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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 306.83 | ACUITE A+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 103.75 | - | ACUITE A1 | Reaffirmed |
| Total Outstanding | 410.58 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A+’ (read as ACUITE A plus) and short-term rating of ‘ACUITE A1’ (read as ACUITE A one) to the Rs. 410.58 Cr. bank facilities of Gagan Ferrotech Limited (GFL). The outlook is ‘Stable’.
Rationale for the rating reaffirmation The rating reaffirmation of the group derives its strength from steady business risk profile of the group as reflected in its growing revenue trend in FY26 coupled with management’s long track record in the sector and healthy financial profile characterized by comfortable gearing and strong debt protection metrics. The rating also draws comfort from the strong liquidity position of the group, aided by efficient working capital management, comfortable current ratio and cushion available in the group’s working capital limits. Also, rating is partially offset by the cyclical nature of the steel industry and the vulnerability of the margins to the volatility in commodity prices. |
| About the Company |
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Gagan Ferrotech Limited (GFL) is the flagship entity of the Gagan Group. GFL is promoted by Mr. Vinay Kumar Agarwal and family. The company was initially engaged in trading of coal. Since 2006, it ventured into the manufacturing of sponge iron and thereafter through forward integration through set up its billets and rolling mill units. GFL is currently engaged in the manufacturing of sponge iron, billets and TMT bars. The manufacturing unit is located at Jamuria. Currently, Gagan Ferrotech Ltd. has integrated steel manufacturing facilities for sponge iron (capacity- 2,64,000 MTPA), Billet (capacity – 3,53,400 MTPA), TMT bars and wires (capacity – 3,36,000 MTPA). In addition, the company also has a captive power plant of 20 MW. The company has undertaken a capex to install Waste Heat Recovery Boiler (WHRB) of 16 MW with the total cost of Rs. 35.00 Cr. fully funded by promoter’s contribution and the expected COD for the same in June 2025.
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| About the Group |
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The group consists of 3 more entities namely Spintech Tubes Private Limited (STPL), Gajanan Iron Private Limited (GIPL) and Shakambhari Overseas Trades Private Limited (SOTPL).
STPL was incorporated by the Gagan group in February 2017 for setting up an integrated manufacturing unit at Jamuria, West Bengal. STPL currently has installed a pellet plant (6,00,000 MTPA) and Rolling mill (26,400 MPTA) which has commenced operations in January 2024. The company is undergoing capex to install a sponge iron plant (300,000 MTPA), a SMS (Steel Melt Shops) (180,000 MTPA), a Rolling mill (1,53,600 MTPA) and captive power plant of 40MW with a total project cost of ~Rs.686 Cr out of which ~ 83 per cent of cost has been incurred till February 2025. The expected COD of the projects is July 2025. Also, the company has planned to install 5 Tube Mill lines with 24,000 MTPA capacity with total project cost of Rs.134.96 Cr. The expected COD for this new plant is October 2025. Mr. Madan Singh, Mr. Vinay Kumar Agarwal, Mr. Raunak Kumar, Mr. Sandeep Agarwal, Mr. Maloy Kumar Chandra are directors of the company. GIPL was incorporated in 2005, Kolkata, West Bengal based and is engaged in the business of manufacturing MS Angles (96,000 MTPA) and M.S billets (1,38,500 MTPA). Mr. Niranjan Gourisaria, Mr. Kailash Kumar Megotia, Mr. Vinay Kumar Agarwal are directors of the entity. SOTPL was incorporated in 1996, Kolkata, West Bengal based and is engaged in manufacturing of cast iron (24,820 MTPA). Mr. Umang Agarwal, Mr. Vinay Kumar Agarwal, Mr. Suman Agarwal are directors of the entity. |
| Unsupported Rating |
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Not Applicable
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| 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 Gagan Ferrotech Limited (GFL), Gajanan Iron Private Limited (GIPL), Shakambhari Overseas Trades Private Limited (SOTPL) and Spintech Tubes Private Limited (STPL) together referred to as the ‘Gagan Group’ (GG). The consolidation is in the view of common promoters and management, intercompany holdings, operational linkages between the entities and a similar line of business.
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| Key Rating Drivers |
| Strengths |
| Long track record of operations and integrated operations
Promoters are associated with the steel industry for over two decades and have established forward as well as backward integrated operations. Group has a diversified product mix which includes pellets, sponge iron, billets, TMT bars and cast iron. Acuité believes that the long operational track record of Gagan group and promoters’ extensive understanding and expertise will support the group’s growth plans going forward. Moreover, the group has a locational advantage as the plants are located in the industrial area of Durgapur, West Bengal, which is in close proximity to various steel plants and sources of raw materials. Further the plants are well connected through road and rail transport which facilitates easy transportation of raw materials and finished goods. Steady scale of operations albeit improving profitability margins Gagan Group’s revenue stood at Rs. 1980.97 Cr. in FY24 as against Rs. 2173.20 Cr. in FY23 due to drop the marginal decline was on account of reduced in sales realization for steel products. However, the group reported improvement in scale of operations marked by revenue of Rs. 1831.37 Cr. in 9MFY25 due to buoyant demand, increased contribution from the recently enhanced capacities and better product diversity. Further, the profitability of the group improved in FY24 as reflected in the EBITDA margins which stood at 8.05 per cent in FY24 as against 5.47 per cent in FY23 due to decline in raw material cost (coking and thermal coal, refractories and ferroalloys), also the group has reported EBITDA margin of 9.88 percent in 9MFY25. The PAT margins also increased and stood at 3.74 per cent in FY24 as compared to 2.37 per cent in FY23. Upon completing the ongoing capex, primarily in STPL, by the second quarter of FY26, the group will transition into a fully integrated steel plant. With the addition of power plants, power costs will decrease, while the scale of operations and operating margins will improve significantly. A substantial growth is expected in FY26 due to the full impact of the completed capital expenditure. Healthy Financial Risk Profile The financial risk profile of the group remained healthy marked by healthy net worth, low gearing and comfortable debt protection metrics. The tangible net worth of the group increased stood Rs. 1211.67 Cr. in FY24 as against Rs. 974.81 Cr. in FY23 due to increase in equity and accretion of profits to reserves and infusion of funds by directors/promoters. Acuite has considered unsecured loans to the tune of Rs. 112.20 Cr. as on March 31, 2024 as part of net worth as these loans are subordinated to bank debt. The gearing ratio of the group stood at 0.54 times in FY24 as compared to 0.35 times in FY23. The debt outstanding of the group in FY24 comprises of long-term debt of Rs. 359.07 Cr., Rs. 6.50 Cr. of non-interest-bearing unsecured loans and Rs. 291.41 Cr. of short-term debt. The TOL/TNW stood at Rs. 0.75 times in FY24 as against 0.56 times in FY23. The debt protection metrics remained healthy comfortable with debt service coverage ratio of 4.14 times and interest service coverage ratio stood at 5.83 times in FY24. Acuite believes, notwithstanding the benefits accrued from the capacity additions, the financial risk profile is likely to moderate to an extent due to the debt funded capex plans however expected to remain comfortable over near to medium term. Efficient working capital operations The GCA days of the group have moderated albeit efficient in nature marked by 161 days in FY24 as against 112 days in FY23.GCA days have increased in FY24 majorly on the account of increased in other current assets. The inventory days of the group increased to 87 days in FY24 as against 54 days in FY23. Generally, the group maintains 2-2.5 months of inventory of iron ore and coal to mitigate the price volatility for which significant amount of advances is paidare paid to the suppliers. The Creditor days of the group stood at 12 days in FY24 as against 6 days in FY23. The company receives 25-30 days credit period from the suppliers. The average bank limit utilisation of by the group stood at 56.78 per cent for fund-based facilities and 72.14 per cent for non-fund facilities for six months ended February 2024. Acuité believes that the working capital operations of the group will remain at same level efficient over the medium term. |
| Weaknesses |
| Vulnerability of profitability to the volatility in commodity prices in a cyclical nature of the industry
The group’s performance remains vulnerable to cyclicality in the steel sector as demand for steel depends on performance of end user segments such as construction and real estate. Indian steel sector is highly competitive due to presence of large number of players. The operating margin of the group is exposed to fluctuations in the prices of raw materials (coal and iron ore) as well as realization from finished goods. |
| ESG Factors Relevant for Rating |
| The group is committed to pursuing innovative technologies that drive sustainable and comprehensive development for all, including both its members and surrounding communities. The company actively engages in environmental stewardship through responsible resource utilization and initiatives aimed at reducing waste and greenhouse gas emissions. Through proactive corporate social responsibility programs in education, healthcare, and community welfare, the Group further reinforces its reputation as a responsible corporate citizen. Some of the CSR initiatives includes plantation programme, health and eye check up programmes, clothes distribution programme etc. |
| Rating Sensitivities |
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| Liquidity Position |
| Strong |
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The liquidity position of the group remained strong on account of adequate net cash accruals against its repayment obligations. The net cash accruals of the company stood at Rs. 118.87 Cr. in FY24 as against Rs. 6.68 Cr. of repayment obligations in FY24. Furthermore, the average bank limit utilisation by the group stood at 56.78 per cent for fund-based facilities and 72.14 per cent for non-fund facilities for six months ended February 2024. Also, the company maintains a cash and cash equivalents of Rs. 170 Cr. in FY24. Acuité believes that going forward the group will continue to maintain strong liquidity position owing to steady accruals and capacity expansion.
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| Outlook: Stable |
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 1980.97 | 2173.20 |
| PAT | Rs. Cr. | 74.10 | 51.51 |
| PAT Margin | (%) | 3.74 | 2.37 |
| Total Debt/Tangible Net Worth | Times | 0.54 | 0.35 |
| PBDIT/Interest | Times | 5.83 | 6.83 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite) |
| 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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