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Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
Bank Loan Ratings | 6.00 | ACUITE A | Stable | Assigned | - |
Bank Loan Ratings | 19.00 | ACUITE A | Stable | Reaffirmed | - |
Total Outstanding | 25.00 | - | - |
Rating Rationale |
Acuité has reaffirmed the long-term rating of ‘ACUITE A’ (read as ACUITE A) on the Rs. 19.00 crore bank facilities of Mahendra Power Private Limited (MPPL). The outlook remains ‘Stable’.
Acuité has assigned the long-term rating of 'ACUITE A’ (read as ACUITE A) on the Rs 6.00 crore bank facilities of Mahendra Power Private Limited (MPPL). The outlook is ‘Stable’. Rationale for rating The rating takes into cognizance the stable business risk profile of the group buoyed by its declining but healthy revenue and sustenance of operating margin. The revenues have declined primarily since the prices of steel in the market have corrected itself in FY2023 and FY2024 and also the power plants in AIPL and MPPL have remained shut for 9 months and 5 months period respectively in FY2023 and FY2024 due to maintenance activities. Furthermore, the profitability of the group has sustained itself despite the declining trend of revenues. Furthermore, the group has added sponge iron and Power plant in Mahendra Sponge and Power Limited which is expected to start operations in current year and augment both the topline and profitability. The rating is also supported by the management’s long-standing experience and healthy financial position characterized by healthy debt coverage indicators. The Company's liquidity is further supported by healthy cash accruals, absence of any major capex plans, minimal debt obligations, moderate current ratio. These strengths are however, partly offset by the intensive working capital management of the group and cyclical nature of the steel industry. |
About the Company |
Incorporated in 2008, Chhattisgarh based Mahendra Power Private Limited is engaged in business of generation of power from biomass-based power plant of 10 MW of which 8.91MW is supplied through firm power purchase agreement with Chhattisgarh State Power Distribution Company Limited (CSPDCL) for a period of 20 years. The firm has resumed the operations of the power plant since 2017 and is operating at full capacity. The company is also engaged in the business of trading in imported coal, iron ore. The company is managed by Mr. Deepesh Agrawal and other directors.
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About the Group |
Mahendra Sponge and Power Limited: - Incorporated in 2002, Chhattisgarh based Mahendra Sponge and Power Limited has an integrated steel manufacturing facility. The company is engaged in business of manufacturing of sponge iron, Billet, re-rolled products like MS Round, MS Square, MS Flat and MS Angles. Mahendra Sponge and Power Limited also has a captive power plant with a capacity of 8 MW (4 MW Waste Heat recovery based and 4 MW Atmospheric Fluidized Bed Combustion). The power plant caters to the entire power requirement of the company. In addition to this, MSPL is also engaged in trading of domestic and imported coal and iron ore pellets. The company is managed by Mr. Deepesh Agrawal and other directors
Animesh Ispat Private Limited: - Incorporated in 2004, Chhattisgarh based Animesh Ispat Private Limited is engaged in business of generation of power from biomass-based power plant of 10 MW of which 8.91 MW is supplied through firm power purchase agreement with Chhattisgarh State Power Distribution Company Limited (CSPDCL) for a period of 20 years. The firm has resumed the operations of the power plant since 2017 and is operating at full capacity. The company is also engaged in the business of trading in imported coal, export of iron ore fines and manufactured steel products. The company is managed by Mr. Deepesh Agrawal and other directors Mahendra Strips Private Limited: - Incorporated in 1996, Chhattisgarh based Mahendra Strips Private Limited is presently engaged in the business of imported coal. It is focused on procurement and supply of imported coal to various steel and power generation companies. The company was earlier engaged in manufacturing of ingots, and rerolled products like M.S Round, MS Square, MS Flat, MS Angles. The manufacturing unit was later sold off for the purpose of consolidation of business. The company is managed by Mr. Deepesh Agrawal and other directors. Aarna Resources Pte Limited formed as a subsidiary under Mahendra Strips Private Limited in 2023. |
Unsupported Rating |
Not Applicable |
Analytical Approach |
Extent of Consolidation |
•Full Consolidation |
Rationale for Consolidation or Parent / Group / Govt. Support |
For arriving at this rating, Acuité has consolidated the business and financial risk profiles of Mahendra Sponge and Power Limited (MSPL), Animesh Ispat Private Limited (AIPL), Mahendra Power Private Limited (MPPL) and Mahendra Strips Private Limited (MSPL) together referred to as the ‘Mahendra Group’ (MG). The consolidation is in the view of common management, intercompany holdings, operational linkages between the entities and a similar line of business.
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Key Rating Drivers |
Strengths |
Established track record of operations and extensive experience of promoters |
Weaknesses |
Moderate working capital management
The working capital intensive nature of operations of the group is marked by high Gross Current Assets (GCA) of 113 days on 31st March 2024 (Provisional) as compared to 94 days on 31st March 2023. The high GCA days are primarily on account of a high proportion of other current assets consisting of other loans and advances. Further, the inventory holding stood moderate at 50 days on 31st March 2024 (Provisional) as compared to 41 days on 31st March 2023. The group maintains inventory due to availability of sufficient raw materials and by virtue of the manufacturing unit being located to the close vicinity of iron-ore mines of Jharkhand and Odisha. However, the debtor period stood comfortable at 22 days in March 2024 (Provisional). The creditor days stood at 54 days in March 2024. Acuité believes that the working capital operations of the group will remain at same level as evident from intensive inventory levels over the medium term. |
Rating Sensitivities |
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Liquidity Position |
Adequate |
The group’s liquidity is adequate marked by steady net cash accruals of Rs. 107.81 crore in FY2024 (Prov.) as against long-term debt repayment of Rs. 10.83 crore over the same period. The cash and bank balances of the group stood at Rs. 218.54 crore in FY2024 (Prov.) as compared to Rs. 91.46 crore in FY2023. The current ratio remains comfortable at similar level of 1.45 times in FY2024 (Prov.) and 1.40 times in FY2023. The fund-based limit remains utilised moderately at 73 percent over the 6 months ended March 2024. However, working capital management of the group is marked by high Gross Current Assets (GCA) of 113 days in FY2024 (Prov.) as compared to 94 days in FY2023. Acuité believes that going forward the group will maintain adequate liquidity position due to steady accruals.
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Outlook: Stable |
Acuité believes that the outlook on Mahendra Group will remain 'Stable' over the medium term on account of the long track record of operations, experienced management, sound business risk profile 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 further elongation in its working capital cyclea
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Other Factors affecting Rating |
None |
Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
Operating Income | Rs. Cr. | 3583.66 | 4068.91 |
PAT | Rs. Cr. | 93.08 | 101.03 |
PAT Margin | (%) | 2.60 | 2.48 |
Total Debt/Tangible Net Worth | Times | 0.63 | 0.72 |
PBDIT/Interest | Times | 3.48 | 3.28 |
Status of non-cooperation with previous CRA (if applicable) |
Not Applicable |
Any Other Information |
None |
Applicable Criteria |
• 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 • Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm |
Note on Complexity Levels of the Rated Instrument |
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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About Acuité Ratings & Research |
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