|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 38.00 | ACUITE BBB+ | Stable | Assigned | - |
| Bank Loan Ratings | 150.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 100.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding | 288.00 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) and the short-term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs.250.00 Cr. bank facilities and has assigned the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) on the Rs.38.00 Cr. bank facilities of BST Infratech Limited (BSTIL). The outlook remains ‘Stable’.
Raitonale for Rating The reaffirmation in the rating takes into account steady improvement in the business risk profile marked by improvement in the operating income and marginal increase in the profitability margins. The operating income of the company stood at Rs.1220.28 Cr. in FY2024 (Prov) as against Rs.1127.38 Cr. in FY2023. The increase in operating income is driven by increased volumes and better price realisation. The operating margins of the company stood at 3.41 percent in FY2024 (Prov) as against 3.18 percent in FY2023 and the PAT margins marginally increased to 0.62 percent in FY2024 (Prov) as against 0.56 percent in FY2023. The rating also takes into consideration the extensive experience of the management in the sector, adequate liquidity and moderate financial risk profile marked by moderate networth and moderate gearing. However, these strengths are partially offset by cyclical nature of the steel industry and intensive working capital operations. |
| About the Company |
| Incorporated in 2007, BST Infratech Limited (BSTIL) is engaged in the manufacturing of mild steel (MS) strips, MS Bars & wire rods, MS/GI Wires, MS & Galvanized Iron (GI) pipes, tubular poles and transmission towers. BSTIL is promoted by Mr. Gopal Kumar Agarwal and Mr. Pradip Kumar Agarwal. The manufacturing unit is located in Asansol (West Bengal) with an installed capacity of 60,000 MTPA for MS strips, 96,000 MTPA for MS/GI pipes, 60,000 MTPA for MS Bars & wire rods, 12,000 MTPA for MS/GI wires, 10,000 MTPA tubular poles and 24,000 MTPA transmission towers. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has taken the standalone view of the business and financial risk profile of BSTIL. |
| Key Rating Drivers |
| Strengths |
| Long track record of operations and segmental diversification
BST Infratech Limited (BSTIL) has established a long standing presence of around two decades in the manufacturing industry of iron & steel products. BSTIL is supported by the extensive experience of Mr. Gopal Kumar Agarwal and Mr Pradip Kumar Agarwal. The company has achieved segmental divergence and executes EPC contracts relating to installation and supply of power transmission towers along with the manufacturing business. Acuité believes that the experienced management and the established presence of the BSTIL will continue to benefit the company going forward. Steady increase in turnover levels and profitability margins coupled with locational advantage The company had witnessed a revenue growth of around 9 percent in FY2024 (Prov) and has achieved revenues of around Rs.1220.28 Cr. in FY2024 (Prov) as compared to Rs.1127.38 Cr. in FY2023. The increase in operating income is driven by increase both volumes and price realisation. Further, the operating margin stood at 3.41 per cent in FY2024 (Prov) as against 3.18 percent in FY2023. Also the PAT margins improved and stood at 0.62 percent in FY2024 (Prov) as against 0.56 percent in FY2023 and 0.52 percent in FY2022. Moreover, the company’s unit is strategically located at Raniganj, West Bengal, a major steel manufacturing and consuming hub due to its large coal reserves, which provides operational advantage to BSTIL. Further, the clients of the company are largely located in the state of West Bengal resulting in low transportation cost and timely delivery of products. Proximity to both raw materials sources and customers results in significant freight cost reduction and enhanced sales volume. Acuite believes the scale of operation is likely to improve over the medium term backed by healthy capacity utilization of the company. Moderate financial risk profile The company’s financial risk profile is moderate marked by moderate net worth, moderate gearing and modest debt protection metrics. The tangible net worth of the company improved and stood at Rs.115.51 Cr. as on March 31, 2024 (Prov) as against Rs.108.01 Cr. as on March 31, 2023 due to accretion to reserves. Acuité has treated unsecured loans of Rs.23.94 Cr. in FY2024 (Prov) as a part of net worth as the management has undertaken to maintain this amount in the business over the medium term. Gearing of the company stood moderate at 2.02 times as on March 31, 2024 (Prov) as against 1.80 times as on March 31, 2023. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 3.09 times as on March 31, 2024 (Prov) as against 3.02 times as on March 31, 2023. The modest debt protection metrics of the company is marked by Interest Coverage Ratio at 1.60 times as on March 31, 2024 (Prov) and Debt Service Coverage Ratio at 1.28 times as on March 31, 2024 (Prov) as against 1.73 times and 1.25 times as on March 31, 2023 respectively. Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.06 times as on March 31, 2024 (Prov) and FY2023. Acuité believes that going forward the financial risk profile of the company will further improve in absence of major debt funded capex plans. |
| Weaknesses |
| Working capital intensive nature of operations
The working capital nature of operations of the company is intensive marked by modest but improving Gross Current Assets (GCA) of 123 days as on March 31, 2024 (Prov) as against 125 days as on March 31, 2023 primarily on account of high other current assets and moderate inventory period. The high other current assets include retention money which stood at around Rs.40.89 Cr. in FY2022. The inventory holding stood at 74 days as on 31st March, 2024 (Prov) as compared to 79 days as on 31st March, 2023. The average inventory holding period stood around ~70 days. However, the debtor period stood comfortable at 32 days as on March 31, 2024 (Prov) as compared to 34 days as on 31st March 2023. The average credit period allowed to customers is of 30-45 days. Also, the creditor period stood at 35 days in FY2024 (Prov) as against 37 days in FY2023. The average credit period allowed by suppliers is 30-45 days. Acuité believes that the working capital management will be crucial to the company in order to maintain a healthy risk profile. Cyclical nature of the industry The company’s performance remains vulnerable to cyclicality in the steel sector as demand for steel depends on the performance of the end user segments such as construction and real estate. Indian steel sector is highly competitive due to the presence of a large number of players. The operating margin of the company is exposed to fluctuations in the prices of intermediate goods as well as realization from finished goods. |
| Rating Sensitivities |
|
Sustenance of revenue growth and thin profitability margins Elongation in the working capital cycle |
| Liquidity Position |
| Adequate |
|
The company’s liquidity position is adequate marked by adequate net cash accruals against its maturing debt obligations. The company has net cash accruals in the range of Rs.9.95-13.53 Crore from FY 2022- 2024 (Prov) against its maturing debt obligations in the range of Rs.4.75-5.46 crore in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.14.87-18.09 crore against the maturing repayment obligations of around Rs.4.20-4.90 crore over the medium term. The working capital management of the Company is intensive marked by improved GCA days of 123 days in FY2024 (Prov) as against 125 days in FY2023. The company maintains unencumbered cash and bank balances of Rs.1.71 crore as on March 31, 2024 (Prov). The current ratio stands at 1.27 times as on March 31, 2024 (Prov) as against 1.31 times as on March 31, 2023. The consolidated fund-based limit remained utilized at 94 per cent and consolidated non-fund-based at around 40 percent over 06 months ended March 2024.
Acuité believes that going forward the company will maintain adequate liquidity position due to the gradually improving accruals. |
| Outlook: Stable |
|
Acuite believes that BSTIL will benefit from the extensive experience of the promoters and the improving scale of operations backed by segmental diversification and locational advantage. The outlook may be revised to 'Positive' if the company significantly scales up its operations while improving its profitability, capital structure and working capital management. Conversely, the outlook may be revised to 'Negative' if BSTIL's financial risk profile, particularly its liquidity, weakens most likely because of a substantial increase in its working capital requirements, or in case of decline in the company’s revenues or profit margins.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 1220.28 | 1127.38 |
| PAT | Rs. Cr. | 7.62 | 6.28 |
| PAT Margin | (%) | 0.62 | 0.56 |
| Total Debt/Tangible Net Worth | Times | 2.02 | 1.80 |
| PBDIT/Interest | Times | 1.60 | 1.73 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
|
• 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 |
| 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. |
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
|
|
|
About Acuité Ratings & Research |
