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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 47.03 | ACUITE BB | Downgraded & Withdrawn | - |
| Bank Loan Ratings | 9.50 | ACUITE BB | Stable | Downgraded | - |
| Bank Loan Ratings | 15.64 | Not Applicable | Withdrawn | - |
| Bank Loan Ratings | 18.83 | - | ACUITE A4+ | Reaffirmed & Withdrawn |
| Bank Loan Ratings | 20.00 | - | Not Applicable | Withdrawn |
| Total Outstanding | 9.50 | - | - |
| Total Withdrawn | 101.50 | - | - |
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Rating Rationale |
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Acuité has downgraded and withdrawn the long-term rating to ‘ACUITE BB’ (read as ACUITE double B) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.47.03 Cr. bank facilities of Ispat Damodar Private Limited (IDPL) and also reaffirmed and withdrawn the short-term rating to ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.18.83 Cr. bank facilities of Ispat Damodar Private Limited (IDPL).
Acuité has withdrawn the long-term proposed facility of Rs.15.64 Cr. bank facilities of Ispat Damodar Private Limited (IDPL) without assigning any rating and also withdrawn the proposed limit of short-term rating of Rs.20.00 Cr. bank facilities of Ispat Damodar Private Limited (IDPL) without assigning any rating. The rating withdrawal is in accordance with Acuite’s policy on withdrawal of rating. The rating is being withdrawn on account of request received from the Company and No Objection Certificate received from the banker. Acuité has also downgraded the long-term rating to ‘ACUITE BB’ (read as ACUITE double B) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.9.50 Cr. bank facilities of Ispat Damodar Private Limited (IDPL). The outlook is ‘Stable’. Rationale for the downgrade The downgrade is a result of dip in profitability position and reducing bank lines are putting a pressure on the company’s liquidity profile. The company’s financial risk profile is marked by improving net worth, comfortable gearing and robust debt protection metrics. The tangible net worth of the company stood at Rs.187.73 Cr. as on FY2023 as compared to Rs.180.08 Cr. as on FY2022. Gearing of the company remained below unity at 0.47 times as on FY2023 as against 0.55 times as on FY2022. The rating continues to derive comfort from long track record of operation and experience of the management and above average financial risk profile; however, profitability remains susceptible towards volatility in traded product costs and foreign currency fluctuations. The above strengths are constrained by working capital intensive nature of operations decline in sales in FY2024 and going forward expected to be subdued and Intense competition and inherent cyclical nature of the steel industry and low and volatile profitability margin. |
| About the Company |
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Incorporated in 1996, Ispat Damodar Private Limited (IDPL) was promoted by Mr. Satpal Bansal and located at Purulia, West Bengal. Currently, IDPL is headed by Mr. Sumita Majee and Mr. Arup Majee. Majee family has taken it in 2019 but shareholding largely remains with Mr. Bansal. The company is engaged in the manufacturing of sponge iron, MS billet and ferro alloys with an installed capacity of 60000 MTPA each. The company also has an 18 MW captive waste heat based power plant.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has taken a standalone view of the business and financial risk profiles of IDPL to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Long track record of operations and experienced management
IDPL’s key promoter, Mr. Vikas Bansal has an experience spanning over a decade in the ferro alloy, billet and sponge iron industry and understanding of the local market dynamics. The company has also established relationships with reputed players like Oswal Minerals Ltd, Odisha Mining Corporation Limited, Carbon Resources Pvt. Ltd. only to name a few. Acuité believes the long track record, experienced management and healthy relations with suppliers and customers will continue to support the business, going forward. Above average financial risk profile The company’s financial risk profile is marked by improving net worth, comfortable gearing and robust debt protection metrics. The tangible net worth of the company stood at Rs.187.73 Cr. as on FY2023 as compared to Rs.180.08 Cr. as on FY2022. Gearing of the company remained below unity at 0.47 times as on FY2023 as against 0.55 times as on FY2022. The Total Outside Liability/Tangible Net Worth (TOL/TNW) stood at 0.95 times as on FY2023 as compared to 1.08 times as on FY2022. The strong debt protection metrics of the company is marked by Interest Coverage Ratio of 8.96 times and Debt Service Coverage Ratio at 7.46 times as on March 31, 2023. Net Cash Accruals/Total Debt (NCA/TD) stood at 0.24 times as on FY2023 as against 0.20 times as on FY2022. Acuité believes that going forward the financial risk profile of the company will remain at similar level backed by steady accruals and no major debt funded capex plans. Update on capex The company has capex in rolling mill of 500TPD at a cost of Rs. 85 Cr. which has been funded largely from internal accruals, unsecured loans and no term debts have been taken. This is expected to be capitalised by second half of FY2025. |
| Weaknesses |
| Decline in sales in FY2024 and going forward expected to be subdued
The Company’s revenues have declined in FY 2023 at Rs. 576.67 Cr. against Rs. 619.98 Cr. in FY2024 due to increasing cost of raw materials leading to lesser sales for the Company as they were not able to pass on the costs. The revenues of the Company were at Rs. 303. 67 Cr. as of December 2023 (Provisional) basis. 2-3 month shut down in billet in FY2023 and FY2024. Intense competition and inherent cyclical nature of the steel industry The downstream steel industry remains heavily fragmented and unorganised. The company 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. Additionally, prices of raw materials and products are highly volatile in nature. Working capital intensive nature of operations The working capital-intensive nature of operations of the company is marked by high Gross Current Assets (GCA) of 113 days as on FY2023 as compared to 111 days as on FY2022. The high GCA days is high on account of a high proportion of other current assets consisting of amount receivables from materials on loan and other loans and advances. However, the inventory days stood comfortable at 53 days as on FY2023 as compared to 48 days as on FY2022. The company generally maintains buffer stock of manganese ore and iron ore. They purchase these in large quantities (vessels) in order to reduce cost and hence maintain stock as these is shortage of such materials at times and also for the smooth functioning of the plant. The debtor period also stood comfortable at 08 days as on FY2023 as compared to 26 days as on FY202. Acuité believes that the working capital operations of the company will remain almost at the same levels as evident from efficient collection mechanism and comfortable inventory levels over the medium term. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The company has a stretched liquidity position on account of continuous reduction in limits from both State Bank of India and Indian Bank. Earlier, the sanctioned cash credit limit was Rs.38 Cr. from SBI and Rs.23.20 Cr. from Indian bank. Presently, the sanctioned cash credit is Rs.1.00 Cr. from SBI and Rs.8.50 Cr. from Indian bank. As a result, the fund-based limit utilization rose to around 101 per cent for the six-months ended Feb 2024. Further, the working capital-intensive nature of operations is marked by high GCA days of 113 days as on FY2023 as compared to 111 days as on FY2022. However, the company has sufficient net cash accruals of Rs.21.33 Cr. in FY2023 as against a long-term debt repayment of only Rs.0.25 Cr. over the same period. The current ratio stood comfortable at 1.71 times as on FY2023 as compared to 1.57 times as on FY2022. The cash and bank balances stood at Rs 0.06 Cr. as on FY2023. Acuité believes that going forward the liquidity position of the company will be stretched further due reduction in its working capital limits.
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| Outlook: Stable |
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Acuité believes the company’s outlook will remain 'stable' over the medium term on account of its experienced management, healthy financial risk profile and healthy scale. The outlook may be revised to 'Positive' in case the company witnesses a material improvement in its scale of operations. Conversely, the outlook may be revised to 'Negative’ in case of decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile and liquidity position or elongation in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 576.67 | 619.98 |
| PAT | Rs. Cr. | 7.65 | 5.04 |
| PAT Margin | (%) | 1.33 | 0.81 |
| Total Debt/Tangible Net Worth | Times | 0.47 | 0.55 |
| PBDIT/Interest | Times | 8.96 | 5.09 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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 |
| 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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