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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 45.00 | ACUITE BBB+ | Stable | Assigned | - |
| Bank Loan Ratings | 52.57 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 1.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 98.57 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘Acuité BBB+’ (read as ACUITE Acuité Tirple B plus) on the Rs. 52.57 crore bank facilities, assigned its long term rating of 'Acuité BBB+' (read as Acuité triple B plus) on the Rs. 45.00 crore bank facilities, Acuité has also reaffirmed the short term rating of Acuité A2 (read as Acuité A two) on the Rs. 1.00 crore bank facilities of Global Copper Private Limited (GCPL). The outlook is 'Stable'. Rationale for Rating Reaffirmation The rating reaffirmation takes into account the stable operating and financial performance of RR Group in FY2023. The revenue of the group stood at Rs. 2649.59 crore in FY2023 as against Rs. 2286.46 crore in FY2022, while the operating margins stood at 4.10 percent in FY2023 as against 4.91 percent in FY2022. The rating draws comfort from ?experienced management, an established track record of operations, and a diversified product portfolio with reputed clients. The rating also draws comfort from the moderate financial risk profile, efficiently managed working capital, and adequate liquidity position of the group. The rating is, however, constrained by declining profitability margins and the susceptibility of margins to volatility in raw material prices. |
| About Company |
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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 4,920 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. |
| 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 Bangladesh-based 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. |
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 Moderate financial risk profile
The group’s financial risk profile is moderate, marked by strong net worth, moderate gearing, and comfortable debt protection metrics. The net worth of RR Group stood at Rs. 280.32 crore as of March 31, 2022, as against Rs. 206.46 crore as of March 31, 2021. The improvement is mainly on account of the accretion of profits to reserves. The total debt decreased to Rs. 269.86 crore as of March 31, 2022, as against Rs. 360.83 crore as of March 31, 2021. The decrease in debt is due to lower utilisation of short-term debt as of March 31, 2022. The short-term debt stood at Rs. 135.76 crore for FY2022 as compared to Rs. 233.02 crore as of the financial year ending in FY2021. Other total debt includes long-term debt of Rs. 72.62 crore, USL from directors and promoters of Rs. 40.51 crore, and CPLTD of Rs. 20.97 crore. The group’s overall gearing and TOL/TNW stood at 0.96 times and 1.55 times, respectively, as of March 31, 2022, as compared to 1.75 times and 2.12 times as of March 31, 2021. Interest coverage and NCA/total debt stood at 4.30 times and 0.27 times for FY2022, as against 2.50 times and 0.09 times for FY2021. A capital expenditure is planned to be undertaken by GCPL towards increasing its production capacity by adding eight new machines and installing wind mills at its premises for captive use. The total project cost is Rs. 63.86 crore, which is to be funded by Rs. 50.00 crore of debt and the balance by internal accruals. The project is estimated to be completed in FY 2024. 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 improvement in the gross current asset (GCA) days, which stood at 77 days as of March 31, 2022, as against 106 days as of March 31, 2021. The GCA days are driven by debtor and inventory days, which stood at 50 days and 21 days, respectively, as of March 31, 2022, as compared to 68 days and 33 days, respectively, as of March 31, 2021. GCPL’s twelve-month average bank limit utilisation ranged between 65 and 80 percent for the period ended March 20, 2023. 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 |
| Declining 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., 4.91 percent in FY2022, 4.04 percent in FY2021, and 4.26 percent in FY2020. Acuité believes that the group’s ability to pass on the cost to the customers would be a key rating sensitivity. |
| Rating Sensitivities |
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| Material Covenants |
| None |
| 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. 71.86 crore in FY2022 against repayment obligations of Rs. 21.00 crore for the same period. The gross accruals are expected to be in the range of Rs. 72–89 crore against debt repayment obligations of Rs. 22–30 crore for the period FY 2023–25. The GCA days stood at 77 days, and the unencumbered cash and bank balance stood high at Rs. 14.73 crore as of March 31, 2022. GCPL’s twelve-month average bank limit utilisation ranged between 65 and 80 percent for the period ended March 20, 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. 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 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 2288.46 | 1526.94 |
| PAT | Rs. Cr. | 54.18 | 15.73 |
| PAT Margin | (%) | 2.37 | 1.03 |
| Total Debt/Tangible Net Worth | Times | 0.96 | 1.75 |
| PBDIT/Interest | Times | 4.30 | 2.50 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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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