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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 13.60 | ACUITE BB | Stable | Upgraded | - |
| Bank Loan Ratings | 3.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 16.60 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term rating from ‘ACUITE BB-’ (read as ACUITE double B minus) to ‘ACUITE BB’ (read as ACUITE double B) and reaffirmed the short term rating of ‘ACUITE A4+’ (read as ACUITE A Four Plus) on the Rs.16.60 crore bank facilities of Rungta Irrigation Limited (RIL). The outlook is ‘Stable’.
Rationale for Upgrade The rating action takes into account improved business risk profile, moderate financial risk profile and adequate liquidity Position. Company reported substantial improvement which is apparent from growth in revenue from operations by ~85% in FY2023 to Rs. 130.13 crore as against Rs. 70.26 crore for FY2022 (193 percent from FY 21 to FY 23). The operating profit margin of the company improved by 65 bps in FY 23. Company reported PAT of Rs 2.98 crore in FY 23 as against Rs 1.27 crore in FY 22. Financial risk profile of the company improved with low gearing, moderate net worth & improved coverage indicators. The Total Tangible net worth stood at Rs. 76.61 Cr as on 31st March 2023 as against Rs. 65.95 Cr a year earlier. Debt to Equity ratio stood low at 0.14 times in FY 2023. Interest coverage ratio stood comfortable at 4.05 times for FY2023 and Debt Service coverage ratio stood at 2.16 times for FY2023. Current Ratio stood at 3.86 times as on 31 March 2023. Acuité believes that the company’s ability to grow its scale of operations and profitability while maintaining a healthy capital structure remains a key rating indicator. |
| About the Company |
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Incorporated in the year 1993, RIL is a Delhi based company promoted by Mr. M. P. Rungta. The company is engaged in manufacturing, designing, assembling and marketing pipe based sprinkler irrigation system. The Company is also engaged in manufacturing of MDPE, HDPE and PVC pipes and others. The company has two manufacturing plants located one at Ghaziabad, Uttar Pradesh and the other at Yanam, Pondicherry.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of RIL to arrive at this rating.
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| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
RIL was incorporated in the year 1993. The company got listed on BSE in the year 1994. The Managing Director of the company Mr. M. P. Rungta has been associated with the company since its inception and has an experience of around three decades in the aforementioned industry and is ably assisted by an experienced second line of management. Moreover, the promoters are also associated with various entities of Rungta group. Rungta group has diversified business in various sectors such as iron and steel, financial consultants, real estates, etc. The Rungta group of companies includes Ramgarh Sponge Iron Private limited, Shriram Power and Steel Private Limited and Gladiolus Finance Consultant Private Limited to name a few. The extensive experience of the promoters has helped the company to maintain a healthy relationship with its customers and suppliers. The customer profile of the company includes both the government as well as private entities. Business risk profile-Improved RIL’s Operating income saw substantial improvement which is apparent from growth in revenue from operations by ~85% in FY2023 to Rs. 130.13 crore as against Rs. 70.26 crore for FY2022 (193 percent from FY 21 to FY 23). The operating profit margin of the company improved by 65 bps in FY 23. Operating Profit Margin of company stood at 4.28% in FY2023 as against 3.63% in FY2022 likewise the net profit margin of the company increased by 48 bps and stood at 2.29 percent in FY2023 as against 1.81 percent in FY 22. ROCE of the company stood at 6.61 percent in FY2023. Business risk profile-Improved RIL’s Operating income saw substantial improvement which is apparent from growth in revenue from operations by ~85% in FY2023 to Rs. 130.13 crore as against Rs. 70.26 crore for FY2022 (193 percent from FY 21 to FY 23). The operating profit margin of the company improved by 65 bps in FY 23. Operating Profit Margin of company stood at 4.28% in FY2023 as against 3.63% in FY2022 likewise the net profit margin of the company increased by 48 bps and stood at 2.29 percent in FY2023 as against 1.81 percent in FY 22. ROCE of the company stood at 6.61 percent in FY2023. Financial Risk Profile- Moderate Company has moderate financial risk profile marked by moderate net worth, coverage indicators and low gearing. The Total Tangible net worth stood at Rs. 76.61 Cr as on 31st March 2023 as against Rs. 65.95 Cr a year earlier. Increase in net worth is on account of increase in paid up capital and Profit accretion. Interest coverage ratio increased by 51 bps and stood comfortable at 4.05 times for FY2023 as against 3.54 times in FY2022. Improvement in Interest coverage ratio is on account of higher operating income and margin in FY 23 in comparison to FY 22. Likewise, Debt Service coverage ratio increased by 82 bps and stood comfortable at 2.16 times for FY2023 as against 1.34 times in FY2022. Total outside liabilities to total net worth (TOL/TNW) stood at 0.34 times as on FY2023 vis-à-vis 0.56 times as on FY2022. Debt-EBITA improved and stood at 1.51 times as on 31st March 2023 as against 5.62 times as on 31st March 2022. The Net Cash Accruals to Total debt stood at 0.41 times as on FY2023 and 0.11 times for FY2022. The financial risk profile of the company is expected to improve and remain comfortable in medium terms, as the company do not have any large capex plan in the medium term. |
| Weaknesses |
| Working capital operations- Improved yet high Company has improved yet high working capital requirements as evident from gross current assets (GCA) of 202 days in FY2023 as compared to 396 days in FY2022. High Working capital requirement is on account of High Receivables and Inventory Days. Inventory days stood at 47 days in FY 23 (101 days in FY22). Debtor days stood at 94 days in FY2023 as against 191 days in FY 22. Working capital limits are utilized at ~ 67 per cent during the last twelve months ended Sep 23. Highly competitive and fragmented nature of industry
The company is operating in a highly competitive and fragmented industry with a large number of organized and unorganized players present in the market, which limits the bargaining power of the company. However, the risk is mitigated to some extent on account of an established track record of operations and experienced management. |
| Rating Sensitivities |
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Improvement in the scale of operations as well as profitability margins.
Improvement in working Cpital Operations |
| All Covenants |
| None |
| Liquidity Position |
| Adequate |
| Company has adequate liquidity marked by net cash accruals to its maturing debt obligations, current ratio, cash and bank balance. Company generated cash accruals of Rs. 4.52 crore for FY2023 as against obligations of Rs. 1.12 crore for the same period. Current Ratio stood at 3.86 times as on 31 March 2023 as against 4.23 times in the previous year. Working capital limits are utilized at ~ 67 per cent during the last twelve months ended Sep 23 leaving additional cushion in working capital limits to meet contingencies. Cash and Bank Balances of company stood at Rs 0.11 crore. |
| Outlook:Stable |
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Acuité believes that RIL will maintain a stable outlook over the medium term backed by its experienced management and established track record of operation in the aforementioned industry. The outlook may be revised to ‘Positive’ in case the company achieves sustained growth in revenues and higher-than-expected improvement in profitability, working capital management and debt protection metrics. Conversely, the outlook may be revised to ‘Negative’ in case of a significant decline in revenues and operating profit margins, or deterioration in the capital structure and liquidity position on account of higherthanexpected workingcapital requirements.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 130.13 | 70.26 |
| PAT | Rs. Cr. | 2.98 | 1.27 |
| PAT Margin | (%) | 2.29 | 1.81 |
| Total Debt/Tangible Net Worth | Times | 0.14 | 0.35 |
| PBDIT/Interest | Times | 4.05 | 3.54 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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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