Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 16.00 ACUITE BBB- | Stable | Reaffirmed -
Bank Loan Ratings 2.00 ACUITE BBB- | Stable | Assigned -
Total Outstanding Quantum (Rs. Cr) 18.00 - -
Total Withdrawn Quantum (Rs. Cr) 0.00 - -
 
Rating Rationale
Acuité has reaffirmed its long term rating of ‘ACUITE BBB-’ (read as ACUITE triple B 'minus') on the Rs 16.00 Cr bank facilities of SAVERA PIPES PRIVATE LIMITED(SPPL) .The rating of 'ACUITE BBB-' (read as ACUITE triple B 'minus') has been assigned on additional Rs.2.00 Cr of bank facilities of SPPL. The outlook is 'Stable'.

The ratings reaffirmation continues to be supported by established track record of operations and experienced management, moderate financial risk profile. The rating is, albeit, constrained by its working capital-intensive nature of operations and highly fragmented and competitive nature of industry.

About the Company
­Hyderabad based, Savera Pipes Private Limited (SPPL) was incorporated in 1996. The directors of the company are Mr. Vinod Kumar Giria (Managing Director) and Mr. Vineet Kumar Giria (Director). It is engaged in the manufacturing of PVC Pipes such as PVC Tubing, Suction Hose, Braided Hose, Krishi Hose, Corrugated Hose, Steel Reinforced PVC Pipes, Duct Hose, PVC Rigid Pipes  amongst others.
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profile of SPPL to arrive at the rating.
 

Key Rating Drivers

Strengths
  • ­Established track record of operations and experienced management
SPPL was incorporated in 1996. The directors of the company are Mr. Vinod Kumar Giria (Managing Director) and Mr. Vineet Kumar Giria, who have an experience of over two decades in the same line of business. The long track record of operations and experience of management has helped the company develop healthy relationships with its customers and suppliers. Acuité believes that the company will continue to benefit from its established track record of operations and experienced management.
  • Moderate financial risk profile
SPPL’s financial risk profile is moderate, marked by moderate net worth,  gearing and debt protection metrics. The net worth of SPPL stood at around Rs. 20.11 Cr as on March 31, 2022(Prov) as against Rs.17.06 Cr as on March 31, 2021. The gearing of the company stood at 1.10 times as on March 31, 2022(Prov) as against 1.25 times as on March 31, 2021. the improvement is on account of increase in net worth during the period. TOL/TNW stood at 1.49 times and 1.58 times as on March 31, 2022(Prov.) and 2021, respectively. The debt protection metrics was moderate as observed from moderate Interest Coverage Ratio (ICR) and Debt Service Coverage Ratio (DSCR)  stood at 3.65 times and 2.55 times as on March 31, 2022(Prov.)  as against 3.94 times and 2.89 times as on March 31, 2021, respectively. We believe that the financial risk profile is expected to be at similar levels over the medium term. Acuité believes that the financial risk profile of the firm is expected to remain at the same level over the medium term.
Weaknesses
  • Working capital intensive operations
The operations of the company are working capital intensive operations marked by gross current assets (GCA) days at 135 days as on March 31, 2022(Prov.) as against 140 days as on March 31, 2021. The GCA days are majorly marked by increased inventory days and moderate debtor days. Inventory days stood at 78 days as on March 31, 2022(Prov.) as against 68 days as on March 31, 2021. Subsequently, the payable period stood at 23 days as on March 31, 2022(Prov.) as against 18 days as on  March 31, 2021 respectively.  The debtor days stood at 59 days as on March 31, 2022(Prov.) as against 71 days as on March 31, 2021. Further, the average bank limit utilization in the last seven months ended August, 22 remained at and 98 percent for fund based limits. Acuité believes that efficient working capital management will be crucial to the firm in order to maintain a healthy risk profile.
  •  Highly fragmented and competitive nature of industry
SPPL operates in a highly fragmented pipe fitting industry with a large number of players in the organised and unorganised sector limiting the bargaining power with customers.
Rating Sensitivities
Positive
  • Higher-than-expected Improvement in the scale of operations and profitability as envisaged.
  • Sustainable improvement in leverage and solvency position of the company.
  • Sustainable improvement in Gross current assets (GCA) days.

Negative
  • Any large debt-funded capital expenditure, which may adversely impact its capital structure and liquidity
  • Any further deterioration in working capital management leading to deterioration in financials risk profile
 
Material covenants
­None
 
Liquidity Position: Adequate
The company has generated adequate net cash accruals to service its debt obligations. The net cash accruals stood at Rs.4.49 Cr in FY2022 (Prov.) as against the repayment of Rs.0.49 Cr for the same period and expected to generate cash accruals in the range of Rs.4-7 Cr. against current portion of long term debt (CPLTD) of Rs.0.36  Cr. over the medium term. Unencumbered cash and bank balances stood at Rs. 0.44 Cr as on March 31, 2022. The current ratio of the company stood at 1.49 times as on 31 March, 2022. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of working capital intensive nature of operations.
 
Outlook: Stable
­Acuité believes that the company will continue to maintain a ‘Stable’ outlook over near to medium term owing to its established market position and experienced management. The outlook may be revised to ‘Positive’ in case the company achieves higher than expected growth in revenues and 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 higher-than-expected working capital requirements
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Provisional) FY 21 (Actual)
Operating Income Rs. Cr. 103.00 84.81
PAT Rs. Cr. 3.05 3.29
PAT Margin (%) 2.96 3.88
Total Debt/Tangible Net Worth Times 1.10 1.25
PBDIT/Interest Times 3.65 3.94
Status of non-cooperation with previous CRA (if applicable)
SPPL’s rating was Reaffirmed and migrated to ‘ISSUER NON COOPERATING” status with
CRISIL through its rating rationale dated September 16, 2021. The reason provided by CRISIL is
nonfurnishing of information by SPPL.
 
Any other information
­None
 
Applicable Criteria
• 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
https://www.acuite.in/view-rating-criteria-55.htm

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
27 Aug 2021 Cash Credit Long Term 16.00 ACUITE BBB- | Stable (Upgraded from ACUITE BB+)
27 May 2020 Cash Credit Long Term 12.50 ACUITE BB+ (Downgraded and Issuer not co-operating*)
22 Mar 2019 Bank Guarantee Short Term 0.50 ACUITE A3 (Withdrawn)
Cash Credit Long Term 12.50 ACUITE BBB- | Stable (Reaffirmed)
27 Apr 2018 Cash Credit Long Term 9.50 ACUITE BBB- | Stable (Assigned)
Bank Guarantee Short Term 0.50 ACUITE A3 (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Rating
CITI Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 16.00 ACUITE BBB- | Stable | Reaffirmed
CITI Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 2.00 ACUITE BBB- | Stable | Assigned
­

Contacts
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About Acuité Ratings & Research
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