­Acuité has considered the consolidated business and financial risk profile of Mukand Limited along with its subsidiaries. The list of subsidiaries and associates that have been considered for consolidation has been attached in the annexures. The entities are together referred to as 'The Group'.

­Strong parentage; long-standing presence in the steel market
Incorporated in 1937, ML largely caters to the automobile and auto component industry. The Chairman and Managing Director of ML, Mr. Niraj Ramkrishna Bajaj has been associated with the steel manufacturing business for almost four decades. The management of the Group is ably supported by qualified team of professionals. Over the years, the Group has been able to build healthy portfolio of reputed automobile manufacturer i.e. end consumers including Maruti Suzuki, Hyundai, Toyota, Nissan, Bajaj Auto, Hero Moto Corp, Honda Motor Cycles and Scooters India Limited

ML has also established its presence in the international markets by way of exports to the U.S, Germany, Italy, Netherlands, Switzerland, United Arab Emirates, Japan, Hong Kong, Taiwan and Vietnam, amongst others. The promoter’s established presence in the steel business has helped the company to form Joint Venture with Sumitomo Corporation, Japan (SC). In January 2018, ML demerged its alloy steel rolling and finishing business and transferred the same to Mukand Alloy Steel Private Limited (MASPL) {wholly owned subsidiary of ML-now rechristened as Mukand Sumi Special Steel Ltd (MSSSL)}. Subsequently, as a part of the scheme of arrangement and amalgamation amongst the companies, Mukand Vijayanagar Steel Limited (MVSL) {wholly owned subsidiary of the company} was amalgamated with MASPL. In FY2022, ML subsidiaries Mukand Engineers Limited (MEL), Mukand Global Finance Limited (MGFL) and Adore Traders and Realtors Private Limited (ATRPL) were also amalgamated into ML vide NCLT order dated 24.05.2022. During FY2021, ML had envisaged plans of monetization of its non-core assets of which the first tranche was implemented in FY2021 and second tranche in FY2022. The funds raised vide the monetization were used to reduce the outstanding debt levels and for working capital purposes. The experience and reputation of the promoters and it belonging to one of India’s reputed business house; i.e. Bajaj Group was crucial in timely implementation of the plans. Acuité believes that ML will continue to benefit over the near to medium term on account of its experienced management and long-standing existence in the industry.

Moderate Financial Risk Profile
The financial risk profile of the group is marked by moderate gearing, comfortable debt protection metrics and tangible networth. The overall gearing improved to 1.67 times on March 31, 2024 as against 1.83 times on March 31, 2023. TOL/TNW stood at 2.33 times on March 31, 2024 as against 2.74 times on March 31, 2023. Debt-EBITDA declined to 4.84 times on March 31, 2024 as against 3.75 times on March 31, 2023.
The debt protection indicators stood comfortable with Interest coverage ratio (ICR) at 2.34 times on March 31, 2024 as against 2.27 times on March 31, 2023. The debt service coverage ratio stood at 2.16 times on March 31, 2024 as against 0.34 times on March 31, 2023.
 

­Intensive Working Capital Management
The operations of the group are intensive marked by Gross Current Asset (GCA) of 166 days on March 31, 2024 as against 153 days on March 31, 2023. The GCA days are driven by inventory days and debtor days. The inventory days stood at 119 days on March 31, 2024 as against 98 days on March 31, 2023. The debtor collection period stood at 38 days on March 31, 2024 as against 30 days on March 31, 2023. The creditor days stood at 40 days on March 31, 2024 as against 42 days on March 31, 2023. The average bank limit utilization stood at 79.50 percent for six months ended May 2024.

Susceptibility of operating performance to volatility in demand and prices
ML manufactures alloy steel using iron ore and metallurgical coke as its main input and stainless-steel using steel scrap and nickel as its main input. The prices of these inputs are linked to the global markets having direct impact on the Group's profitability. Besides the domestic demand volatility, supply side factors such as imports from China are also major determinate which influence the credit profile of the steel manufacturers. ML imports 40-60 per cent of its raw material requirement and is, thus, also exposed to forex fluctuations. The operating margins on a consolidated basis stood at 5.64 percent in FY2024 as against (3.23) percent in FY2023. The decline in operating income is primarily on account of decline in sales realisation along with marginal decline in sales volume. Net profitability margins stood at 1.98 percent in FY2024 (3.09 percent in FY2023 - supported by other income of surplus generated on land parcel sale). Acuité believes that ML will continue to remain exposed to the risk of changes in raw material prices, thereby impacting its profitability. However, in order to mitigate the risk to some extent, ML has entered into a cost-plus arrangement with its Joint Venture MSSSL for the sale of its entire output of alloy steel division and follows an order back to back policy for its raw material requirement for its stainless steel division.