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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 183.00 | ACUITE A- | Stable | Upgraded | Positive to Stable | - |
| Bank Loan Ratings | 5.00 | - | ACUITE A2+ | Assigned |
| Bank Loan Ratings | 175.00 | - | ACUITE A2+ | Upgraded |
| Total Outstanding | 363.00 | - | - |
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Rating Rationale |
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ACUITE has upgraded the long-term rating to ‘ACUITÉ A-’ (read as ACUITÉ A minus) from 'ACUITÉ BBB+' (read as ACUITÉ Triple B plus) and short-term rating to ‘ACUITÉ A2+’ (read as ACUITÉ A two plus) from ‘ACUITÉ A2' (read as ACUITÉ A two) on the Rs.358 Cr. bank facilities of Manaksia Coated Metals and Industries Limited (MCMIL). The outlook has been revised to ‘Stable’ from ‘Positive’.
ACUITE has further assigned the short-term rating to ‘ACUITÉ A2+’ (read as ACUITÉ A two plus) on the Rs.5 Cr. bank facilities of Manaksia Coated Metals and Industries Limited (MCMIL). Rationale of the Rating The rating upgrade 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 FY2025. MCMIL has already attained better turnover as on March 31, 2024 which stood at Rs. 746.18 Cr. Presently, for FY2024, the company has already achieved a revenue of Rs. 746.18 Cr. as compared to Rs.653.31Cr. in FY2023. 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 FY2025 with improved contribution from both domestic and export markets. Also, the new galvalume project is expected to augment the turnover and profitability of the business. In FY2024, 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. MCMIL has already attained profitability of Rs. 56.87 Cr. (7.62%) as on March 31, 2024 (earlier projected at Rs. 54.03 Cr.; 7.18%). This has been a result improved contribution from the export markets, increase in operating efficiencies and addition of capacities of FY2023 being stabilised during FY2024. 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 balance is expected by H1FY25) and improved debt protection metrices due to improving cash accruals and absence of debt funded capex plans. Acuite has also treated as Rs. 28 Cr. as quasi capital due to subordination of these unsecured loans to debts, not considered earlier. This further enhances the capital structure. The rating also derives comfort from the improving liquidity position of the company marked by surplus cash accruals, prepayment of GECL loans, 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 and Industries Limited (MCMIL) is a Kolkata-based company managed by Mr. Sushil Agrawal and Mr. Karan Agarwal. 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 aluminium 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: Manaksia International FZE is a non-operational company. There were no revenue during the Financial Year 2022-23. During the year under review, there were no operations in the said Company.
JPA Snacks Private Limited: Incorporated in 2017, JPA Snacks Private Limited is inolved in manufacturing of grain mill products, starches and starch products, and prepared animal feeds. Directors of the Company are Mr. Sunil Kumar Agrawal, Mr. Mahabir Prasad Agrawal and Mr. Sridhar Bhattacharjee. The total revenue of the Company for Financial Year 2022-23 stood at Rs.50.96 Lacs. During the year the Company incurred a net gain of Rs. 4.34 Cr. |
| 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 has already attained better turnover as on March 31, 2024 which stood at Rs. 746.18 Cr. Presently, for FY2024, the company has already achieved a revenue of Rs. 746.18 Cr. as compared to Rs.653.32 Cr in FY2023. This has been a result of better realization in Q2 and Q3 of FY2024 and better off-takes in volume. MCMIL is expected to scale up their operations in FY2025 with the new facilities being set up for galvalume products which has better realisations and lower cost of production. The company's value-added pre-painted steel coils have emerged as robust performers, indicating a promising growth area for the business Additionally, the company has successfully leveraged the product's success, reducing its dependence on Galvanized steel products and boosting the share of pre-painted steel products in its sales. It has an order book of Rs. 193.93 Cr. to be executed in the next 3-4 months horizon providing it near term revenue visibility. The turnover of the company was at Rs. 143.21Cr. in 2 months in FY2025. MCMIL has already attained profitability of Rs. 56.87 Cr. (7.62%) as on March 31, 2024 (earlier projected at Rs. 54.03Cr.; 7.18%). This has been a result improved contribution from the export markets, increase in operating efficiencies and addition of capacities of FY2023 being stabilised during FY2024. In FY2024, 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. 56.87 Cr. (7.62%) in FY2024 compared Rs. 36.63 Cr. (5.61%) in FY2023. PAT has also increased to Rs.11.24 Cr. in FY24 versus Rs.9.36 Cr. in FY23. 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 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 aluminum is cheaper than Zinc as raw material. This is expected to contribute to both topline and operating margins. Improvement in financial risk profile The financial risk profile of the company is moderate marked by healthy adjusted net worth, higher than unity gearing and moderate debt protection metrics. The net worth of the company stood at Rs.180.37 Cr. as on March 31, 2024 as compared to Rs. 119.25 Cr as on March 31, 2023. The adjusted gearing of the company improved to 0.83 times in FY2024 against 1.59 times as on March 31, 2023 as compared to 1.63 times as on March 31, 2022. The company had issued and allotted 2.24 crore warrants on preferential allotment basis to promoter (1.38 crore warrants) and non-promoter group on October 11, 2023. The warrants have been issued at Rs.18 (including Rs.17 of premium) and they will be converted into equity shares within a period of 18 months from date of allotment i.e. October 11, 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. The company received Rs.21.87 crore in two tranches. In October 11, 2023 the company received Rs.10.08 Cr. as application money against warrants which is 25% of the total warrants value. Further in January 15, 2024, company converted 87.35 lakh warrants (out of 2.24 crore) into equity shares after receiving balance consideration aggregating to Rs.11.79 crore. The balance monies are expected to be infused by H2FY2025. Also, the Company is not taking any debt for its capex. Furthermore, about Rs, 28 Cr. of unsecured loans are being treated as quasi equity which improves the gearing profile of the Company since such loans has been subordinated to IDBI Bank loans. This is expected to improve the overall gearing ratio of the company over the medium term. Furthermore, the company has also not utilized any term debt for its capex which has been funded through internal accruals and fund infusion. It also intends not to avail term loans in the near to medium term on the back of healthy accruals and current fund infusion. TOL/TNW improved to 1.98 times as on March 31, 2024 against 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 1.74 times in FY2024 as against 1.96 times in FY2023 and debt service coverage ratio (DSCR) at 1.21 times in FY2024 as against 1.21 times in FY2023. The net cash accruals against total debt (NCA/TD) stood low at 0.14 times as on March 31, 2024 similar as previous year. Acuité believes the financial risk profile of the company would improve with slight improvement since 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 has improved as reflected by Gross Current Assets (GCA) of 169 days as on 31st March 2024 as compared to 200 days as on 31st March 2023. 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 122 days as on 31st March 2024 as compared to 151 days as on 31st March 2023. However, the debtor period stood comfortable at 27 days in 31st March 2024 as compared to 24 days in 31st March 2023. Against this the Company receives credit from its suppliers and the creditor days stood at 102 days as on March 31, 2024. Acuité believes that the working capital operations of the company will remain at similar levels 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. 20.44 Cr in FY24 as against current maturity of Rs 11.16 Cr during that year. The Company has also prepaid a part of their GECL loans. 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 April 2024 stood at around 81.41 per cent. The Company is also expected to receive enhancement on working capital limit from Rs. 300 Cr. to Rs. 325 Cr. which is expected to improve the liquidity even further over the medium term. The current ratio stood moderate at 1.20 times in FY24. The working capital operations of the company remained intensive marked by high Gross Current Assets (GCA) of 169 days as on 31st March 2024 as compared to 200 days as on 31st March 2023. 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: Stable |
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Acuité believes the outlook on MCMIL will remain ‘Stable’ over the medium term backed by the company’s established track record and part of a reputed group. The outlook may be revised to ‘Positive’ 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 ‘Negative’ 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 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 746.18 | 653.31 |
| PAT | Rs. Cr. | 11.24 | 9.36 |
| PAT Margin | (%) | 1.51 | 1.43 |
| Total Debt/Tangible Net Worth | Times | 0.83 | 1.59 |
| PBDIT/Interest | Times | 1.74 | 1.96 |
| 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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