Experienced management
The Majority Partner of the firm, Mr. Rajiv Kumar Sood, has more than two decades of experience in the iron and steel industry, through his association with other group companies. He is ably supported by other highly qualified and experienced promoters. Moreover, the promoters are resourceful and have also supported the firm by infusing unsecured loans as and when required to support the business operations. Acuité believes that the long operational track record of the Royal group coupled with the long experience of the management might continue to benefit the group going forward, resulting in steady growth in the scale of operations.
Efficient working capital management
The efficient working capital management of the firm is marked by GCA days of 56 days in FY24 as against 53 days in FY23 due to a change in the prices of the finished goods. Inventory days stood at 24 days in FY24 as against 23 days in FY23. The debtor and the creditor period were observed to be on similar levels for FY24 when compared to FY23. Acuité believes that the working capital requirement is likely to remain at similar levels in the near to medium term.
Moderate business risk profile
The operating income of the firm slightly moderated to Rs.160.30 Cr. in FY24 as against Rs.165.04 Cr. in FY23, thereby registering a decline of 2.87% because of a decrease in the prices of finished goods. Further, the revenue of the firm stands at Rs. 76.44 Cr. for H1-FY25 and they aim to achieve the mark of Rs. 165 Cr. for FY25. Acuite expects slight moderation in the operating income on account of increased volume of sales albeit absence of backward integration of sponge iron plant and reliance on external power source.

Average financial risk profile
The firm’s financial risk profile is marked by modest net worth base, moderate gearing and moderate debt protection metrics. The tangible net worth of the firm slightly decreased to Rs. 9.69 Cr. in FY24 from Rs.10.03 Cr. in FY23 on account of withdrawal of Quasi Equity worth Rs. 1.29 Cr. but infusion of capital fund of Rs. 0.95 Cr. by three new partners. Acuité has considered unsecured loans of Rs.2.01 Cr. as on March 31, 2024, as quasi-equity as the management has undertaken to maintain the amount in the business over the medium. Gearing of the firm slightly declined to 1.84 times for FY24 as against 1.55 times for FY23 because of the increase in short-term borrowings. Moreover, slight moderation in the debt protection metrics has been observed wherein the Interest Coverage Ratio has decreased to 1.58 times in FY24 from 1.70 times in FY23 and the Debt Service Coverage Ratio saw a mild moderation to 1.21 times in FY24 from 1.23 times in FY23. However, going forward the firm plans to repay the long-term debts which will help them to support the debt protection metrics.
Inherent cyclical nature of the steel industry
The firm'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 economy. 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 realization from finished goods. The prices and supply of the main raw material, sponge iron, directly impacts on the realizations of finished goods.
Further the global disruption in the steel prices because of the slowdown in the infra market of China has led China to increase export to other countries leading to an increased supply and decreased prices in the global market. Any significant reduction in demand and prices adversely impacting the operating margins and cash accruals of the group will remain a key monitorable.