|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 140.70 | ACUITE BBB+ | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 2.50 | - | ACUITE A2 | Reaffirmed & Withdrawn |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 143.20 | - | - |
| Rating Rationale |
|
Acuité has reaffirmed & withdrawn the long term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) and the short term rating of ‘ACUITE A2’ (read as ACUITE A two)’ on the Rs.143.20 crore bank facilities of Shah Foils Limited (SFL).
The rating is being withdrawn on account of the request received from the company and the NOC received from the banker as per Acuité’s policy on withdrawal of ratings. |
| About the Company |
|
Shah Foils Limited, based in Gujarat, was formed as a partnership firm named Shah Metal Industries in 2001 and reconstituted as a private limited company in 2004. It has been promoted by the Gujarat-based Mr. Kartik Ramesh Shah and family. The company manufactures stainless steel cold-rolled coils, strips and circles and mainly caters to stainless steel tubes, auto ancillary and utensil manufacturers. The manufacturing facility is located in Ahmedabad and Ludhiana.
|
| Analytical Approach |
|
Acuité has considered the standalone business and financial risk profile of SFL while arriving at the rating
|
Key Rating Drivers
| Strengths |
| > Experienced management and established track record of operations
Started its operations in 2001 as a partnership firm, Shah Foils Limited has a long track record of operations along with experienced management. Promoted by Gujarat based Singhvi and Shah families, the Company currently has Mr. Karthik Shah at the helm of its operations, who is ably supported by a strong line of mid-level managers. The extensive experience of the promoters is reflected through the established relationship with its customers and suppliers. Majority of the top ten customers and suppliers have been associated with Company for over a decade. The Company supplies its products in various states such as Maharashtra, Gujarat, Delhi, Haryana, Tamil Nadu in domestic market and Turkey, USA and Europe in international market. SFL’s main input material is stainless steel coils which are either procured from domestic steel companies namely Steel Authority of India, Posco Steel India Processing Center Private Limited, Jindal Stainless Limited or imported from China, Hongkong and South Korea. SFL’s operating income stood at Rs.664.19 Cr in FY2022 as against Rs.450.67 Cr in FY2021 and Rs.505.06 Cr in FY2020. The Company’s operating income in 9MFY2022 stood at ~Rs.605 Cr. The operating margin of the company improved to 10.82 percent in FY2022 as against 8.69 percent in FY2021 and 7.27 percent in FY2020. PAT margin of the company stood at 5.95 percent in FY2022 as against 3.50 percent in FY2021 and 2.36 percent in FY2020. >Healthy Financial Risk Profile
SFL’s financial risk profile is healthy marked by healthy net worth, healthy gearing and moderate debt protection metrics. The tangible net worth stood at Rs.158.03 Cr in FY2022 as against Rs.118.62 Cr in FY2021 and Rs. 102.89 Cr in FY2020. The improvement is on account of accretion to reserves. The total debt as on March 31, 2022, stood at Rs.123.16 Cr and comprised of long term borrowings of Rs. 26.99 Cr, short term borrowings of Rs. 85.06 Cr and CPLTD of Rs.11.11 Cr. The overall gearing improved to 0.78 times as on March 31, 2022, as against 0.95 times as on March 31, 2021 and 1.12 times as on March 31, 2020. The debt protection metrics of SFL is moderate marked by interest coverage of 6.54 times in FY2022 as against 3.67 times in FY2021 and 3.07 times in FY2020. The DSCR stood at 2.89 times in FY2022 as against 2.31 times in FY2021 and 1.55 times in FY2020. The Debt to EBITDA stood at 1.71 times in FY2022 as against 2.88 times in FY2021 and 3.11 times in FY2020.
|
| Weaknesses |
|
>Working capital intensive nature of operations
SFL’s operations are working capital intensive in nature as reflected by GCA days of 152 days as on March 31, 2022, as against 148 days as on March 31, 2021, and 120 days as on March 31, 2020. The GCA days are driven by inventory and debtor days. The inventory days stood at 81 days as on March 31, 2022, as against 66 days as on March 31, 2021, and 61 days as on March 31, 2020. The Company gives a credit period of 30-60 days to its customers. The same is also reflected in its debtor days position as on year end. The Company makes majority of its procurement on cash and carry basis. The same is also reflected in its creditor days of 30 days as on March 31, 2022, as against 03 days as on March 31, 2021, and 12 days as on March 31, 2020. However, the credit period allowed by suppliers is 07-10 days.
> Susceptibility of profitability to volatility in raw material prices and fluctuations in forex risk The price of key input material i.e. stainless steel coils is volatile. Any sharp upward movement in the raw material prices and inability of the Company to pass on the increased cost of raw materials may result in dip in operating margins. Thus, with limited natural hedge of exports against high imports, SFL's profitability remains susceptible to foreign exchange fluctuations risk. |
| Rating Sensitivities |
|
| Material covenants |
| None. |
| Liquidity Position: Adequate |
|
SFL’s liquidity position is adequate marked by comfortable cash accruals against debt repayment obligations. The Company’s net cash accruals stood at Rs.47.81 Cr in FY2022 as against Rs. 24.84 Cr in FY2021 and Rs.20.43 Cr in FY2020, while the debt repayment obligation for the same period stood at Rs. 11.11 Cr in FY2022 as against Rs.11.22 Cr in FY2021 and Rs.4.94 Cr in FY2020. The GCA days of the Company stood at 152 days as on March 31, 2022, as against 148 days as on March 31, 2021. The average bank limit utilization ranged between 80% - 90% for last six months ending November 2022. The current ratio and unencumbered cash and bank balance stood at 1.84 times and at Rs. 7.83 Cr as on March 31, 2022, respectively.
|
| Outlook |
| Not Applicable. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 664.19 | 450.67 |
| PAT | Rs. Cr. | 39.55 | 15.77 |
| PAT Margin | (%) | 5.95 | 3.50 |
| Total Debt/Tangible Net Worth | Times | 0.78 | 0.95 |
| PBDIT/Interest | Times | 6.54 | 3.67 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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 |
|
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
|
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |
|
Contacts |
| Analytical | Rating Desk |
| About Acuité Ratings & Research |
