Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 0.53 ACUITE C | Downgraded -
Bank Loan Ratings 21.47 ACUITE D | Downgraded -
Bank Loan Ratings 23.00 - ACUITE D | Downgraded
Total Outstanding 45.00 - -
 
Rating Rationale

Acuité has downgraded its long-term rating to 'ACUITE D' (read as ACUITE D) from 'ACUITE BB-' (read as ACUITE Double B Minus) and the short-term rating to ‘ACUITE D’ (read as ACUITE D) from 'ACUITE A4' (read as ACUITE A four) on the Rs. 44.47 crore bank facilities of Sri Raghavendra Ferro Alloys Private Limited (SRFAPL).
Acuité has also downgraded its long-term rating to 'ACUITE C' (read as ACUITE C) from 'ACUITE BB-' (read as ACUITE Double B Minus) for the Rs. 0.53 crore proposed bank facilities of Sri Raghavendra Ferro Alloys Private Limited (SRFAPL).

Rational for rating downgrade
The rating downgrade is on account of continuous over utilisation of more than 30 days in cash credit facility of Union Bank of India availed by the company in the  month of August 2024.

About the Company
Sri Raghavendra Ferro Alloys Private Limited (SRFAPL) was initially incorporated in the year 2004 by Mr. K Srinivasa Reddy. The company is primarily involved in the business of manufacturing Ferro Alloys and in particular Silico Manganese and Ferro Silicon. The company’s registered office is located at Nalgonda, Telangana and has 4 manufacturing plants with a combined annual capacity of around 100,000 tonnes per annum.
 
Unsupported Rating
­Not Applicable
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profiles of SRFAPL to arrive at this rating.
 
Key Rating Drivers

Strengths
­Established track record of operations with experience management
SRFAPL was established in 2004 reflecting a track record of operations for more than 1.5 decades in manufacturing of ferro alloys. The SRFAPL has four manufacturing plants with a combined annual capacity of ~100,000 tonnes per annum. Furthermore, the promoters of the SRFAPL have more than two decades of experience in the afore mentioned industry. The extensive experience of the promoters has helped the SRFAPL to establish long term relationships with its customers and suppliers. The key customers includes renowned steel plants in the country like Vishakhapatnam Steel Plant, JSW Steel Ltd among others. Acuité believes that the SRFAPL will continue to benefit from established track record of operations with promoter’s extensive experience over the medium term.

Moderate Financial Risk Profile
Sri Raghavendra Ferro Alloys Private Limited has a moderate financial risk profile marked by moderate net worth, moderate gearing and moderate debt protection metrics. SRFAPL’s net-worth marginally improved and stood at Rs. 53.79 crore in FY2024 (Prov.) against Rs. 53.20 crore as on FY2023 on account of accretion of profits to reserves. SRFAPL’s gearing stood at 0.50 times as on March 31,2024 (Prov.) as well as March 31, 2023. The company’s total debt also stood at similar levels as on March 31,2024 (Prov.) at Rs. 26.72 crore as compared to Rs. 26.61 crores as on March 31, 2023; comprising of long-term debt of Rs. 0.97 crore, short-term debt of Rs. 25.59 crore and Unsecured loans from promoters/directors of Rs. 0.16 crore. TOL/TNW stood at 1.61 times as on March 31, 2024 (Prov.). The interest coverage ratio of the company stood at 2.99 times in FY24 (Prov.) against 2.35 times in FY23. DSCR stood at 2.90 times in FY2024 (Prov.) against 2.35 times in FY2023.

Weaknesses
Highly Intensive working capital operations
Sri Raghavendra Ferro Alloys Private Limited has highly intensive working capital operations with average gross current asset (GCA) days standing over 260 days during FY22 to FY24. GCA days increased to 487 days in FY2024 (Prov.) against 183 days in FY2023. Inventory days stood higher at 302 days in FY2024 (Prov.) against 58 days in FY2023. The debtor days stood at 58 days for FY24(Prov.) against 89 days for FY23. The average credit period allowed to the customers is around 90 days. The creditor days of the company stood at 857 days for FY24 (Prov.) as against 108 days for FY23. The average credit period allowed by the suppliers is around 40-60 days. The average working capital utilization for fund-based limits stood at ~101.34% for the last 12 months ending April 2024.

Instances of overutilisation in cash credit facility
Multiple instances of overutilisation in cash credit facility of the company is noted. In August 2024, the cash credit facility remained over withdrawn continuously for more than 30 days.
 
Rating Sensitivities
  • Improvement in the scale of operations and its profitability margin
  • Further elongation in working capital cycle
  • Sustenance of the financial risk profile
  • Timely servicing of debt obligations
     
 
Liquidity Position
Poor
Liquidity is poor due to instances of over withdrawal for more than 30 days in a cash credit facility of Union bank of India availed by the company.
 
 
Outlook: Not Applicable
­
 
Other Factors affecting Rating
None
 

Particulars Unit FY 24 (Provisional) FY 23 (Actual)
Operating Income Rs. Cr. 79.18 184.51
PAT Rs. Cr. 0.59 1.94
PAT Margin (%) 0.74 1.05
Total Debt/Tangible Net Worth Times 0.50 0.50
PBDIT/Interest Times 2.99 2.35
Status of non-cooperation with previous CRA (if applicable)
Not Applicable
 
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
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
08 Jul 2024 Cash Credit Long Term 21.00 ACUITE BB- (Downgraded & Issuer not co-operating* from ACUITE BB | Stable)
Term Loan Long Term 5.00 ACUITE BB- (Downgraded & Issuer not co-operating* from ACUITE BB | Stable)
Letter of Credit Short Term 15.00 ACUITE A4 (Downgraded & Issuer not co-operating* from ACUITE A4+)
Bank Guarantee/Letter of Guarantee Short Term 4.00 ACUITE A4 (Downgraded & Issuer not co-operating* from ACUITE A4+)
10 Apr 2023 Cash Credit Long Term 21.00 ACUITE BB | Stable (Reaffirmed)
Term Loan Long Term 5.00 ACUITE BB | Stable (Reaffirmed)
Letter of Credit Short Term 15.00 ACUITE A4+ (Reaffirmed)
Bank Guarantee/Letter of Guarantee Short Term 4.00 ACUITE A4+ (Reaffirmed)
12 Dec 2022 Cash Credit Long Term 22.00 ACUITE BB (Reaffirmed & Issuer not co-operating*)
Letter of Credit Short Term 15.00 ACUITE A4+ (Reaffirmed & Issuer not co-operating*)
Bank Guarantee/Letter of Guarantee Short Term 8.00 ACUITE A4+ (Reaffirmed & Issuer not co-operating*)
16 Sep 2021 Bank Guarantee/Letter of Guarantee Short Term 8.00 ACUITE A4+ (Reaffirmed & Issuer not co-operating*)
Letter of Credit Short Term 15.00 ACUITE A4+ (Reaffirmed & Issuer not co-operating*)
Cash Credit Long Term 22.00 ACUITE BB (Downgraded & Issuer not co-operating* from ACUITE BB+ | Stable)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
Union Bank of India Not avl. / Not appl. Bank Guarantee/Letter of Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 4.00 Simple ACUITE D | Downgraded ( from ACUITE A4 )
Union Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 21.00 Simple ACUITE D | Downgraded ( from ACUITE BB- )
Union Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 19.00 Simple ACUITE D | Downgraded ( from ACUITE A4 )
Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 0.53 Simple ACUITE C | Downgraded ( from ACUITE BB- )
Union Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 31 Mar 2029 0.47 Simple ACUITE D | Downgraded ( from ACUITE BB- )
­

Contacts




About Acuité Ratings & Research
© Acuité Ratings & Research Limited. All Rights Reserved.www.acuite.in