Press Release November 27, 2024 SUPRA STEEL AND POWER PRIVATE LIMITED Rating Assigned and Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	47.00	ACUITE BB- | Stable | Assigned	-
Bank Loan Ratings	13.00	ACUITE BB- | Stable | Upgraded	-
Bank Loan Ratings	5.00	-	ACUITE A4 | Assigned
Total Outstanding	65.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuite has upgraded its long-term rating to ‘ACUITE BB-‘ (read as ACUITE double B minus) from 'ACUITE B' (read as ACUITE B) on Rs.13 Cr. bank facilities of Supra Steel and Power Private Limited. The outlook is ‘Stable’. Acuite has further assigned the long-term rating to ‘ACUITE BB-‘ (read as ACUITE double B minus) and short-term rating to ‘ACUITE A4’ (read as ACUITE A four) on the Rs.52.00 Cr. bank facilities of Supra Steel and Power Private Limited. The outlook is ‘Stable’.  Rationale  for Rating The rating upgrade reflects steady business risk profile marked by moderate revenue despite a marginal decline due to low price realizations for finished products but partially offset by increase in sales volume. The operating profitability margin stood at 5.94 percent in FY24 as against 4.15 percent in FY23 due decrease in cost of raw materials. The rating also draws comfort from the average financial risk profile marked by moderate capital structure and debt protection metrices. The upcoming capex plan for expansion will give operational advantage to the company. The company has good relationship with customers and suppliers in south Indian market. These strengths are however constrained by the intensive working capital cycle and inherent cyclicality in the steel business and the intense competition in the industry, which makes margins and cash flows vulnerable to fluctuations in prices and demand.

About the Company

­Supra Steel And Power Private Limited (SSPPL) was established in 2005 by Mr. Shashi Kumar Singh and Mrs. Sandhya Kumari. The company is engaged in the manufacturing of sponge iron and has installed capacity of 200 Tonnes Per Day (TPD). The manufacturing facility is located at Bellary, Karnataka.

Unsupported Rating

­Not Applicable

Analytical Approach

­Acuite has considered standalone financial and business risk profile of SSPPL.

Key Rating Drivers

Strengths

Steady business risk profile albeit decline in revenue and improving margins The company has achieved an operating income of Rs.113.75 Cr. in FY24 as compared to Rs.122.04 Cr. in FY23 and Rs. 105.18 Cr. in FY22. The decline in revenue is due to lower price realizations for finished products but partially offset by increase in sales volume. The company has reported revenues of ~Rs.96.56 Cr. till October 2024. The EBITDA margin stood at 5.94 percent in FY24 as against 4.15 percent in FY23 due decrease in cost of raw materials. The PAT margin stood at 1.40 percent in FY24 as against 1.09 percent in FY23 and 1.43 percent in FY22. Acuite believes that the scale of operations will improve over the medium term due to capacity additions over the medium term.

Weaknesses

Average Financial Risk Profile The Company has an average financial risk profile marked by its moderate net worth and gearing, and low debt protection metrics. The tangible networth increased to Rs.37.17 Cr. as on March 31, 2024 from Rs. 30.05 Cr. as on March 31, 2023 and Rs.13.77 Cr. as on March 31, 2022, due to accretion of reserves. The equity share capital increased to Rs. 14.40 Cr. in FY23 as against Rs. 5.05 Cr. in FY22 due to equity capital infusion of Rs.10 Cr. by promoters for undertaking their capex plan for capacity expansion. Acuite has also treated Rs. 10.47 Cr. as quasi equity as the same has been subordinated to bank loans. Adjusted Gearing of the Company stood at 1.46 times in FY2024 as against 1.51 times in FY2023 and 1.17 times in FY22. The debt protection metrics remained low with Interest Coverage Ratio (ICR) at 1.85 times and Debt Service Coverage Ratio at 1.17 times, as on March 31, 2024. Acuite believes that the financial risk profile of the Company will improve over the medium term. ­Intensive Working Capital Management The Company has a working capital cycle as reflected from 250 days of GCA days in FY24 as against 199 days in FY23 and 174 days in FY22. The inventory days stood at 133 days in FY24 as against 65 days in FY23 and 51 days in FY22, this was largely because there was a build-up of inventory during year end for 2nd kiln which became operational in November 2023 as part of expansion plan. The Company’s debtor days stood comfortable at 48 days in FY24 as against 106 days in FY23 and 57 days in FY22. The current assets also include advances for material of Rs. 18.16 Cr. and other statutory tax receivables of Rs. 2.11 Cr. The creditor days stood at 111 days in FY24 as against 60 days in FY23 and 67 days in FY22. Acuite believes working capital requirement is expected to improve over medium term. Cyclical nature of the steel industry The company’s performance remains vulnerable to cyclicality in the steel sector as demand for steel depends on performance of end user segments such as construction and real estate. Indian steel sector is highly competitive due to presence of large number of players. The operating margin of the company is exposed to fluctuations in the prices of raw materials (coal and iron ore) as well as realization from finished goods.

Rating Sensitivities

­Movement in operating income and profitability Working capital cycle Movement in capital structure and debt protection metrices

Liquidity Position

Adequate

The liquidity profile of the Company remained adequate reflected by low but steady cash accruals, low current ratio, moderate debt funded capex plan and high dependence on bank limit utilisation for meeting working capital requirement although supported by financial flexibility of promoters to infuse funds in business. The net cash accrual stood at Rs 2.65 Cr. in FY24 vis-à-vis debt repayments of Rs. 1.71 Cr. during that period. The current ratio stood low at 1.04 times and cash & bank balance stood at Rs.0.78 Cr. in FY2024. The average working capital limit utilisation (consolidated) stood at ~97.43 percent during last 6 months ended October 2024. Although, liquidity is supported by financial flexibility of the promoters to infuse fund in business from time to time. As on March 31, 2024, the management has infused Rs.10.47 Cr. of unsecured loans being treated as quasi equity. Acuite expects liquidity profile of the Company to remain at similar levels due to low but steady accruals, low current ratio, high dependence on bank lines to meet working capital requirement and present capex plan.

Outlook: Stable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	113.75	122.04
PAT	Rs. Cr.	1.59	1.34
PAT Margin	(%)	1.40	1.09
Total Debt/Tangible Net Worth	Times	1.46	1.52
PBDIT/Interest	Times	1.85	2.09

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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 07 Nov 2024 Cash Credit Long Term 13.00 ACUITE B (Reaffirmed & Issuer not co-operating*) 11 Aug 2023 Cash Credit Long Term 13.00 ACUITE B (Reaffirmed & Issuer not co-operating*) 17 May 2022 Cash Credit Long Term 13.00 ACUITE B (Reaffirmed & Issuer not co-operating*) 11 Feb 2021 Cash Credit Long Term 13.00 ACUITE B (Reaffirmed & Issuer not co-operating*)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Credable Equentia Financial Services Pvt Ltd Not avl. / Not appl. Bills Discounting Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.00 Simple ACUITE A4 | Assigned ICICI Bank Ltd Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 13.00 Simple ACUITE BB- | Stable | Upgraded ( from ACUITE B ) Axis Bank Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 10.00 Simple ACUITE BB- | Stable | Assigned Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 7.55 Simple ACUITE BB- | Stable | Assigned Axis Bank Not avl. / Not appl. Term Loan 15 Feb 2023 Not avl. / Not appl. 15 Feb 2028 25.00 Simple ACUITE BB- | Stable | Assigned Axis Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 29 Mar 2029 4.45 Simple ACUITE BB- | Stable | Assigned

Contacts

Mohit Jain Senior Vice President - Rating Operations Manvi Khaitan Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@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. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.