PR

Press Release
SHERA ENERGY LIMITED (ERSTWHILE SHERA ENERGY PRIVATE LIMITED)
June 06, 2023
Rating Assigned and Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	7.73	ACUITE BBB \| Stable \| Assigned	-
Bank Loan Ratings	56.25	ACUITE BBB \| Stable \| Reaffirmed	-
Bank Loan Ratings	27.25	-	ACUITE A3+ \| Assigned
Bank Loan Ratings	79.75	-	ACUITE A3+ \| Reaffirmed
Total Outstanding Quantum (Rs. Cr)	170.98	-	-

Rating Rationale

Acuité has reaffirmed the long-term rating of Acuité BBB (read as Acuité Triple B) for bank facilities of Rs. 56.25 crore, and the short-term rating of Acuité A3+ (read as Acuité A Three Plus) for bank facilities of Rs. 79.75 crore, and assigned the long-term rating of Acuité BBB (read as Acuité Triple B) for bank facilities of Rs. 7.73 crore and the short term rating of Acuité A3+ (read as Acuité A Three Plus) for bank facilities of Rs. 27.25 crore for SHERA ENERGY LIMITED. The outlook is 'stable'.

Rating Rationale
Acuité has taken into account the established track record of operations, sustained business risk profile, reputed and diversified customer portfolio and moderate financial risk profile of the company. Shera Group’s scale of operations continue to be at comfortable levels with total operating income of Rs 696.39 crore registered in FY 23. However, the operating margins of the group have declined and stood at 4.67 per cent in FY2023. The Overall financial risk profile remained moderate with moderate improvement in gearing levels while at the same time registering marginal improvement in the debt coverage indicators.

About Company

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.

About the Group

Shera Group (SG) was formed with the establishment of a proprietorship firm, Shera Metals & Engineers, in 2003 by Mr. Naseem Sheikh. SEL has three subsidiaries: Shera Metal Private Limited (SMPL), Rajputana Industries Private Limited (RIPL), 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). 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.

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 Private Limited (RIPL), and Shera Infrapower Private 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)".

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.
Improvement in Operating Performance
The operating income of the group stood at Rs. 696.39 crore in FY 23 as against Rs. 523.82 crore in FY 22. The revenue for the group has improved, with a CAGR of 33%. The rise in revenue is due to the increase in sales in the exports division of the company. The operating revenue of the company has been increasing, and to meet the same, the company is working to enhance its utilisation. The installation capacity for all three companies is 35,000 MT per year. The actual production is 60%–65%, and the company is planning to enhance it by another 10%–15% in this financial year.

Weaknesses

Decline in operating margins
The operating income of the company is increasing, but the operating margins have declined to 4.67% in FY 23 as compared to 5.33% in FY 22. The company deals in multiple products; hence, the margins on each of them are different. The decline in margins is due to the sale of these products in FY 23.
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 company 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.

Rating Sensitivities

Improvement in the profitability margins.
Deterioration in its working capital management.
Deterioration in the financial risk profile of the company.

Material Covenants

None

Liquidity Position

Adequate

The liquidity of the group is adequate on account of adequate cash accruals for maturing debt service obligations over the same period. Cash accruals, however, provide a limited liquidity buffer to support incremental working capital operations, and hence, utilisation of working capital limits is high. Further, the group had Rs. 3.47 crore of unencumbered cash and bank balances as of March 31, 2023. Furthermore, the group has Rs. 10.10 crore of fixed deposits held as margin money, lending adequate financial flexibility. The company has got sanction limits from the Bank of Maharashtra for a CC limit of Rs 24 crore and a letter of credit limit of Rs 28 crore to provide cushion to its liquidity position.

Outlook:

Acuité believes that SG will maintain a ‘Stable’ outlook and will continue to derive benefits over the medium term due to its extensive experience as a promoter. The outlook may be revised to ‘Positive’, if the group demonstrates substantial and sustained growth in its margins from the current levels while maintaining its capital structure. Conversely, the outlook may be revised to ‘Negative’ 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.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 23 (Actual)	FY 22 (Actual)
Operating Income	Rs. Cr.	696.39	523.82
PAT	Rs. Cr.	9.11	6.62
PAT Margin	(%)	1.31	1.26
Total Debt/Tangible Net Worth	Times	0.83	1.11
PBDIT/Interest	Times	2.07	2.02

Status of non-cooperation with previous CRA (if applicable)

None

Any Other Information

None

Applicable Criteria

• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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

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 categorisauon of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash ?ow panerns, number of counterparues and general understanding of the instrument by the market. It has to be understood that complexity is di?erent from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Raung Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
24 Mar 2022	Cash Credit	Long Term	29.00	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	9.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	3.30	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.06	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	3.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.05	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	2.50	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.13	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.03	ACUITE BBB \| Stable (Reaffirmed)
	Bank Guarantee	Short Term	15.00	ACUITE A3+ (Reaffirmed)
	Proposed Bank Facility	Long Term	8.62	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.10	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.08	ACUITE BBB \| Stable (Reaffirmed)
	Letter of Credit	Short Term	64.00	ACUITE A3+ (Reaffirmed)
	Standby Line of Credit	Long Term	1.00	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.13	ACUITE BBB \| Stable (Reaffirmed)
25 Mar 2021	Cash Credit	Long Term	29.00	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.24	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.15	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	2.50	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.13	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.30	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.24	ACUITE BBB \| Stable (Reaffirmed)
	Letter of Credit	Short Term	64.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	3.30	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	3.00	ACUITE A3+ (Reaffirmed)
	Channel Financing	Short Term	9.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.12	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.26	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.30	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.25	ACUITE BBB \| Stable (Reaffirmed)
	Proposed Bank Facility	Long Term	6.85	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.11	ACUITE BBB \| Stable (Reaffirmed)
	Bank Guarantee	Short Term	15.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.25	ACUITE BBB \| Stable (Reaffirmed)
	Standby Line of Credit	Long Term	1.00	ACUITE BBB \| Stable (Reaffirmed)
17 Mar 2021	Term Loan	Long Term	0.12	ACUITE BBB \| Stable (Reaffirmed)
	Cash Credit	Long Term	29.00	ACUITE BBB \| Stable (Reaffirmed)
	Letter of Credit	Short Term	64.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.30	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.13	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.25	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.11	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.24	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.15	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.24	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	3.00	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	3.30	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.25	ACUITE BBB \| Stable (Reaffirmed)
	Standby Line of Credit	Long Term	1.00	ACUITE BBB \| Stable (Reaffirmed)
	Channel Financing	Short Term	2.50	ACUITE A3+ (Reaffirmed)
	Term Loan	Long Term	0.26	ACUITE BBB \| Stable (Reaffirmed)
	Proposed Bank Facility	Long Term	1.85	ACUITE BBB \| Stable (Reaffirmed)
	Term Loan	Long Term	0.30	ACUITE BBB \| Stable (Reaffirmed)
	Bank Guarantee	Short Term	15.00	ACUITE A3+ (Reaffirmed)
	Channel Financing	Short Term	9.00	ACUITE A3+ (Reaffirmed)
19 Feb 2020	Term Loan	Long Term	0.40	ACUITE BBB \| Stable (Assigned)
	Channel Financing	Short Term	6.00	ACUITE A3+ (Assigned)
	Term Loan	Long Term	0.35	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.26	ACUITE BBB \| Stable (Assigned)
	Channel Financing	Short Term	3.00	ACUITE A3+ (Assigned)
	Cash Credit	Long Term	29.00	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.33	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	3.60	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.26	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.26	ACUITE BBB \| Stable (Assigned)
	Letter of Credit	Short Term	64.00	ACUITE A3+ (Assigned)
	Term Loan	Long Term	0.40	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.40	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.39	ACUITE BBB \| Stable (Assigned)
	Proposed Bank Facility	Long Term	5.06	ACUITE A3+ (Assigned)
	Term Loan	Long Term	0.39	ACUITE BBB \| Stable (Assigned)
	Term Loan	Long Term	0.40	ACUITE BBB \| Stable (Assigned)
	Bank Guarantee	Short Term	10.00	ACUITE A3+ (Assigned)
	Standby Line of Credit	Long Term	1.00	ACUITE BBB \| Stable (Assigned)
	Channel Financing	Short Term	5.50	ACUITE A3+ (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
State Bank of India	Not Applicable	Bank Guarantee (BLR)	Not Applicable	Not Applicable	Not Applicable	15.00	Simple	ACUITE A3+ \| Reaffirmed
Bank of Maharashtra	Not Applicable	Cash Credit	Not Applicable	Not Applicable	Not Applicable	24.00	Simple	ACUITE BBB \| Stable \| Reaffirmed
State Bank of India	Not Applicable	Cash Credit	Not Applicable	Not Applicable	Not Applicable	30.00	Simple	ACUITE BBB \| Stable \| Reaffirmed
State Bank of India	Not Applicable	Letter of Credit	Not Applicable	Not Applicable	Not Applicable	64.00	Simple	ACUITE A3+ \| Reaffirmed
Bank of Maharashtra	Not Applicable	Letter of Credit	Not Applicable	Not Applicable	Not Applicable	0.75	Simple	ACUITE A3+ \| Reaffirmed
Bank of Maharashtra	Not Applicable	Letter of Credit	Not Applicable	Not Applicable	Not Applicable	27.25	Simple	ACUITE A3+ \| Assigned
Not Applicable	Not Applicable	Proposed Term Loan	Not Applicable	Not Applicable	Not Applicable	0.40	Simple	ACUITE BBB \| Stable \| Reaffirmed
Not Applicable	Not Applicable	Proposed Term Loan	Not Applicable	Not Applicable	Not Applicable	0.20	Simple	ACUITE BBB \| Stable \| Assigned
Small Industries Development Bank of India	Not Applicable	Term Loan	Not available	Not available	Not available	1.85	Simple	ACUITE BBB \| Stable \| Reaffirmed
State Bank of India	Not Applicable	Term Loan	Not available	Not available	Not available	7.53	Simple	ACUITE BBB \| Stable \| Assigned

Contacts

Analytical	Rating Desk
Aditya Gupta Vice President-Rating Operations Tel: 022-49294041 aditya.gupta@acuite.in Satyam . Analyst-Rating Operations Tel: 022-49294065 satyam.saxena@acuite.in	Varsha Bist Senior Manager-Rating Operations Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité.