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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 20.72 | ACUITE BBB+ | Stable | Assigned | - |
| Bank Loan Ratings | 97.57 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 5.00 | - | ACUITE A2 | Assigned |
| Bank Loan Ratings | 1.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding | 124.29 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘Acuité BBB+’ (read as ACUITE Acuité Tirple B plus) and the short-term rating of Acuité A2 (read as Acuité A two) on the Rs.98.57 crore bank facilities, assigned its long-term rating of 'Acuité BBB+' (read as Acuité triple B plus) and the short-term rating of Acuité A2 (read as Acuité A two) on the Rs.25.72 crore bank facilities of Global Copper Private Limited (GCPL).
The outlook is 'Stable'. Rationale for Rating Reaffirmation The rating reaffirmation reflects stable operating and financial performance of RR group. The operating income improved to Rs.2648.98 Cr. in FY2023 as against Rs.2288.46 Cr. in FY2022 reporting a growth of 15.75 percent. Further, the operating profit margin of the RR group remained range bound within 4.00-5.00 percent for the last three years in spite of fluctuations in the copper prices. The financial risk profile of the RR group is moderate marked by strong net worth of Rs. 323.71 Cr. as on March 31, 2023 above-average gearing levels and moderate debt coverage indicators.
The rating further draws comfort from experienced management, an established track record of operations, and a diversified product portfolio with reputed clients. Going forward, the ability of the group to complete the CAPEX being undertaken within the timeline and to grow its scale of operations while maintaining its profitability will remain a key rating monitorable |
| About Company |
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Global Copper Private Limited (GCPL) is an Ahmedabad based company incorporated in 2010 by Mr. Laxmichand Vaghela and Mr. Hitesh Vaghela, GCPL is engaged in the manufacturing of level wound coil (LWC) copper and pancake copper coils (PCC) and copper tubes of varied sizes, with an installed capacity of 9600 MT per annum. The company is also planning for upcoming products like inner grooved tubes (IGT) and copper tube fittings. All the products are made from Cu-DHP (Deoxidized High Residual Phosphorous Copper) and Cu-ETP (Electrolytic Tough Pitch Copper), using high-grade copper cathodes (99.99% purity), which ensures consistent and unmatched quality in all the products. The raw material used is of the highest grade (copper cathode with 99.99% purity), which, coupled with modern technology, provides superior products for air conditioning, refrigeration, industrial heat exchangers, solar systems, and sanitary applications.
GCPL is the only manufacturer with advanced "cast and roll" and the sole manufacturer of level wound coil (LWC) in India. |
| About the Group |
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RRWL was incorporated in 1992 by Mr. Rameshwarlal Kabra along with his sons and has been listed at BSE since 1994. It is engaged in the manufacturing of winding wires, paper-covered strips, enamelled aluminium wire, copper strips, and flat cables under the brand name "RR Shramik". It is the flagship company of RR Group, which is one of the leading conglomerates in the electrical and copper industries. RRWL is the second-largest manufacturer of super enamelled copper winding wires in India. RRWL has four manufacturing facilities with a combined capacity of 35900 MTPA.
Incorporated on August 26, 2020, EEPL is the latest addition to the group, with a 74 percent shareholding in Ram Ratna Wires Limited and a 26 percent shareholding in Ennova Techno Tools Private Limited. It is engaged in the manufacturing of BLDC motors. RR Imperial Electricals Limited is a joint venture between the RR Group and the Bangladeshbased Imperial Group. It is engaged in the manufacturing, processing, sale, and distribution of copper enamelled wires, copper stripes (bare and paper-covered), bus bars, low-voltage and HT cables, and electrical products. The manufacturing unit is located in Bangladesh. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has taken a consolidated view of business and financial risk profiles of Global Copper Private Limited (GCPL), Ram Ratna Wires Limited (RRWL), EPAVO Electricals Private Limited (EEPL) and RR Imperial Electricals Limited (RRIEL) to arrive at this rating, owing to similar line of business, common management and operational as well as financial synergies between the entities. Acuité has also factored in the minimal impact of GCPL on the overall operations as well as financial risk profile of the group. Further, GCPL’s standalone performance is in congruence with the performance of the group. The entities are together referred to as ‘RR Group’.
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| Key Rating Drivers |
| Strengths |
| Experienced management, an established track record of operations, and a diversified product portfolio with a reputed clientele
RR Group is founded by Mr. Rameshwarlal Kabra, who has more than four decades of experience in the aforementioned industry. Currently, the group is led by Mr. Tribhuvan Prasad Kabra, Mr. Mahendra Kumar Kabra, and Mr. Hemant Kabra, along with a team of experienced professionals. The promoters are actively involved in the day-to-day operations of the group, which has helped the group develop long-term relationships with its customers and suppliers. The group has a well-diversified product portfolio distinguished by various product lines such as enamelled copper wires, enamelled copper strips, submersible winding wires, level wound coil (LWC) copper, and pancake copper coils (PCC), to name a few. Notwithstanding the highly competitive and fragmented nature of the winding wire industry due to the presence of thousands of small industry players constituting the unorganised segment, RR Group has an established position as well as a brand name in the industry. This is primarily on account of a reputed clientele consisting of OEMs such as Cummins Generator Technologies India Private Limited, CG Power and Industrial Solutions Limited, Godrej Boyce Manufacturing Company Limited, and Global Connection Impex Trading LLC, to name a few. The group achieved a revenue of Rs.2648.98 crore in FY2023 as against Rs.2288.46 Cr. in FY2022 reporting growth of 15.75 percent. The increase in revenue is mainly due to the continued delivery of strong volume (MT) growth despite the fluctuation in copper prices. The group's total production grew by 20.50 percent, with an average of 79 percent capacity utilization. The consolidated operating margin moderated in FY2023 and stood at 4.18 percent as against 4.91 percent in FY2022. Regardless of the fluctuations in copper prices, the margin of the group has stood within 4.00–5.00 percent range for the last three years. PAT margin stood at 1.77 percent in FY2023 as against 2.37 percent in FY2022. Further, group reported revenue of Rs.2179.86 Cr in 9MFY2024. Acuité believes that RR Group will continue to benefit from its established track record of operations, extensive experience of the promoters, diversified product profile, and reputed clientele. Moderate financial risk profile The group’s financial risk profile is moderate, marked by strong net worth, above - average gearing, and moderate debt protection metrics. The net worth of RR Group stood at Rs.323.71 Cr. as on March 31, 2023 as against Rs.280.32 Cr. as on March 31, 2022. The improvement is mainly on account of the accretion of profits to reserves. The total debt stood at Rs.266.74 Cr. as on March 31, 2023 which consists of Rs.55.36 Cr. of long term debt, Rs.41.64 Cr. of unsecured loans from directors, Rs.155.59 Cr. of short term debt and Rs.14.15 Cr. of current maturities of long term debt. The Group’s overall Debt/ Equity moderately improved and stood at 0.82 times as on March 31 2023 as against 0.96 times as on March 31 2022 and TOL/TNW stood at a similar level of 1.55 times for the last two years ended March 31 2023. Further, Debt/EBITDA stood at 2.29 times as on March 31 2023. The debt protection metrics moderately deteriorated in FY2023 with Interest coverage ratio (ICR) of t 3.48 times as on March 31 2023 as against 4.30 times as on March 31 2022. The Debt Service Coverage Ratio (DSCR) stood at 1.82 times as on March 31 2023 as against 2.02 times as on March 31 2022. The NCA/TD stood at 0.25 times as on March 31 2023. A capital expenditure is planned by RR group for the setting up of a new manufacturing plant in the Salarapur industrial area, Bhiwadi, Rajasthan. The total project cost is Rs.200.00 crore, which is to be funded through the sale of RRWL's stake in RR Kabel which amounts to Rs.120.00 Cr. and the remaining Rs. 80.00 Cr. through internal accruals. The plant is likely to be operational by 2HFY25. Acuite believes that the group's financial risk profile is expected to be moderate over the medium term on account of moderate profitability and strong net worth. Efficiently managed working capital The group's working capital requirement continues to be efficiently managed, with improvements in the gross current asset (GCA) days, which stood at 79 days as of March 31, 2023, as against 77 days as of March 31, 2022. The GCA days are driven by debtor and inventory days, which stood at 47 days and 27 days, respectively, as of March 31, 2023, as compared to 50 days and 21 days, respectively, as of March 31, 2022. GCPL’s twelve-month average bank limit utilisation ranged between 50-75 percent for the period ending January 2024. Acuité expects the working capital operations of the RR group to remain efficient on account of the level of inventory to be maintained and the credit given to its customers. |
| Weaknesses |
| Fluctuating profitability margins and susceptibility of margins to volatility in raw material prices
The group's total raw materials cost constitutes 90 percent of the total operating income of the group, which indicates the vulnerability of profitability margins to fluctuations in raw material prices. It is the primary reason for the fluctuating trend of profitability margins, as evident from the continuous variation in operating margins for the last three years, i.e., 4.18 percent in FY2023, 4.91 percent in FY2022, and 4.04 percent in FY2021. Acuité believes that the group’s ability to effectively pass on the burden of increased cost to the customers would be a key rating sensitivity. |
| Rating Sensitivities |
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| Liquidity Position: Adequate |
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The group’s liquidity is expected to remain adequate over the medium term on account of sufficient cash accruals against debt repayment obligations. The Group generated cash accruals of Rs.65.46 Cr. in FY2023 against repayment obligations of Rs.21-22 Cr. for the same period. The net cash accruals are expected to be in the range of Rs.87.01-103.25 Cr. against debt repayment obligations of Rs.14-16 Cr. for the period FY24-25. The GCA days stood at 79 days, and the unencumbered cash and bank balance stood high at Rs.8.63 crore as of March 31, 2023.
GCPL’s twelve-month average bank limit utilisation ranged between 50 and 75 percent for the period ended January, 2023. Acuité believes that the liquidity of the group is likely to remain adequate over the medium term on account of moderate cash accruals against debt repayment obligations. |
| Outlook: Stable |
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Acuité believes that RR group will maintain a 'Stable' outlook over the medium term on the back of promoters’ extensive experience in the industry and long-standing relationships with its customers. The outlook may be revised to 'Positive' in case the group registers higher than expected growth in its revenue and profitability while improving its liquidity position and timely completion of Capex. Conversely, the outlook may be revised to 'Negative' in case the group registers lower-than expected growth in revenues and profitability or in case of deterioration in the company's financial risk profile or significant elongation in the working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 2648.98 | 2288.46 |
| PAT | Rs. Cr. | 46.82 | 54.18 |
| PAT Margin | (%) | 1.77 | 2.37 |
| Total Debt/Tangible Net Worth | Times | 0.82 | 0.96 |
| PBDIT/Interest | Times | 3.48 | 4.30 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| None |
| 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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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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) |
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1.Global Copper Private Limited (GCPL) 2.Ram Ratna Wires Limited (RRWL) 3.EPAVO Electricals Private Limited (EEPL) 4. RR Imperial Electricals Limited (RRIEL) |
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