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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 21.00 | ACUITE BBB | Positive | Assigned | - |
| Bank Loan Ratings | 61.01 | ACUITE BBB | Positive | Reaffirmed | - |
| Bank Loan Ratings | 107.60 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 189.61 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of 'ACUITE BBB' (read as ACUITE Triple B) and the short-term rating of 'ACUITE A3+'(read as ACUITE A Three Plus) for bank facilities of Rs. 168.61 Cr. of Shera Energy Limited (Erstwhile Shera Energy Private Limited) . The outlook is 'Positive'.
Further Acuite has assigned long term rating 'ACUITE BBB' (read as ACUITE Triple B) for bank facilities of Rs. 21 crore of Shera Energy Limited (Erstwhile Shera Energy Private Limited) . The outlook is 'Positive'. Rationale for Rating The rating action takes into account improved operating income, healthy financial risk profile and adequate liquidity Position. Group reported growth in revenue from operations by 25.66% in FY2024 to Rs 875.10 crore as against Rs. 696.39 crore for FY2023. Net profit margin of the group stood at 1.61% against 1.31% for the corresponding previous period. Financial risk profile of the group remains healthy on account of healthy net worth, comfortable gearing and moderate coverage indicators. Debt Service coverage ratio stood at 1.20 times and Interest Coverage ratio at 1.80 times for FY 2024. Group has healthy business risk profile for FY 2024. Acuité believes that the Group's ability to grow its scale of operations and profitability while maintaining a healthy capital structure with improvement in working capital operations remains a key rating indicator. |
| About the Company |
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Jaipur-based Shera Energy Limited (SEL) was initially established as a proprietorship firm by Mr. Naseem Sheikh, namely Shera Metals & Engineers, in the year 2003 and was reconstituted as a private limited company in the year 2009. The company is engaged in the manufacturing of winding wire products such as paper-wrapped round and rectangular wires, enamel/magnet round and rectangular wires, and fibre glass-taped round and rectangular wires.
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| About the Group |
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Shera Group (SG) was formed with the establishment of a proprietorship firm, Shera Metals & Engineers, in 2003 by Mr. Naseem Sheikh. SEL had three subsidiaries: Shera Metal Private Limited (SMPL), Rajputana Private Limited (RIL), and Shera Infrapower Private Limited (SIPL). SMPL is engaged in the manufacturing of copper bus bar, tin-plated copper bus bar, PCC poles, brass rod and wire, and paper-covered copper strips, while RIPL was incorporated with a view to securing a backward integration of its product lines manufactured by SEL and SMPL through the manufacturing of mother tubes of brass (copper and zinc mix) tube, copper nickel (copper nickel mix) tube, and brass rod and section (copper and zinc). Group has now sold Shera Infrapower Private Limited and floated one subsidiary in Zambia names as Shera Zambia Limited. SEL now has three subsidiaries: Shera Metal Private Limited (SMPL), Rajputana Industries Limited (RIL) and Shera Zambia Limited. SG caters to the intermediate product requirements of various industries, such as transformers, electric and electronic goods, refineries, construction, the capital goods industry, sugar plants, automobiles, and aviation, to name a few.
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| Unsupported Rating |
| Not Applicable. |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profiles of Shera Energy Limited (SEL), Shera Metal Private Limited (SMPL), Rajputana Industries Limited (RIL), and Shera Zambia Limited to arrive at this rating. The consolidation is on account of common management, presence in the same line of business, and significant business and financial synergies between the entities. The group is herein referred to as "Shera Group (SG)"
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| Key Rating Drivers |
| Strengths |
| Experienced management and an established track record of operations
The group is a producer of copper and aluminium winding wires along with other products like bus bars of copper, aluminium, and brass, copper, copper alloys, and cupronickel casted, extruded, and drawn products, viz. billets and ingots, mother shells, tubes and pipes, rods, profiles, and sections. The promoters and directors of the group have over a decade of experience in the aforementioned industry. SG caters to the demands of various industries, such as LPG valve manufacturing, automobiles, forging, marine, power generation, and the electrical industry, to name a few, through its diversified product portfolio. Business risk profile Shera Group’s operation witnessed improvement which is apparent from growth in revenue from operations by 25.66% in FY2024 to Rs. 875.10 crore as against Rs. 696.39 crore for FY2023. The operating profit and net margins of the company went up by 120 and 30 bps in FY 24 respectively. Operating Profit Margin of group stood at 5.87% in FY 24 as against 4.67 % in FY 23. The net profit margin of the group stood at 1.61% in FY 24 as against 1.31% in FY 23. ROCE of the group stood at 20.46% in FY 23 against 13.47% in FY 24. Recently group has started supplying bullet shells to the companies which are in business of arms and ammunition with high margins in this business segment. Comfortable Financial Risk Profile The group has comfortable financial risk profile marked by healthy net worth, comfortable gearing and moderate coverage indicators. The Total Tangible net worth stood at Rs. 139.54 Cr. as on 31st March 2024 as against Rs. 119.51 Cr. a year earlier. Group follows conservative leverage policy. Debt to Equity ratio improved by 7 bps and stood at 0.76 times in FY 24 as against 0.83 times in FY 23. Debt Protection Matrix (i.e. DSCR & ISCR) stood at 1.20 & 1.80 times for FY 24 against 1.09 & 2.07 times for FY 23 respectively. Going forward coverage indicators are expected to improve in near medium term. Debt-EBITDA improved and stood at 1.95 times as on 31st March 2024 as against 2.94 times as on 31st March 2023. The Net Cash Accruals to Total debt stood at 0.18 times for FY2024. The financial risk profile of the group is expected to improve and remain comfortable. |
| Weaknesses |
| Competitive industry and susceptibility to raw material prices
Copper and aluminium are highly competitive industries 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 group remains low due to the competitive nature of the industry. However, the risk is mitigated to an extent on account of the established track record of operations. Further, SG’s revenue and profitability are susceptible to volatility in copper and aluminium prices. Working capital operations- Moderate Group has moderate working capital requirements as evident from gross current assets (GCA) of 139 days in FY2024 as compared to 145 days in FY2023. Inventory days stood at 87 days in FY2024 against 88 days in FY 2023. Debtor & Creditor days stood at 48 & 68 days in FY 2024 respectively. |
| Rating Sensitivities |
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1. Improvement in the profitability margins. 2. Deterioration in its working capital management. 3. Deterioration in the financial risk profile of the group. 4. Group's ability to achieve the financial position as envisaged. |
| Liquidity Position |
| Adequate |
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Group has adequate liquidity marked by net cash accruals to its maturing debt obligations, current ratio, cash and bank balance. Group generated cash accruals of Rs. 19.59 crore for FY 2024 as against debt repayment obligations of Rs. 11.40 crore for the same period indicating availability of funds to pay off debt obligations. Current Ratio stood at 1.31 times as on 31 March 2024. Cash and Bank Balances of company stood at Rs. 4.02 crore. The liquidity of the group is expected to improve with group expected to generate cash accruals in the range of Rs. 25 to 35 Cr. with debt obligation of Rs 10 to 12 crore will also support the liquidity of the company. The average utilization for fund-based limit for last seven months ending March 2024 is 85.83%.
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| Outlook - Positive |
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Acuité believes that SG will maintain a ‘Positive’ outlook and will continue to derive benefits over the medium term from its extensively experienced promoter and the business strategies being implemented. Rating may be upgraded if the group demonstrates substantial and sustained growth in its margins and turnover from the current levels while maintaining its healthy capital structure. Conversely, the outlook may be revised to ‘Stable’ if the group generates lower-than-anticipated cash accruals, most likely as a result of a sharp decline in operating margins or a deterioration in working capital leading to a higher reliance on external borrowings, thereby impacting its financial risk profile, particularly its liquidity.
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 875.10 | 696.39 |
| PAT | Rs. Cr. | 14.05 | 9.11 |
| PAT Margin | (%) | 1.61 | 1.31 |
| Total Debt/Tangible Net Worth | Times | 0.76 | 0.83 |
| PBDIT/Interest | Times | 1.80 | 2.07 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| Any Other Information |
| None. |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||||
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