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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 35.00 | ACUITE BB+ | Stable | Downgraded | - |
| Total Outstanding | 35.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has downgraded its long-term rating to 'ACUITE BB+' (read as ACUITE double B plus) from ‘ACUITE BBB-’ (read as ACUITE Triple B minus) on the Rs. 35.00 crore bank facilities of S D Bansal Iron and Steel Private Limited (SDBISPL). The outlook is 'Stable'.
Rationale for rating The rating downgrade takes into account the decline in the revenue of the company on account of lower steel price realisation and low demand from the end-user industry. The rating also considers the exposure to inherent cyclicality in the steel industry along with intensive working capital operations marked by full utilisation of the fund-based limits. However, the rating factors in the long operational track record of Bansal group, stable operating margin and moderate financial risk profile. Further, any significant reduction in the demand and prices adversely impacting the operating margins and cash accruals of the company will remain a key monitorable. |
| About the Company |
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Incorporated in 2006, S D Bansal Iron and Steel Private Limited (SDBISPL) is a Bhopal based company engaged in the business of steel manufacturing i.e. TMT Bars and MS Billets, having an installed capacity of 80,000 MT. The company imports raw material of scrap from Singapore, Hong Kong and Middle Eastern countries. The manufacturing facility of SDBISPL is located at Raisen district of Madhya Pradesh (MP) and company is having geographical presence in MP, Chhattisgarh, Rajasthan and Gujarat. Additionally, the company is also engaged into the electronic media business and runs a news channel named ‘Bansal News’. The company is currently managed by Mr. Sunil Bansal and Mr. Kartik Bansal.
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| About the Group |
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Bansal group of Bhopal (MP) has diversified business operations across sectors such as civil and road construction, steel processing, media, education, healthcare and solvent extraction through various group entities.
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| Unsupported Rating |
| Not Applicable. |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of the SDBISPL to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and established presence
SDBISPL has an established presence in the steel industry since 2006. The company has established its own brand ‘Bansal TMT Sariya’ which has a strong regional market recall for TMT bars. The key promoters, Mr. Anil Bansal & Mr. Sunil Bansal, have more than two decades of experience in steel industry and has developed keen insight and market knowledge needed for anticipating price trends, calibrating purchases as well as stocking decisions. The experience of promoters and longstanding relationship with customers is also reflected through its group presence across diversified businesses. Acuité believes that SDBISPL will continue to benefit from its experienced management, established brand presence and longstanding relationship with its customers and suppliers. Moderate financial risk profile The financial risk profile of the company stood moderate, marked by moderate net worth, low gearing and moderate debt protection metrics. The tangible net worth stood at Rs.51.78 Cr. as on 31st March, 2024 as against Rs.48.45 Cr. as on 31st March, 2023 due to accretion to reserves. The total debt of the company stood slightly low at Rs.44.70 Cr. in FY24 as against Rs.45.91 Cr. in FY23 which improved gearing at 0.86 times as on 31st March, 2024 as against 0.95 times as on 31st March, 2023. However, due to the decrease in the profitability, the Interest Coverage Ratio (ICR) and Debt Service Coverage Ratio (DSCR) lowered at 3.15 times and 2.27 times respectively for FY24 as against 5.36 times and 3.62 times respectively for FY23. Acuité believes that the financial risk profile of SDBISPL will remain moderate in near to medium term on the back of steady cash accruals and no significant debt funded capex. |
| Weaknesses |
| Declining revenue affected by low demand and realisations
The revenue of the company declined to Rs.203.54 Cr. in FY24 as against Rs.307.14 Cr. in FY23. Further, the company has recorded revenue of ~Rs.100 Cr. till January,2025. This decrease was on account of subdued demand from end-user segments like infrastructure and housing construction companies and secondly because of elections that took place in MP in the first quarter of FY25. Moreover, the reduction in steel prices continues to affect the top line of the company leading to lower realisations. Going ahead, the recovery seems to be challenging due to the current industry scenario and also because of slow down in the government spending on infra sector. However, despite the significant moderation in the top line, the operating margin has improved to 5.47 percent in FY24 as against 5.17 percent in FY23 due to the lower input cost incurred. Therefore, any significant reduction in the demand and prices adversely impacting the operating margins and cash accruals of the company will remain a key monitorable. Intensive working capital operations The working capital management of the company is intensive marked by Gross Current Assets (GCA) of 179 days in FY24 as against 132 days in FY23. The debtor days stood high at 132 days in FY24 as against 54 days in FY23. While earlier the average credit period allowed to customers was 30-40 days, this increased significantly in FY24 due to the comfort extended to the debtors to maintain the market position. The creditor days stood at 61 days in FY24 as against 47 days in FY23 which is slightly more with the average credit period allowed by suppliers of 45-50 days. The inventory holding period of the company stood low at 17 days in FY24 as against 37 days in FY23 on account of low procurement due to reducing demand. The average inventory holding period is around 45-60 days. Acuité believes the working capital cycle is expected to remain intensive over the medium term considering the downtrend in the industry. Cyclical and competitive nature of steel industry The steel long products industry is intensely competitive with many organized and unorganized players especially in the secondary/steel re-rolling business, which is less capital intensive. SDBISPL operates in a highly competitive steel industry thereby putting pressure on capacity utilisation and pricing power. In addition, the industry is reeling under the pressure of cheaper imports. The performance of the steel industry is linked to end user industries such as real estate, infrastructure and construction which is cyclical in nature as well as. |
| Rating Sensitivities |
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Improvement in the operating income and profitability margins.
Elongation of working capital cycle. Sustenance of healthy capital structure. |
| Liquidity Position |
| Stretched |
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The company’s liquidity position is stretched marked by full utilisation of the fund based limit at ~100 percent for last 6 months ending February 2025. Further, the current ratio stood moderate at 1.60 times as on 31st March, 2024. However, the net cash accruals of the company stood at Rs.6.47 Cr. against debt repayment obligation of Rs.0.77 Cr. in FY24. Going forward, the net cash accruals are expected to be in the range of Rs.3.00-5.00 Cr. through FY2025-27 against repayment obligations of Rs.0.55-0.85 Cr. The company has cash and bank balance of Rs.2.66 Cr. as on 31st March, 2024.
Acuité believes that the liquidity of SDBISPL is likely to remain stretched over the medium term on account of slow recovery in the steel industry. |
| Outlook: Stable |
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 203.54 | 307.14 |
| PAT | Rs. Cr. | 3.33 | 7.95 |
| PAT Margin | (%) | 1.64 | 2.59 |
| Total Debt/Tangible Net Worth | Times | 0.86 | 0.95 |
| PBDIT/Interest | Times | 3.15 | 5.36 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite) |
| Not applicable |
| Any other information |
| None. |
| Applicable Criteria |
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• 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 |
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