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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 55.40 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 46.00 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 101.40 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE A-’ (read as ACUITE A minus) and the short term rating of ‘ACUITE A2+’ (read as ACUITE A two plus) on the Rs. 101.40 Cr bank facilities of Ghankun Steels Private Limited.
Outlook is 'stable' Rating Rationale The rating takes into cognizance the sound business risk profile of the group buoyed by its improving revenue trend along with healthy profitability margins driven by rise in sale volume and average realization of steel products. The rating is also supported by the management’s long standing experience and healthy financial position as reflected by low gearing. These strengths are however, partly offset by the cyclical nature of the steel industry. |
| About the Company |
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Incorporated in 2004, Ghankun Steels Private Limited (GSPL) is engaged in manufacturing of sponge iron and billets. In 2010, the company became part of the Maruti group. Currently, GSPL is headed by Mr. Bimal Kishore Khetan, Mr. Ankit Chowdhary and others. The company has a capacity of 75000 MTPA for Sponge Iron, 75000 MTPA for Billet (Previously, capacity of 15000 for Billet was present and now capacity of 60000 MTPA got transferred from Hanuman Ispat Private Limited) and a 9.5MW captive power plant.
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| About the Group |
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Incorporated in 2005, Raipur based Maruti Ferrous Private Limited (MFPL) is engaged in manufacturing of billets and TMT bars. The company is the flagship entity of the Maruti Group. Currently, MFPL is headed by Mr. Bimal Kishore Khetan, Mr. Ankit Chowdhary and others. The company has a capacity of 96000 MTPA for Billet and 150000 MTPA for TMT bars.
Incorporated in 2002, Nutan Ispat & Power Private Limited (NIPPL) is engaged in manufacturing of sponge iron, billets and TMT bars. In 2014, the company became part of the Maruti group. Currently, NIPPL is headed by Mrs. Sumitra Khetan, Mr. Sourabh Tola and others. The company has a capacity of 60000 MTPA for Sponge Iron, 88320 MTPA for Billet, 150000 MTPA for TMT bars and a 10MW captive power plant. Incorporated in 1991, Sunil Ispat & Power Limited (SIPL) is engaged in manufacturing of sponge iron. In 2019, Maruti Ferrous Private Limited had acquired Sunil Ispat & Power Limited (SIPL) through NCLT. Currently, the company has a capacity of 115000 MTPA for Sponge Iron,30000 MTPA for Ferro Alloys and a 20MW captive power plant. The Group also consists of three more entities Hanuman Ispat Private Limited (HIPL), HSR Re-Rollers Private Limited (HRRPL) and Karnikripa Power Private Limied(KPPL). Earlier, Hanuman Ispat Private Limited (HIPL) had a billet capacity of 60000 MTPA, which is now transferred to Ghankun Steels Private Limited. Currently, HIPL earns lease rental on the said capacity. Further, HSR Re-Rollers Private Limited (HRRPL) is engaged in manufacturing of 60000 MTPA of TMT and Karnikripa Power Private Limied(KPPL) is engaged in manufacturing of 165000 MTPA of Sponge Iron. |
| Analytical Approach |
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For arriving at this rating, Acuité has revised the approach to include Karnikripa Power Private Limied(KPPL) into the ‘Maruti Group’, as the group has a 100 per cent stake in the entity and the operations would be managed by the Maruti group. Hence, Acuité has consolidated the business and financial risk profiles of Maruti Ferrous Private Limited (MFPL), Nutan Ispat and Power Private Limited (NIPPL), Ghankun Steels Private Limited (GSPL), Hanuman Ispat Private Limited (HIPL), HSR Re-Rollers Private Limited (HRRPL), Sunil Ispat and Power Limited (SIPL) and Karnikripa Power Private Limied(KPPL) together referred to as the ‘Maruti Group’ (MG). The consolidation is in the view of common management, parent subsidiary relationship, strong operational linkages between the entities and a similar line of business.
Extent of consolidation: Full. |
Key Rating Drivers
| Strengths |
The key promoters of the group, Mr. Nawal Khetan, Mr. Ashok Chowdhary and Mr. Rajesh Tola have been associated with the iron & steel industry for two decades. In addition to this, the second generation promoters are having experience of around a decade. Acuité derives comfort from the long experience of the promoters.
The revenue of the group increased to Rs.1323.95 Cr in FY2022 as compared to revenues of Rs.980.21 Cr in FY2021, thereby registering a growth of 35.10 per cent. Moreover, the group has achieved around Rs. 1121.82 Cr till December 2022(Provisional). The growth in revenue is primarily on account of healthy demand and better market condition.
The operating margin of the group marginally improved to 8.04 per cent in FY2022 as compared to 7.78 per cent in FY2021. The PAT margins stood at 2.84 per cent in FY2022 as against 2.45 per cent in FY2021. The RoCE levels stood at a comfortable level of about 14.30 per cent in FY2022 as against 13.22 per cent in FY2021. The improvement in profitability margins are due to increase in the average realization of all the products across all the companies of the group. Acuité believes that the sustainability in the revenue growth and improvement in the profitability margin would be a key monitorable going forward. Moreover, the sound business risk profile of the group is supported by the integrated nature of operations with a manufacturing capacity of sponge iron, billets, TMT Bars & other rolled products, ferro alloys and three waste heat based captive power plants. Nutan Ispat and Power Private Limited has become fully integrated after the recent addition of billet division and power plant. Further,Sunil Ispat & Power Limited (SIPL) supplies sponge iron to Maruti Ferrous Private Limited and now the newly installed Karnikripa power Private Limited company will supply sponge iron for the captive consumption of the group. Acuité believes that the integrated nature of the group enhances the operating efficiencies and mitigates the risks arising from the cyclical nature of steel industry to some extent. In addition to this, the group has a locational advantage as the plants are located in the industrial area of Raipur, Chhattisgarh, 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.
The group’s healthy financial risk profile is marked by healthy networth, low gearing and comfortable debt protection metrics. The tangible net worth of the group increased to Rs.417.11 Cr as on March 31, 2022 from Rs.265.13 Cr as on March 31, 2021 due to accretion of reserves. Acuité has considered unsecured loans of Rs.181.43 Cr as on March 31, 2022, as quasi-equity as the management has undertaken to maintain the amount in the business over the medium term. Gearing of the group stood low at 0.65 times as on March 31, 2022 as against 0.84 times as on March 31, 2021.The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood moderate at 1.09 times as on March 31, 2022 as 1.41 times as on March 31, 2021. The comfortable debt protection metrics of the group is marked by Interest Coverage Ratio at 3.18 times as on March 31, 2022 and Debt Service Coverage Ratio at 1.87 times as on March 31, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood healthy at 0.24 times as on March 31, 2022. Acuité believes that going forward the financial risk profile of the group will remain healthy over the medium term, despite having debt funded capex plans.
In order to increase the value chain and improve profitability, the group had undertaken planned capex in Sunil Ispat & Power Limited (SIPL) by setting up 30,000 MTPA Ferro alloys along with 20 MW power plant which is completed and will be operational from April’23, onwards. The total project cost is Rs.190.05 Cr, which will be funded by term loan from bank of Rs.120 Cr and remaining Rs.70.05 Cr from the promoters’ contribution. Further, the group decided to set up the sponge iron plant with an installed capacity of 165,000 MTPA in a newly founded company, Karnikripa Power Pvt. Ltd. The total cost of the project for Sponge Iron manufacturing is Rs. 120.80 crore which will be funded through debt of Rs. 80 Cr and Rs. 40.80 Cr from promoters’ sources.
The moderate working capital management of the group is marked by Gross Current Assets (GCA) of 129 days as on 31st March 2022 as compared to 109 days as on 31st March 2021. The GCA days is primarily on account of a high proportion of other receivables and recoveries. Further, the inventory holding stood at 67 days in 31st March 2022 as compared to 70 days as on 31st March 2021. However, the debtor period stood comfortable at 10 days as on 31st March 2022 as compared to 11 days as on 31st March 2021. Acuité believes that the working capital operations of the group will remain at same level as evident from efficient collection mechanism and moderate inventory levels over the medium term.
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| Weaknesses |
The steel rolling industry remains fragmented and unorganised. The group is exposed to intense competitive pressures from large number of organised and unorganised players along with its exposure to inherent cyclical nature of the steel industry. Further, there has been a significant push by the government on steel-intensive sectors such as railways and infrastructure, any sustained downturn in demand will adversely impact performance of steel companies. Additionally, prices of raw materials and products are highly volatile in nature. Business operations also face competition from cheaper Indonesian and Chinese imports. Substantial increase in imports may adversely impact realisation and volumes, and hence, remains a key monitorable.
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| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position |
| Adequate |
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The group’s liquidity is adequate marked by steady net cash accruals of Rs.64.21 Cr as on March 31, 2022 as against long term debt repayment of Rs.18.00 Cr over the same period. The current ratio stood comfortable at 1.41 times as on March 31, 2022 as compared to 1.12 times as on March 31, 2021. The fund based bank limit utilization stood moderately high at 83.67 per cent over the six months ended January, 2023. The cash and bank balances of the group stood at Rs.0.86 Cr as on March 31, 2022 as compared to Rs.2.60 Cr as on March 31, 2021. However, working capital management of the group is moderate marked by Gross Current Assets (GCA) of 129 days in 31st March 2022 as compared to 109 days as on 31st March 2021. Acuité believes that going forward the group will maintain adequate liquidity position due to steady accruals.
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| Outlook: Stable |
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Acuité believes that the outlook on Maruti Group will remain 'Stable' over the medium term on account of the long track record of operations, experienced management, sound business position and healthy financial risk profile. The outlook may be revised to 'Positive' in case of significant growth in revenue while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the Group’s revenues or profit margins, or in case of deterioration in the group’s financial risk profile or delay in completion of its projects or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
| Not Applicable |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 1323.95 | 980.21 |
| PAT | Rs. Cr. | 37.53 | 24.03 |
| PAT Margin | (%) | 2.84 | 2.45 |
| Total Debt/Tangible Net Worth | Times | 0.65 | 0.84 |
| PBDIT/Interest | Times | 3.18 | 2.72 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| Not Applicable |
| 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 • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.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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