 (Prov.). Acuité believes that financial risk profile is expected to be remain average over the medium term in absence of major debt funded capex plans. |
| Weaknesses |
| Working capital intensive nature of operations
The working capital-intensive nature of operations of the group is marked by high Gross Current Asset days (GCA) of 205 days as on FY2024 (Prov.) as compared to 136 days of FY2023 due to significantly changes in high other current asset. However, the debtor days stood comfortable at 35 days as on FY2024 (Prov.) as compared to 43 days as on FY2023. The inventory period stood relatively low at 62 days as on FY2024 (Prov.) as compared to 70 days FY2023 respectively. Acuité believes that the working capital management of KAIIPL’s will remain intensive given the nature of the industry. Susceptibility of profit margins to prices of raw material Majority of raw material, i.e., MS scrap and pig iron are sourced locally. During the past three years, raw material cost remained the major cost driver for the group. The group has witnessed a drop in profitability margins the past. Accordingly, any adverse movement in prices of raw materials impacting the margins and thereby deterioration in financial risk profile of the group. |
| Rating Sensitivities |
| Not Applicable |
| Liquidity Position |
| Adequate |
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The group’s liquidity position is adequate marked by net cash accruals of Rs.13.38 Cr. as on FY2024 (Prov.) as against Rs. 5.61 Cr. long-term debt repayment during the same period. The current ratio stood at 8.52 times as on FY2024 (Prov.), as compared to 1.30 times as on FY2023. The cash and bank balances stood at Rs. 0.24 Cr. FY2024 (Prov.). However, the working capital-intensive nature of operations of the group is marked by Gross Current Assets (GCA) of 205 days as on FY2024 (Prov.) as compared to 136 days as on FY2023. Acuité believes that going forward the liquidity position of the group will remain adequate due to the improving net cash accruals.
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| Outlook: Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 186.44 | 284.07 |
| PAT | Rs. Cr. | 10.50 | 6.78 |
| PAT Margin | (%) | 5.63 | 2.39 |
| Total Debt/Tangible Net Worth | Times | 0.86 | 1.31 |
| PBDIT/Interest | Times | 0.00 | 3.31 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.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 http://www.acuite.in
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||
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