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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 20.00 | ACUITE BBB+ | Positive | Assigned | - |
| Bank Loan Ratings | 163.00 | ACUITE BBB+ | Positive | Reaffirmed | Stable to Positive | - |
| Bank Loan Ratings | 175.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding | 358.00 | - | - |
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Rating Rationale |
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ACUITE has reaffimed the long-term rating to ‘ACUITÉ BBB+’ (read as ACUITÉ triple BBB plus) and short-term rating to ‘ACUITÉ A2’ (read as ACUITÉ A two) on the Rs.338 Cr. bank facilities of Manaksia Coated Metal and Industries Limited (MCMIL). The outlook has been revised to ‘Positive’ from ‘Stable’.
ACUITE has further assigned the long-term rating to ‘ACUITÉ BBB+’ (read as ACUITÉ triple BBB plus) on the Rs.20 Cr. bank facilities of Manaksia Coated Metal and Industries Limited (MCMIL). The outlook is ‘Positive’. Rationale of the Rating The rating reaffirmation with revision in outlook reflects improvement in business risk profile of the company reflected by increased scale of operations and robust order book position in 9MFY2024. For 9MFY2024, the company has already achieved a revenue of Rs. 566.01Cr. as compared to Rs.469.41 Cr. in 9MFY2023. This has been a result of better realization in Q2 and Q3 of FY2024 and better off-takes in volume. The company is estimating the growth performance to continue in Q4FY24 with improved contribution from both domestic and export markets. In 9MFY2024, the operating profitability of the Company is better than expected with increase in contribution from the export markets, increase in operating efficiencies and addition of capacities. The EBDITA stood at Rs. 39.72 Cr. (7.02%) in 9MFY2024 compared Rs. 27.96 Cr. (5.96%) in 9MFY2023. PAT has also increased to Rs.6.18 Cr. in 9MFY24 versus Rs.1.62 Cr. in 9MFY23. Acuité further notes that the financial risk profile has improved at the back of comfortable capital structure due to capital infusion by way of issuance of share warrants of Rs.40.32 Cr. (of which Rs. 21.78 Cr. received as on March 7, 2024) and improved debt protection metrices due to improving cash accruals and absence of debt funded capex plans. The rating also derives comfort from the improving liquidity position of the company marked by surplus cash accruals, absence of any new term debts to be taken and financial flexibility of the management to infuse funds. The rating also factors in a diversified geographical presence as MCMIL caters to both domestic and overseas markets, supported by increasing demand in the industry providing revenue visibility over the medium term. These strengths are however, partly offset by the high working capital intensity in the operations and susceptibility of the margins to volatility in raw material prices. |
| About Company |
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Manaksia Coated Metals & Industries Limited (MCMIL) is a Kolkata-based company managed by Mr. Sushil Agrawal and Mr. Ajay Chakraborty. It was incorporated in 2010 and was a dormant company till 2013. Subsequently, the coated metal division and mosquito coil division of Manaksia Ltd (ML) was transferred under the scheme of demerger. Manaksia Ltd is a multi-division conglomerate with 17 manufacturing plants in India and 3 abroad; two in Nigeria, one in Ghana. Prior to the demerger, Manaksia Ltd. had four divisions viz. steel division, packaging division, coated metal & mosquito coil division and aluminum division. MCMIL is primarily engaged in the manufacturing of value-added steel flat products like galvanized steel sheets & coils and pre painted steel sheets & coils. The coated steel division of the company has an operational capacity to produce 1,08,000 MT per annum of galvanized steel coils, an operational capacity of 60,000 MT per annum of pre painted steel coils and the home insecticide division of the company can produce 432 million mosquito coils per annum. The company's manufacturing facilities are located in Gujarat, Madhya Pradesh, Telangana and Assam. The metals operation takes place in Kutch and MCMIL produces Mosquito Repellent Coils in Guwahati, Bhopal & Hyderabad and produces Ultramarine Blue Powder in Bhopal under contract manufacturing for Reckitt Benckiser India. The company has also commenced contract manufacturing of Robin Blue for Reckitt Benckiser India Pvt Ltd since FY20.
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| About the Group |
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Manaksia International FZE: There was no revenue in FY23 and there were no operations in the company. There are no borrowings in the company.
JPA Snacks Pvt Ltd: The total revenue of the company was Rs.50.96 lakh and incurred a net gain of Rs.4.34 Cr. in FY23 due to write off of loans from Directors. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the business and financial risk profiles of MCMIL, Manaksia International FZE (MIF) and JPA Snacks Private Limited (JPASPL) together referred to as the 'Manaksia Group' (MG) to arrive at the rating. The consolidation is in view of the fact that both the Companies are a 100% subsidiary of MCMIL and have common management. While MIF is a non-operational entity, there is very limited operations in JPASPL.
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| Key Rating Drivers |
| Strengths |
| Experienced management and part of renowned group
MCMIL has been engaged into manufacturing of coated metal & mosquito coil since 2013, prior to 2013 the operations were under Manaksia Ltd (ML). ML is the flagship company of the group. ML has been engaged in this industry for more than 40 years and is promoted by Mr. Sushil Kumar Agrawal who is the Managing Director of MCMIL and has experience of about three decades in steel industry. The company have been able to establish its presence in Kutch for steel products and Bhopal, Assam and Telangana for other products. The Company has also increased its capacities and plan to advent into galvalume products which are expected to be operationalized in FY2025 and is expected to generate better revenues and profitability as these fetch higher margins and price realizations. Over the years, the Company has been able to establish healthy relationship with its customers and suppliers. Acuité believes that the extensive experience of the promoter in the industry has helped the company build strong market presence. Geographical diversification Major portion of the company’s revenue comes from domestic markets through its distribution channel for coated metal products. The company has 24 dealers spread across Gujarat, Rajasthan and Kerala. The company caters to 20 countries in the overseas markets. Expected revenue and profitability growth from FY2024 onwards MCMIL’s revenues remained subdued as per expectation at Rs. 653.61 Cr. in FY2023 vis-à-vis Rs.648.03 Cr. in FY2022. This was a result of a reduction in export sales due to imposition of 15% export duty during May 2022- Nov 2022. However, the company mitigated and maintained its scale of operations by increasing the sales in domestic market substantially and also by increasing its exports in Q4FY23. Presently, for 9MFY2024, the company has already achieved a revenue of Rs. 566.01Cr. as compared to Rs.469.41 Cr. in 9MFY2023. This has been a result of better realization in Q2 and Q3 of FY2024 and better off-takes in volume. The company is estimating the growth performance to continue in Q4FY24 with improved contribution from both domestic and export markets. It has an order book of Rs. 172.97 Cr. to be executed in the next 3-4 months horizon providing it near term revenue visibility. In FY2023, the profitability of the company had declined as EBITDA margin of the company stood at 5.61 per cent as against 6.49 percent in FY2022 and 7.87 percent in FY2021. Such decline was a result of increase in prices of raw materials and inability of the Company to fully pass on such increase in the domestic markets due to high competition. In 9MFY2024, the operating profitability of the Company is better than expected with increase in contribution from the export markets, increase in operating efficiencies and addition of capacities. The EBDITA stood at Rs. 39.72 Cr. (7.02%) in 9MFY2024 compared Rs. 27.96 Cr. (5.96%) in 9MFY2023. PAT has also increased to Rs.6.18 Cr. in 9MFY24 versus Rs.1.62 Cr. in 9MFY23. In FY2025, the company’s new project of converting existing galvanising line from pure Zinc coating to Alu Zinc coating products will command premium due to its enhanced corrosion resistance and durability. Further, the project will result in lower costs as aluminium is cheaper than Zinc as raw material. This is expected to contribute to both topline and operating margins. Moderate financial risk profile The financial risk profile of the company is moderate marked by healthy net worth, higher than unity gearing and moderate debt protection metrics. The net worth of the company stood at Rs.119.25 Cr. as on March 31, 2023 as compared to Rs. 108.76 Cr. as on March 31, 2022. The gearing of the company stood at 1.59 times as on March 31, 2023 as compared to 1.63 times as on March 31, 2022. The company had issued share warrants on preferential allotment basis to promoter and non-promoter group on October 2023. Effectively the company raised around Rs.40.32 crore during this allotment of which around Rs.21.87 crore has been infused into the company in March 2024. Also, the Company is not taking any debt for its capex (as envisaged earlier). This is expected to improve the overall gearing ratio of the company over the medium term. TOL/TNW stood high at 3.60 times as on March 31, 2023 as against 3.45 times as on March 31, 2022. The moderate debt protection metrics of the company is marked by Interest coverage ratio (ICR) at 1.96 times in FY2023 as against 1.88 times in FY2022 and debt service coverage ratio (DSCR) at 1.21 times in FY2023 as against 1.22 times in FY2022. The net cash accruals against total debt (NCA/TD) stood low at 0.10 times as on March 31, 2023 similar as previous year. Acuité believes the financial risk profile of the company would improve over the medium term due to capital infusion, absence of any term debt and improved profitability leading to better debt protection metrices over the medium term. |
| Weaknesses |
| Working capital intensive nature of operations
The working capital operations of the company is intensive reflected by high Gross Current Assets (GCA) of 200 days as on 31st March 2023 as compared to 165 days as on 31st March 2022. The high level of GCA days is primarily on account of high inventory levels during the same period, this is due to stocking up of large quantity of raw materials and finished goods on account of export duty levy. The inventory holding stood at 151 days as on 31st March 2023 as compared to 121 days as on 31st March 2022. However, the debtor period stood comfortable at 24 days in 31st March 2023 as compared to 27 days in 31st March 2022. The Company also has advances paid to its suppliers and other expenses to the tune of Rs. 37.12 Cr. Against this the Company receives credit from its suppliers and the creditor days stood at 135 days as on March 31, 2023. Acuité believes that the working capital operations of the company will remain at similar high level over the medium term. 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. Acuite believes that the company would remain susceptible to the intense competition and inherent cyclical nature of steel industry over the medium term. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has adequate liquidity profile as reflected from its net cash accrual of Rs. 18.55 Cr. in FY23 as against current maturity of Rs 11.55 Cr. during that year. The net cash accruals are expected to improve at the back of improving profitability and there are only small debt obligations. The management has the flexibility of infusing fund in the business in the form of unsecured loans. The fund based bank limit utilization of 9 months ended January 2024 stood at around 94.3 per cent. The current ratio stood moderate at 1.13 times in FY23. The working capital operations of the company remained intensive marked by high Gross Current Assets (GCA) of 200 days as on 31st March 2023 as compared to 165 days as on 31st March 2022. Acuite expects the liquidity position of MCMIL to remain adequate over the medium term backed by improving accruals, absence of debt funded capex plans, flexibility of management to infuse funds in the business.
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| Outlook : Positive |
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Acuité believes the outlook on MCMIL will remain ‘Positive’ over the medium term backed by the company’s established track record and part of a reputed group alongwith improvement expected in profitability of the group. The rating may be upgraded if the company is able to sustain its turnover growth momentum along with improvement in the profitability margins and working capital cycle. Conversely, the outlook may be revised to ‘Stable’ in case of a decline in margins or elongation in working capital cycle or incurring large debt funded capex.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 653.31 | 648.03 |
| PAT | Rs. Cr. | 9.36 | 8.62 |
| PAT Margin | (%) | 1.43 | 1.33 |
| Total Debt/Tangible Net Worth | Times | 1.59 | 1.63 |
| PBDIT/Interest | Times | 1.96 | 1.88 |
| 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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