Experienced management and integrated nature of operation
SKS was incorporated in 2000 by its directors, Mr. Anil Mahabir Gupta and Mr. Deepak Gupta who has an experience of over two decades in steel industry. They are supported by other directors, Mr. Neeta Mithalal Jain, Mr. Rajeev Sabhlok and Mr. Devidas Kashinath Kambale. The company has a long presence in this sector and has established a healthy relationship with customers for more than a decade.

SIPL has an integrated steel manufacturing facility, having presence across the value chain and is engaged in manufacturing of sponge iron, billets, rolled products (structural steel in heavy, medium, light sections) such as channels, beams & angles and also produces MS Wire rods, HB Wire, Silico Manganese etc.) and captive power plant of 85 MW. It provides the company flexibility to sell intermediate products as well as use them for captive consumption. The facilities are also supported by captive power plants, waste heat recovery plants and railway sidings, which result in cost efficiencies.

Improving scale of operation coupled with healthy profitability margin
The revenue of the company witnessed a 40.12 per cent growth in FY2022, its revenue increased to Rs.1407.80 crore in FY2022 as compared to Rs.1004.73 crore in the previous year. This growth of the revenue is majorly due to increase in average realization per unit during FY2022 backed by steady demand for sponge iron, billet, rolled product and ferro alloys. There has been moderation in steel and ferro alloy prices since Q2FY2023 which may lead to an overall muted sales growth of the company in FY2023. The company has booked around Rs.720 of sales crore till 30^th September 2022 (Prov.).

The operating profitability margin of the company has improved to 13.42 per cent in FY2022 as compared to 12.57 per cent in the previous year. This improvement in profitability margin is on account of overall decrease in certain overhead expenses, despite of increase in raw material price. The profit margins of the company have been at around same levels in 6MFY2023 as compared to the previous year. Going forward, Acuité believes, that the profitability margin of the company will be sustained at healthy levels over the medium term backed by steady demand and stable realization. The net profitability margin of the company stood healthy at 6.67 per cent in FY2022 as compared to 11.96 per cent in the previous year.

Robust financial risk profile
The financial risk profile of the company is marked by strong net worth, very low gearing and strong debt protection metrics. The net worth of the company stood healthy at Rs.854.47 crore in FY 2022 as compared to Rs 760.21 crore in FY2021. This improvement in networth is mainly due to the retention of current year profit. The total networth of company includes Rs.159.96 crore of Compulsory Cumulative Convertible Preference Shares (CCCPS) termed as quasi equity in FY2022. The CCPS has subsequently got converted into equity in the current year in Aug’22. The gearing of the company stood at 0.10 times as on March 31, 2022 when compared to 0.18 times as on March 31, 2021. This further improvement in gearing is mainly on account of improvement in networth and repayment of long term debt coupled with lower utilization of working capital facility during FY2022. Interest coverage ratio (ICR) is strong and stood at 15.28 times in FY2022 as against 5.22 times in FY2021. The debt service coverage ratio (DSCR) of the company also stood strong at 2.73 times in FY2022 as compared to 2.72 times in the previous year. The net cash accruals to total debt (NCA/TD) stood strong at 1.44 times in FY2022 as compared to 1.10 times in the previous year. Going forward, Acuité believes the financial risk profile of the company will remain robust on account of steady net cash accruals and no major debt funded capex plan over the near term.