­Long experience of the promoters and established relationship with customers & suppliers-
The promoter directors of the company Mr. Joginder Singh and Mrs. Kamaljit Kaur have been engaged in the ferro alloy industry over a decade. This has helped the company in establishing relationship with its suppliers and customers which helps in bagging advance orders. Acuité believes  that  the promoters’ extensive understanding and expertise of the business and healthy relations with customers and suppliers will continue to support the business going forward.

Healthy scale of operation coupled with healthy profitability margin-
The revenue of the company stood healthy at Rs.195.13 crore in FY2022 (Prov.) as compared to Rs.100.57 crore in the previous year. This improvement in revenue is on account of increase in average realization per unit during the period along with increase in volume sales. Going forward, Acuité believes that maintaining this growth momentum would be a key credit monitorable.

The operating profitability margin of the company stood healthy at 17.47 per cent in FY2022 (Prov.) as against of 6.88 per cent in the previous year. This increase in operating profitability margin is on account of higher price realisation during the period. Acuité believes that the operating profitability margins of the company will be lenient going forward on account of moderation in iron and steel prices globally despite of steady demand and established market presence. The net profitability margin of the company also stood healthy at 16.08 per cent in FY2022 (Prov.) as compared to 0.77 per cent in the previous year.

Healthy financial risk profile-
The financial risk profile of the company is marked by moderate net worth, low gearing and strong debt protection metrics. The net worth of the company stood moderate at Rs.42.45 crore in FY 2022 (Prov.) as compared to Rs. 10.57 crore in FY2021. This improvement in networth is mainly due to the retention of profit during FY2022. The gearing of the company stood at 0.45 times as on March 31, 2022 (Prov.) when compared to 2.13 times as on March 31, 2021. Interest coverage ratio (ICR) is strong and stood at 19.96 times in FY2022 (Prov.) as against 3.80 times in FY2021. The debt service coverage ratio (DSCR) of the company also stood strong at 15.00 times in FY2022 (Prov.) as compared to 2.33 times in the previous year. The net cash accruals to total debt (NCA/TD) stood at 1.35 times in FY2022 (Prov.) as compared to 0.14 times in the previous year. Going forward, Acuité believes the financial risk profile of the company will remain healthy on account of steady net cash accruals and no major debt funded capex plan over the near term.

­Working capital management
The working capital management of the company is marked by high gross current asset (GCA) days of 123 days in FY2022 (Prov.) as compared to 129 days in the previous year. This high GCA day of the company is mainly due to high inventory holding for raw material during the period. The inventory holding period of the company stood high at 113 days in FY2022 (Prov.) as compared to 114 days in the previous year. The debtor days of the company stood comfortable at 5 days in FY2022 (Prov.) as compared to 14 days in the previous year. Acuité believes that the ability of the company to manage its working capital operations efficiently will remain a key rating sensitivity.

Highly fragmented and intensely competitive industry
The Ferro Alloys industry is marked by the presence of a large number of organized and unorganized players owing to low entry barriers. The company faces intense competition from the presence of several mid to large sized players in the said industry. The presence of a large number of players has a direct impact on pricing, restricts bargaining power having an adverse impact on margins.