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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 35.00 | ACUITE BBB+ | Stable | Upgraded | - |
| Bank Loan Ratings | 60.00 | - | ACUITE A2 | Upgraded |
| Total Outstanding | 95.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term rating to 'ACUITE BBB+' (read as ACUITE triple B plus) from ‘ACUITÉ BB+’ (read as ACUITÉ double B plus) and short term to ‘ACUITE A2’ (read as ACUITE A two) from 'ACUITE A4+' (read as ACUITE A four plus) on the Rs.95.00 crore bank facilities of Deccan Ferro Alloys Private Limited (DFAPL). The outlook is ‘Stable’.
Rationale for rating Upgrade The rating upgrade considers the migration of DFAPL from ‘Issuer Not Co-operating (INC)’ status. The rating also factors in the improvement in the scale of operations and profitability margins of the group due to strategic acquisition of Chhattisgarh Steel and Power Limited (CSPL). Further, the rating also reflects the management’s long track record in the industry and healthy financial profile characterized by below unity gearing and strong debt protection metrics. The rating also draws comfort from the adequate liquidity position of the group, aided by efficient working capital management and cushion available in the group’s working capital limits. However, the ratings are constrained by susceptibility of profitability to volatility in raw material prices and presence in a highly fragmented and intensely competitive industry. |
| About the Company |
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Deccan Ferro Alloys Private Limited (DFAPL) was incorporated in 2000. The company is engaged in manufacturing of ferro chrome, ferro manganese and silico manganese. The company has a production facility in Visakhapatnam, Andhra Pradesh with an installed capacity of 39000 MT per annum. Directors of the company are Mr. Sivarama Raju Pericherla and Mr. Sirisha Ayinampudi.
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| About the Group |
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Chhattisgarh Steel and Power Limited (CSPL)
Chhattisgarh based, CSPL was incorporated in 2003. The company is primarily involved in manufacturing of ferro/silico-manganese products and is established in 150 acres of land in Champa, Chhattisgarh. The facility includes its own 30MW coal based captive power plant and 2x16.5 MVA Ferro Alloys furnaces. DFAPL initiated the acquisition process on September 1, 2023, which was completed on March 31, 2024. DPAPL initially acquired a 51.79% stake in CSPL, and in FY25, its holding has increased to 56.67%. Mr. Ramesh Singh Thakur, Ms. Lakshmi Lavanya Pannasa, Mr. Surendrapal Neware, Mr. Suresh Marpu, and Mr. Appalaraju Ayinampudi are directors of the company. Vijaynagar Ispat and Alloys Private Limited (VIAPL) Andhra Pradesh based, VIAPL was incorporated in 2021. VIAPL is a 100 percent subsidiary of DFAPL. Directors of the company are Mr. Sivarama Raju Pericherla and Mr. Sirisha Ayinampudi. The company does not have any operations. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the business and financial risk profiles of Deccan Ferro Alloys Private Limited (DFAPL), Chhattisgarh Steel and Power Limited (CSPL) and Vijaynagar Ispat and Alloys Private Limited (VIAPL). The consolidation is in the view of common promoters and management, intercompany holdings, operational linkages between the entities and a similar line of business. Collectively, these entities are referred to as the "Deccan Group".
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| Key Rating Drivers |
| Strengths |
| Experienced management
Promoters of the group are associated with the ferro alloys industry for over two decades. The group has a strong customer base which includes reputed steel players such as JSW Steel Limited, Arcelor Mittal Nippon Steel India Limited, Rashtriya Ispat Nigam Limited among others. The company has been associated with their key customers almost since inception. Acuite believes that the extensive experience of the promoter would continue to help in the business risk profile of the group going forward. Improvement in operating performance The group reported increase in the revenue that stood at Rs.500.20 Cr. in FY2025(prov.) as against Rs.326.15 Cr. in FY2024 and Rs. 509.54 Cr. in FY2023. The subdued revenue in FY2024 was due to temporary shutdown of unit from the period July to October 2023. The shutdown of furnaces was due to surge in power and fuels costs incurred for running the plants. This temporary shutdown was not specific only to DFAPL but had been undertaken by multiple factories in the state due to the steep price increase. The group reported significant improvement in EBITDA margin that stood at 8.67 percent in FY2025(Prov.) as against 4.24 percent in FY2024 due to decrease in raw material expenses. Subsequently, the net profitability of the group stood at 5.85 percent in FY2025(prov.) as against 1.56 percent in FY2024. The acquisition of CSPL has further enhanced the customer base, operational efficiency and profitability of the group. Acuite believes the group's ability to scale up its operations and maintain its profitability margins shall remain a key rating sensitivity. Healthy financial risk profile The financial risk profile of the group remained healthy marked by healthy net worth, below unity gearing and strong debt protection metrics. The net worth of the group stood at Rs.195.53 crore in FY25(prov.) as compared to Rs.168.96 crore in FY24. The gearing of the group improved and stood comfortable at 0.22 times as on March 31, 2025(Prov.) as against 0.35 times as on March 31, 2024. The total debt of the group decreased and stood at Rs. 43.66 Cr. as on March 31, 2025(Prov.) as against Rs.59.43 Cr. as on March 31, 2024. The total debt of Rs. 43.66 Cr. consists of Rs. 1.62 Cr. of long-term debt, Rs. 9.72 USL from directors/ promoters and Rs.32.32 Cr. of short-term debt. TOL/TNW stood at 0.73 times as on March 31, 2025(prov.) as against 0.90 times as on March 31, 2024. Interest coverage ratio (ICR) improved and stood at 8.33 times for FY2025(Prov.) as against 3.62 times for FY2024. Also, the debt service coverage ratio (DSCR) improved and stood at 7.30 times for FY2025(Prov.) as against 2.08 times for FY2024. Acuité believes that the financial risk profile of the group is likely to be sustained in near to medium term on the back of absence of major debt funded capex and healthy net worth. Moderately efficient Working capital operations The working capital cycle of the group is moderately efficient marked by decreasing GCA days that stood at 117 days in FY2025(Prov.) as against 171 days in FY2024. The debtor also improved and stood at 10 days in FY2025(prov.) as compared to 26 days in FY2024. The inventory days stood at 79 days in FY2025(Prov.) against 105 days in 2024. The creditor days stood at 83 days in FY2025(Prov.) as compared to 108 days in FY2024. Post-acquisition due to ease of availability of raw materials for CSPL and direct tie ups with coal fields mines, the reliance on creditor support has been reduced for the group. The group has low reliance on fund-based limit as reflected from its low utilization of working capital limits. The average bank limit utilisation for the six months ended March 2025 stood at 46.20 percent for fund-based facilities. |
| Weaknesses |
| Susceptibility of profitability to volatility in raw material prices
The group’s profitability is highly susceptible to volatility in prices of the key raw material. Any sharp upward movement in the raw material prices and the inability of the group to pass on the increased cost of raw materials may result in dip in the operating margins. Acuite believes, the profit margins of the group likely to remain exposed to volatility in raw material prices. 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 this industry. The presence of a large number of players has a direct impact on pricing, restricts bargaining power having an adverse impact. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The Group’s liquidity profile is adequate as reflected from its healthy net cash accruals of Rs.37.41 Cr. in FY25(Prov.) as against nominal debt repayment obligation of Rs. 0.30 Cr. during the same period. The average bank limit utilisation for the six months ended March 2025 stood at 46.20 percent for fund-based facilities. The current ratio stood modest at 1.35 times as on March 31, 2025(Prov.). The cash and cash balance of the group stood at Rs. 6.44 Cr. as on March 31, 2025(Prov.). Acuité believes that the liquidity of the group is likely to remain adequate over the medium term on account of adequate cash accrual over the medium term against repayment obligations.
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| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 25 (Provisional) | FY 24 (Actual) |
| Operating Income | Rs. Cr. | 500.20 | 326.15 |
| PAT | Rs. Cr. | 29.26 | 5.10 |
| PAT Margin | (%) | 5.85 | 1.56 |
| Total Debt/Tangible Net Worth | Times | 0.22 | 0.35 |
| PBDIT/Interest | Times | 8.33 | 3.62 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
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None
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| 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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||
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