­Established track record of operations and experienced management
VTPL has an established track record in the iron and steel industry, supported by the extensive experience of its management team, which has been active in the sector for more than a decade. Before incorporating VTPL, the directors were engaged in diverse businesses including cold storage, ceramic manufacturing, building construction materials, and dyes and intermediates in Gujarat, which provided them with broad industrial exposure and strengthened their operational capabilities. This background has enabled the company to build long-standing relationships with clients and dealers, ensuring stability and repeat business.
Acuité believes that VTPL will continue to benefit from its experienced leadership, diversified business understanding and strong dealer network to maintain a competitive position in the iron and steel industry.

Recovery in profitability despite subdued revenues
In FY24, the operating margins declined to 0.04% (2.09% in FY23) leading to negative PAT, owing to the sharp decline in the realisation price of steel and inability to pass through the high cost procured raw material. However, in FY2025, despite lower operating revenue, the operating margin recovered and improved to 2.68 percent. Further, the company has reported a revenue of Rs. 463.06 Cr. for 7M FY2026 at a margin of 2.80 percent.
Going forward, sustenance of profitability margins will be a key rating sensitivity.

Moderate financial risk profile
The financial risk profile of VTPL is marked by moderate networth, low gearing and adequate debt coverage metrics. The tangible networth stood at Rs. 89.32 Cr. on March 31, 2025 post profit accretion. The gearing improved significantly and stood below unity at 0.68 times in FY2025 from 1.01 times in FY2024 on account of decline in the overall debt levels of the company. The Debt-EBITDA declined to 2.57 times in FY2025 from its high of 21.96 times in FY2024, majorly on account of improvement in the EBITDA levels of the company. Further, the TOL/TNW levels also stood improved at 0.89 times in FY2025 as against 1.15 times in FY2024. The coverage indicators stand adequate above unity with interest coverage ratio (ICR) at 3.08 times and debt service coverage ratio (DSCR) at 1.46 times in FY2025.
 The financial risk profile is expected to remain on similar levels, on account of no debt funded capex plans over the medium term.

Efficient working capital operations
The efficient operations of VTPL are marked by low gross current assets (GCA) of 38 days in FY2025. The inventory days stood at 18 day and receivable period stood at 15 days in FY2025 as against 13 days and 15 days respectively in FY2024. The creditor days stood at 5 days in FY2025 as against 4 days in the previous year.

The operations of the company are expected to remain efficient over the medium term.

Intense competition and inherent cyclicality in the steel industry
The company is operating in competitive and fragmented nature of industry in steel producing industry. There are several players who are engaged in the manufacturing business in organized and unorganized sector. Moreover, the profit margins and sales of the company remain exposed to inherent cyclicality in the steel industry which led to decline in the FY2025  revenue by ~14 percent to Rs. 835.18 Cr. from Rs. 972.24 Cr. in FY2024, due to downtrend in realization prices and decline in the sales volumes owing to subdued demand.

Susceptibility of profitability to volatility in raw material and realization prices
The profitability of the domestic steel industry remains highly vulnerable to fluctuations in raw material costs and realization prices. Steel producers are significantly dependent on the availability and pricing of key inputs such as iron ore, coking coal, and scrap, much of which is imported and exposed to global commodity cycles and currency movements. Any sharp increase in input costs without a corresponding rise in steel prices directly compresses margins, while sudden declines in realization prices can erode profitability even when production volumes remain stable. Seasonal demand patterns, government infrastructure spending, and international trade dynamics further add to volatility, making it challenging for companies to maintain profitability margins.