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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 26.68 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 3.32 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 30.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed 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.30.00 Cr bank facilities of Anindita Steels Limited (ASL). The outlook remains ‘Stable’.
Rationale for rating reaffirmation The rating reaffirmation factors in the stable business risk profile of the company marked by steady operating income of Rs. Rs.299.94 Cr in FY2023 (Provisional) as against Rs.252.19 Cr in FY2022. The rating also considers the long standing operations of ASL in the iron and steel industry backed by the extensively experienced management and the efficient working capital operations. The rating further takes into account the above average financial risk profile marked by low gearing at 0.44 times as on March 31, 2023 (Provisional) and healthy interest coverage ratio at 3.63 in FY2023 (Provisional). However, these strengths are, offset by the moderate profitability margins of ASL and the exposure to the highly competitive industry. |
| About the Company |
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Incorporated in 1995, Anindita Steels Limited (ASL) is based in Jharkhand and is managed by Mr. Deepak Rungta, Mrs. Sonakshi Rungta and Mr. Firoz Abdi. ASL is engaged in manufacturing of Sponge Iron. The company has a production capacity of 1,20,000 MTPA which includes 4 kilns each having a capacity of 30,000 MTPA.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of ASL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| Established track record of operations along with experienced management
ASL has a long track record of operations of over 15 years. Moreover, the Directors, Mr. Deepak Kumar Rungta, Mrs. Sonakshi Rungta and Mr. Firoz Abdi have an extensive experience of more than two decades in the iron & steel industry. Acuité believes that the experienced management and the long standing operations of the company will continue to benefit in establishing and maintaining healthy clientele relationships. Stable business risk profile aided by proximity to raw material sources The company achieved steady revenues over the years. The operating income increased to Rs.299.94 Cr in FY2023 (Provisional) as compared to Rs.252.19 Cr in FY2022 and Rs.174.69 Cr in FY2021. The scale of operations in FY2023 is supported by the favourable demand scenario and the increased capacity utilisation over the same period. Further, the company achieved Rs.52.84 Cr till May, 2023 (Provisional). Moreover, the company is located in Jharkhand, which is in close proximity to various steel plants and various producers and dealers of its main raw materials (i.e. iron ore, coal and dolomite). It is well connected through road and rail transport that ensures easy transportation of raw materials and finished goods. Acuité believes that, going forward, improvement in the capacity utilisation supported by steady demand for sponge iron will continue to support the operating performance of the company. Above average financial risk profile The financial risk profile of the company is above average marked by moderate net worth, low gearing and comfortable debt protection metrics. The net worth of the company slightly rose to Rs.49.06 Cr as on 31 March, 2023 (Provisional) as compared to Rs.45.61 Cr as on 31 March 2022 due to accretion of reserves. The gearing of the company improved to 0.44 times as on March 31, 2023 (Provisional) when compared to 0.63 times as on March 31, 2022 owing to reduction in the debt burden. Further, the Interest Coverage Ratio (ICR) stood healthy at 3.63 times in FY2023 (Provisional) as against 2.82 times in FY2022. The debt service coverage ratio (DSCR) stood moderate at 1.91 times in FY2023 (Provisional) as compared to 2.01 times in the previous year. The Net Cash Accruals to total debt (NCA/TD) stood moderate at 0.30 times in FY2023 (Provisional) and 0.19 times the previous year. Acuité believes the financial risk profile of the company will improve further owing to the gradually improving cash accruals and no major debt funded capex plan over the medium term. |
| Weaknesses |
| Moderate profitability margins
The PAT margin of the company stood at a moderate level of 1.15 per cent in FY2023 (Provisional) as against 1.01 per cent in FY2022. However, the operating profitability margin dipped to 3.53 per cent in FY2023 (Provisional) from 4.02 per cent in FY2022 due to the elevated cost of coking coal. Acuité believes that, going forward, improvement in the profitability margins will be key monitorable. Highly competitive and fragmented industry ASL’s profitability is susceptible to volatility in raw material prices. The company operates in highly fragmented and competitive industry which consists of large number of organised and un-organised players. Prospects of the steel industry are strongly co-related to economic cycles. Demand for steel is sensitive to trends of particular industries, viz, automotive, construction, infrastructure and consumer durables, which are the key consumers of steel products. These key user industries in turn depend on various macroeconomic factors, such as consumer confidence, employment rates, interest rates and inflation rates in the economies in which they sell their products. When downturns occur in these economies or sectors, the steel industry may witness a decline in demand. |
| Rating Sensitivities |
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| Material covenants |
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None
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| Liquidity Position: Adequate |
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The liquidity position of the company stood adequate marked by comfortable net cash accruals of Rs.6.40 Cr in FY2023 (Provisional) as against long term debt repayment of Rs.1.95 Cr over the same period. Moreover, the fund based bank limit utilisation stood moderately comfortable at ~66 per cent for the six months ended April, 2023. The current ratio of the company stood comfortable at 2.19 times in FY2023 (Provisional). The cash and bank balances stood at Rs.0.22 Cr in FY2023 (Provisional). Moreover, the efficient working capital management of the company is marked by GCA days of 92 days in FY2023 (Provisional) as compared to 113 days in FY2022.
Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of gradually improving cash accruals against low debt repayment burden over the medium term. |
| Outlook: Stable |
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Acuité believes ASL will continue to benefit over the medium term backed by its experienced management, established track record of operations and stable business risk profile. The outlook may be revised to ‘Positive’ in case the company maintains strong growth in revenues and profit margins while maintaining its working capital management and financial risk profile. Conversely, the outlook may be revised to ‘Negative’ in case of significant deterioration in profitability and operating revenue leading to deterioration in its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 299.94 | 252.19 |
| PAT | Rs. Cr. | 3.45 | 2.55 |
| PAT Margin | (%) | 1.15 | 1.01 |
| Total Debt/Tangible Net Worth | Times | 0.44 | 0.63 |
| PBDIT/Interest | Times | 3.63 | 2.82 |
| Status of non-cooperation with previous CRA (if applicable) |
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Infomerics, vide its press release dated April 19, 2023 had denoted the rating of Anindita Steels Limited as 'IVR B+/Negative/A4; ISSUER NOT COOPERATING’.
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| Any other information |
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None
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| 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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