­Acuité has combined and consolidated the financial and business risk profiles of Shri Ram Multicom Private Limited with its subsidiaries, Shri Ram Mall Private Limited, Shri Ram Residency Private Limited, Shri Ram Ozone Retail Private Limited, Shri Ram Precisions, Ozone Logistics Private Limited, Jalan Inter continental Hotels Private Limited and others (Refer Annexure 2). This is on account of common promoters, holding subsidiary relationship, fungibility of cash flows and corporate guarantee provided by Shri Ram Multicom Private Limited, the flagship company to its subsidiaries. The group is herein referred to as the Shri Ram Ozone group.

­Long track record of operations and experienced management
The group has a long track record of over two decades in varied business like distribution of TMT bars, dealership of jewellery, real estate/commercial estate, and logistics business. The group has an established presence in Jharkhand and West Bengal. Initially, the group started with clearing & forwarding business and development of residential and commercial projects. The group is managed by Mr. Pradeep Kumar Sonthalia, who possesses vast experience of over two decades in the industry. Currently, his son Mr. Nityanand Sonthalia is actively involved in the day to day operations of the group. Acuité believes the group’s established market presence and vast experience of the promoters in diverse industries would continue to support the group’s business risk profile going forward.

Diversified business with major contribution from distribution of TMTbars
The group has presence in diverse sectors like real estate development, steel trading, jewellery, hospitality and logistics. However, major revenues of the group are generated from distribution of TMT bars, manufactured by Electrosteel Steels Limited and Jindal Steel and Power Limited. The group’s TMTbars trading division is operated under Ozone Logistics Private Limited. In FY24, TMT bars trading division contributed to around 59 per cent of the total revenues of the group. Moreover, the group also derives healthy revenues from the jewellery business. The group operates showrooms, in Kolkata, Ranchi and Dhanbad and is an authorized dealer of Tanishq Jewellery, Mia and Caratlane. Apart from this, the group has leased out commercial properties in Dhanbad which provide stable cash flows. The leased out properties have had healthy occupancy over the years, along with modest growth in rentals. Also, the group has leased out its retail space in its newly developed hotel, Fairfield by Marriott to reputed retailers which provides stable rentals. The group is also operating Taj-Vivanta Kolkata which is in the vicinity of airport and hospital area. The group has acquired Sarga Hotel Private Limited and has started operating The Westin Kolkata fromFY24. The group is always in capex or acquisition mode to increase its business profile. Acuité believes that though the debt levels of the group remains significantly high, the stable cash flows from its leased out properties and steel trading activities (contributing to around 59 percent of the group’s revenues) will help the group to sustain steady cash accruals and maintain its business risk profile over the medium term.

Improvement in working capital management
The working capital management of the group has improved and is moderate marked by Gross Current Assets (GCA) of 95 days on 31st March 2024 as compared to 108 days on 31st March 2023. The moderate level of GCA days is on account of moderate inventory levels during the same period. The inventory holding stood at 45 days on 31st March 2024 as compared to 58 days as on 31st March 2023. Also, the debtor period stood comfortable at 8 days on 31st March 2024. The group has a cash and carry model of business. Acuité believes that the working capital operations of the group will remain at same level as evident from efficient collection mechanism and moderate inventory levels over the medium term.

­Average Financial Risk Profile
The tangible net worth of the group stood at Rs.696.95 Cr. as on March 31, 2024 as compared to Rs.380.45 Cr. as on March 31, 2023 due to additions to capital reserve and accretion of profits to reserves. The debt protection metrices of the group is marked by Interest coverage ratio (ICR) of 3.13 times and debt service coverage ratio (DSCR) of 2.02 times for FY2024. Acuite believes that the DSCR has increased on account of reversal of DTA which has led to increase in PAT and cash accruals for FY24. Adjusted DSCR stood at 1.64 times in FY24. Acuite is of the opinion that the debt protection metrices are expected to moderate in FY25 and FY26 due to onboarding of debt for acquisition of Sarga Hotels Pvt Ltd and ongoing or addition of capex. The net cash accruals to total debt (NCA/TD) stood moderate at 0.16 times in FY2024. Acuité believes that the financial risk profile of the group is expected to remain average due to debt funded capex plans over the medium term and moderate debt protection metrics.

Ongoing capex plans of the group
To expand the business profile of the group, it is in capex mode. The group currently has 4 projects in pipeline – mall extension under Shri Ram Mall Private Limited, mall development in Patna in JV with PS Srijan Group under Bailey Properties Private Limited, hotel under Taj brand and a stalled project under Kashish Distributors Limited. The cumulative project cost is expected to be upwards of Rs.500 Cr. to be funded by debt and internal accruals. The expected timeline of completion of the projects- mall extension under SRMPL and mall development under Bailey Properties Private Limited – is by end of FY2026. However, since the group undertakes project developments on an ongoing basis, timely completion of the projects as well as addition of new projects which will affect the groups capital structure and financial risk profile, will remain a key monitorable.

Intense competition and inherent fragmented nature of the steel industry
The downstream steel industry remains heavily fragmented and unorganised. The group is exposed to intense competitive pressures from large number of organised and unorganised players along with its exposure to inherent cyclical nature of the steel industry. Additionally, prices of rawmaterials and products are highly volatile in nature. Acuite believes since almost 60% of the group’s revenue contribution is from trading of steel, the group will remain susceptible to risks inherent in steel trading business