| Long track record of operations for the group and experienced management
The group has had a long operational track record in the iron and steel industry for around one and a half decades. Royal Group is a Punjab-based group engaged in the manufacturing of flat steel products and ingots. Further, the key promoter of the group, Mr. Sanjeev Sood, has more than two decades of experience in the iron and steel industry. He is ably supported by other highly qualified and experienced promoters. Moreover, the promoters are resourceful and have also supported the group companies by infusing unsecured loans as and when required to support the business operations.
The long-standing experience of the partners and long track record of operations has helped the group to establish healthy relationships with key suppliers and customers.
Sustained profitability margins albeit decline in scale of operations;
The overall profitability margins of the group remained range-bound during FY26 (prov.), despite a decline in revenue generated during the same period. In FY26 (prov.), the group reported a decline in revenue to Rs. 426.27 Cr., reflecting a 30.57 per cent decrease compared to the FY25 revenue of Rs. 613.99 Cr. This decline is primarily attributed to lower sales volume of its products.
The group’s profitability remained moderate. The operating margin for FY26 (prov.) stood at 3.52 per cent, showing a slight decline from 3.61 per cent in FY25. This moderation was due to an increase in other manufacturing and administrative costs. The Profit After Tax (PAT) margin remained intact at 1.31 per cent in FY26 (prov.), compared to 1.11 per cent in FY25. Looking ahead, margins are expected to improve slightly as the firm focuses more on value-added products. The business was impacted to an extent by the exit of old partners.
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| Moderate financial risk profile
The financial risk profile of the group stood moderate, marked by moderate net worth, low gearing and moderate debt protection metrics. The net worth of the group stood modest at Rs. 43.51 Cr. in FY 2026 (prov.) as compared to Rs 35.76 Cr. in FY 2025. This improvement in net-worth is mainly due to the retention of current year profit. The group’s total debt comprises of Rs. 59.99 Cr. long-term debt, Rs. 18.08 Cr. of short-term debt, Rs. 36.62 Cr. USL and Rs. 2.70 Cr. of CPLTD amounted to Rs. 117.39 Cr. as of March 31, 2026 (Prov.) The gearing of the group stood at 2.70 times as on 31st March 2026 (prov.) as compared to 3.16 times as on 31st March 2025. The TOL/TNW of the group stood high at 4.12 times in FY2026 (prov.) as against 4.62 times in FY2025. Further, debt protection metrics stood moderate with Interest coverage ratio (ICR) at 2.02 times as on 31st March 2026 (prov.) as against 1.92 times as on 31st March 2025. The debt service coverage ratio (DSCR) of the group stood at 1.27 times as on 31st March 2026 (prov.) as compared to 1.49 times in the previous year. The Debt-EBITDA of the group stood at 7.31 times as on 31st March 2026 (prov.) as against 4.80 times as on 31st March 2025. The net cash accruals to total debt (NCA/TD) stood at 0.07 times as on 31st March 2026 (prov.) as compared to 0.09 times in the previous year.
Acuite believes, the financial risk profile to improve in the near term on account of absence of any debt funded capex plans and gradual repayment of the loans.
Moderately intensive working Capital Operations
The working capital operations of the group are moderate in nature marked by gross current asset (GCA) days of 161 days in FY2026 (prov.) against 96 days in FY2025. This increase is primarily driven by higher debtors’ days as compared to previous year, which extended to 78 days as of March 31, 2026 (prov.), from 39 days as of March 31, 2025. average collection period is around 25-40 days. The inventory days stood at 43 days as on March 31, 2026 (prov.), as against 38 days as on March 31, 2025 .Generally the group hold the inventory for around 30 days. Additionally, creditors’ days stood at 30 days in FY2026 (prov.), compared to 18 days in the previous year. Average credit period allowed is around 15-20 days. Furthermore, the reliance on working capital limits remained high with utilization of working capital limits at around 99.50% over the last 6 months ending April 2026 for fund-based limits.
Inherent cyclical nature of the steel industry
The group's performance remains vulnerable to cyclicality in the steel sector given the close linkage between the demand for steel products and the domestic and global economies. The end-user segments such as real estate, civil construction, and engineering also display cyclicality. Further, operating margins are vulnerable to volatility in the input prices (sponge iron, iron ore, and coal) as well as realisation from finished goods. The prices and supply of the main raw material, sponge iron, directly impact the realisation of finished goods. Any significant reduction in demand and prices adversely impacting the operating margins and cash accruals of the group will remain a key monitorable.
Inherent risk of capital withdrawal in a partnership firm
Being a partnership firm, Royal Group remains exposed to the risk of capital withdrawal by the partners. Acuité notes that any significant capital withdrawal may adversely impact the firm’s financial risk profile and will remain a key rating monitorable.
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