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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 101.95 | ACUITE BBB- | Stable | Assigned | - |
| Bank Loan Ratings | 0.25 | - | ACUITE A3+ | Assigned |
| Total Outstanding | 102.20 | - | - |
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Rating Rationale |
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Acuite has assigned its long-term rating of ‘ACUITÉ BBB-' (read as ACUITE Triple B minus) and short-term rating of ‘ACUITÉ A3+’ (read as ACUITE A Three plus) on the Rs. 102.20 Cr. bank facilities of Riddhi Steel & Tube Limited (RSTL). The outlook is ‘Stable’.
Rationale for Rating The rating assigned reflects the established track record of operations and industry experience of the company’s directors in steel industry for more than two decades. The rating also factors in the moderate financial risk profile of the company reflected by moderate gearing(debt/equity) of 1.38 times in FY24. The rating also considers growth in revenue recorded in FY24 to Rs. 327.57 Crore from Rs.302.67 Crore in FY23. The company has recorded a revenue of Rs.90.09 Cr. (Est) in Q1 FY25. The rating further considers the prepayment of loans made by the company from the amounts recovered from loans and advances made in FY2023 and FY2024. Furthermore, the company has been able to sustain its operating profit margins over the last 3 financial years despite volatility in steel prices. However, the rating is constrained by moderately intensive working capital management with high GCA days of 193 days. Further, the company has high reliance on bank borrowings with an average utilization of more than 88% for 12 months ended June 2024. Further, it factors in the susceptibility of profitability to competitive industry and fluctuations in raw material prices. |
| About the Company |
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Riddhi Steel & Tube Limited is a limited company Listed with Bombay Stock Exchange (BSE).The company was incorporated in 2001. The Directors of the company are Mr. Rajesh Ramkumar Mittal and Mrs. Preeti Rajesh Mittal. RSTL is engaged in manufacturing of MS Black pipes and galvanized pipes with installed capacity of 79,200 tone/annum and the company has its registered office and manufacturing unit in Ahmedabad. Since inception the company serves a broad set of industries like solar, Power transmission, agriculture, roadways & highways, green house & more.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered the standalone business and financial risk profile of Riddhi Steel & Tube Limited (RSTL)to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations-
The company is managed by Mr. Rajesh Ramkumar Mittal and Mrs. Preeti Rajesh Mittal and a team of experienced personnel. The directors possess over 20 years of experience in this line of business. The long-standing experience of the directors and long track record of operations has helped the company to establish comfortable relationships with key suppliers and customers. The experience of the directors is also evident through the improving scale of operations, with revenue of the company increased to Rs. 327.57 Cr. in FY24 from Rs. 302.67 Cr. in FY23. Furthermore, the company achieved a revenue of around Rs 90.09 Cr. (Est) till June 2024 and is expected to achieve a revenue of Rs 375 Cr. for FY 25. Acuite believes that company shall continue to benefit from its established presence and track record along with a healthy relationship with customers. Moderate Financial Risk Profile The financial risk profile of the company is moderate, marked by moderate net worth, moderate gearing and average debt protection metrics. The net worth of the company stood at Rs.79.52 crore in FY 2024 as compared to Rs 61.18 crore in FY2023. The increase in networth is majorly due to accretion of profits to the reserves. The gearing of the company has stood moderate at 1.38 times in FY 2024 as compared to 1.82 times in FY 2023. The gearing is expected to remain on similar levels over the medium term on account of absence of any debt funded capex plans and modest incremental working capital requirements. The TOL/TNW of the company stood at 1.47 times as on 31st March 2024 as against 1.99 times as on 31st March 2023. Further, debt protection metrics stood average with Interest Coverage Ratio (ICR) stood of 1.86 times as on 31st March 2024 as against 1.69 times as on 31st March 2023. The Debt Service Coverage Ratio (DSCR) of the company stood at 0.73 times as on 31st March 2024 as compared to 1.57 times in the previous year. The Net Cash Accruals to Total Debt (NCA/TD) ratio stood at 0.07 times as on 31st March 2024 as compared to 0.06 times in the previous year. Acuite expects the financial risk profile of the company may continue to remain moderate, with no major debt funded capex plan in medium term and steady cash accruals. |
| Weaknesses |
| Moderately intensive working capital management
The working capital operations of the company are moderately intensive in nature marked by GCA days of 193 days in FY2024 as compared to 182 days in FY2023. The debtor’s collection period stood at 61 days in FY2024 as against 89 days in FY2023. Generally, the company has a policy of providing credit upto 60-90 days to its customers. The inventory days for the company stood at 99 days in FY2024 as against 79 days in FY2023. Generally, the inventory holding period that the company follows is around 60-75 days. Also, the creditors days stood at 3 days in FY2024 as against 7 days in FY2023. Generally, the company is paying advance to majority of suppliers. Furthermore, the average utilization of working capital for fund based limits remained high, averaging around 88% over the last 12 months ending June 2024. Acuite believes that working capital operations of RSTL may continue to remain moderately intensive over the medium term. Susceptibility of profit ability to competitive industry and fluctuations in raw material prices The company operates in a highly competitive and fragmented industry characterised by low entry barriers, which results in intense competition from the large number of organised and unorganised players present in the downstream segment providing similar products and services. Hence, the bargaining power of the company remains low due to the competitive nature of the industry. Additionally, prices of raw materials and products are highly volatile in nature. Any volatility in the prices of the raw materials has a direct impact on the profitability margins of the company. |
| Rating Sensitivities |
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Improvement in scale of operation while improving the profitability margin. Any further significant elongation in its working capital cycle. Deterioration in financial risk profile. |
| Liquidity Position |
| Adequate |
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The company’s liquidity position is adequate, marked by sufficient net cash accruals of Rs.8.12 Cr. in FY2024 as against its maturity debt obligations of Rs.7.79 Cr. in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs. 10.09 – 11.97 crore as against the maturing repayment obligations of around Rs. 2.12 Cr. over the medium term. However, the working capital management of the company is moderately intensive marked by GCA days of 193 days in FY2024 as against 182 days in FY2023 . The current ratio stands at 1.63 times as on 31st March 2024 as against 1.56 times as on 31st March 2023. The average bank limit utilization for the past 12 months ending June 2024 is high averaging around 88% percent.
Acuite believes that liquidity position of the company may continue to remain adequate with steady cash accruals. |
| Outlook: Stable |
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Acuite believes the outlook on RSTL will continue to remain ‘Stable’ over the medium term backed by its long track record of operations and experienced management and moderate financial risk profile. The outlook may be revised to ‘Positive’ if the company is able to successfully acquire higher orders which will lead to significant improvement in scale of operations and the profitability margins while also improving its working capital operations. Conversely, the outlook may be revised to ‘Negative’ in case of any operating inefficiency by RSTL leading to deterioration in revenue and profitability along with financial risk profile and liquidity position of the company.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 327.57 | 302.67 |
| PAT | Rs. Cr. | 4.80 | 3.40 |
| PAT Margin | (%) | 1.46 | 1.12 |
| Total Debt/Tangible Net Worth | Times | 1.38 | 1.82 |
| PBDIT/Interest | Times | 1.86 | 1.69 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.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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| Rating History : |
| Not Applicable |
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