The Shakambhari group has a long track record of over two decades in the iron and steel industry. Shakambhari Ispat & Power Limited was incorporated in October 2001 in the name of Ma Chhinnamastika Steel & Power Pvt. Ltd. The previous promoters had sold the company to Shakambhari group in December 2001. Thereafter in 2010, the name of the company was changed to its current name. Further, in FY2020, the group had acquired SPS Rolling Mills Limited from NCLT which strengthened their business profile. Currently the group is selling TMT Bars in the eastern and northern parts of India such as West Bengal, Jharkhand, UP, Bihar Assam and Punjab through its extensive distribution channels which includes 12000 dealers and 3200 distributors. The group has two established brands ‘Thermocon’ and ‘Elegant’ which have a strong brand recall in West Bengal and its neighbouring states.The group caters to both domestic and overseas markets such as Nepal, Japan, South Korea among others.Acuité believes that the long track record of operations will benefit the company going forward, resulting in steady growth in the scale of operations. Currently the group is headed by Mr. Deepak Agrawal who has an experience of more than two decades in the iron and steel industry. Acuité derives comfort from the long experience of the promoters. 

The strong business risk profile of the group is supported by the integrated nature of operations of the group; this enhances the operating efficiencies and mitigates the risks arising from the cyclical nature of steel industry to some extent. The diversity in revenue streams of the group also augurs well. The aggregate installed capacity of the Shakambhari Group is 705,000 MT of sponge iron, 820,000 MT of billet, 98750 MTPA of ferro alloys, 597,000 MT of rolled steel products and 62 MW of captive power plant.

Also, the group had registered healthy revenue growth as reflected from its revenue of Rs 4086.10 Cr in FY2022 as against Rs. 2685.19 Cr in FY2021 and Rs. 1974.46 Cr in FY2020. The growth is driven by substantial rise in average realization of TMT bar and ferro alloy because of strong demand from end user industries such as construction, real estate etc. In addition to this, the group had enhanced its existing capacities. The scale of operation is expected to improve over the medium term backed by capacity addition.

Moreover, the group has a locational advantage as the plants are located in the industrial area of West Bengal, which is in close proximity to various steel plants and sources of raw materials. Further the plants are well connected through road and rail transport which facilitates easy transportation of raw materials and finished goods.

The group has reported healthy profit margins both at the operating and net level historically. The operating margin of the group stood at 16.11 per cent in FY22 as compared to 12.90 per cent in FY21. The profit after tax (PAT) margins of the group stood at 8.19 per cent in FY22 as against 4.08 per cent in the preceding year. The improvement is driven by exceptional rise in realization of ferro alloys because of high demand from both domestic and overseas markets. However, the profit margin is likely to witness moderation during FY23 due to inventory losses in Q1HFY23 because of decline in realization of steel products. Nevertheless, Acuite expects the profitability margin of the group is expected to remain at comfortable level over the medium term backed by integrated operation.

• Healthy financial risk profile

The group’s healthy financial risk profile is marked by strong networth, moderate gearing and healthy debt protection metrics. The tangible net worth of the group increased to Rs.1511.72 Cr as on March 31, 2022 from Rs.1129.48 Cr as on March 31, 2021 due to accretion of reserves. Acuité has considered unsecured loans to the tune of Rs.0.28 Cr as on March 31, 2022 as part of networth as these loans are subordinated to bank debt. Gearing of the group stood moderate at 1.54 times as on March 31, 2022 as against 1.45 times as on March 31, 2021. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood moderate at 1.96 times as on March 31, 2022 as against 1.81 times as on March 31, 2021. The healthy debt protection metrics of the group is marked by Interest Coverage Ratio at 4.67 times as on March 31, 2022 and Debt Service Coverage Ratio at 2.19 times as on March 31, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood healthy at 0.18 times as on March 31, 2022.

Acuité believes that going forward the financial risk profile of the group will remain healthy even though they might witness some moderation in leverage indicators in medium term due to the ongoing capex plans.