| Integrated operation with large operational capacity
The NR group is promoted by the Agrawal family of Raigarh (Chattisgarh). The group is managed by Mr. Sanjay Agarwal, who has two decades of experience in the steel business. The group has integrated operations with capacities to produce sponge iron, steel billets and long products across three companies – NR Ispat, NR TMT and NRVS. The aggregate installed capacity of the NR Group is 240,000 MT of sponge iron, 476,760 MT of billets, 164,000 MTPA of ferro alloys/Pig iron and 356,000 MT of rolled steel products. In the current fiscal, the group has commissioned 164,000 MT of pig iron and 164,160 MT per annum for billet capacities in NR Steel.
The group has undertaken large capex plan to enhance existing capacities in NRVS and NR TMT. The project cost of ongoing capex is around Rs 292 Cr which will be funded through a mix debt and equity in 2:1 ratio. The expansion capex will enhance the existing sponge iron capacity to 435,000 MTPA, billet capacity to 761,760 MTPA and captive power source to 48 MW. The project is expected to complete by Q2FY24.
The group has registered sustained growth as revenue stood at Rs 1130 Cr in FY22(Provisional) as against Rs 768 Cr in FY21 and Rs 598 Cr in FY20. The improvement is driven by rise in sale volume and average realization of steel products. Moreover, the growth is also driven by capacity addition during last 2FYs. The group has posted a revenue of Rs 345 Cr in Q1FY23(Provisional). The scale of operation expected to improve over the medium term backed by capacity addition.
Healthy financial risk profile
The financial risk profile of the group is marked by healthy net worth, comfortable gearing and strong debt protection metrics. The net worth of the group stood at Rs.250.64 Cr in FY2022 (Provisional) as compared to Rs.193.51 Cr in FY2021.The gearing of the group increased to 1.25 times as on March 31, 2022(Provisional) as compared to 0.86 times as on March 31, 2021 due to debt funded capex plan. TOL/TNW stood at 1.72 times in FY22(Provisional) as against 1.14 times in FY21.The group had witnessed significant rise in debt level because of continuous debt funded capex plan. Interest coverage ratio (ICR) stood strong at 8.20 times in FY2022(Provisional) as against 7.42 times in FY 2021. The debt service coverage ratio (DSCR) also stood comfortable at 2.41 times in FY22(Provisional) as against 2.40 times in FY2021. The improvement in interest coverage is driven by rise in absolute EBITDA backed by increased turnover levels. The net cash accruals against total debt (NCA/TD) stood at 0.27 times in FY22(Provisional) as compared to 0.39 times in previous year. Acuité believes the financial risk profile of the group will remain comfortable over the medium term backed by steady accruals and comfortable profit margin even though they might witness some moderation in FY’22 due to the ongoing capex in NRVS Steel.
Stable profitability margin
The group has reported steady operating margin as EBITDA margin stood at 10.00 percent in FY22(Provisional) as compared to 11.59 percent in FY21.The moderation is due to high power and raw material costs. Acuite expects the profitability margin of the group will remain at comfortable level in medium term backed by increase in operational efficiencies due to addition of 25 MW captive power source.
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