|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 35.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Total Outstanding | 35.00 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed its long-term rating to ‘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 reaffirmation The reaffirmation of the rating takes into account the stable operating performance of SDBISPL, marked by an improved scale of operations albeit a slight moderation in operating profitability and moderate financial risk profile. The revenue of the company improved to Rs.307.14 crore in FY2023 as against Rs.221.31 crore in FY2022. Further, the rating also factors in long extensive experience of promoters in the steel business, vintage of relationship with its customers and suppliers and adequate liquidity. However, the above mentioned strengths are constrained by susceptibility to volatility in raw material prices, Moderately intensive working capital operations, intense competition and cyclicality inherent in the steel industry. |
| About the Company |
|
SD Bansal Iron & Steel Pvt Ltd (SDBISPL) is a Bhopal, Madhya Pradesh-based Company incorporated in December 2006. The Company is engaged in the business of manufacturing of Mild Steel (MS) ingots and TMT bars. MS Ingots are mainly utilised for captive use. SDBISPL’s manufacturing facility is located in Mandideep Industril Area, Raisen District (Madhya Pradesh) and has an installed capacity of 80,000 Metric Tons Per Annum (MTPA) of rolling mill for manufacturing TMT bars and a capacity of 80,000 MTPA for MS Billets. The Company manufactures ISI quality TMT bars of size ranging from 8 mm to 32 mm and sells it under the brand name 'Bansal TMT Sariya'. SDBISPL also has a media division under the name of “Bansal News” through which it runs a regional news channel in Madhya Pradesh and Chhattisgarh. SDBISPL is a part of the Bansal group which has a presence in the Construction, Healthcare, Soya Extraction, Education, and the Metal industry.
|
| About the Group |
|
Bansal group of Bhopal (Madhya Pradesh) which has diversified business operations across sectors such as civil and road construction, steel processing, media, education, healthcare and solvent extraction through various group entities.
|
| 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 brand presence in steel industry
SDBISPL has an establish 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 promoter Shri Anil Bansal & Shri Sunil Bansal, has more than two decades of experience in steel industry and has developed keen insight and market knowledge needed for anticipating price trends, calibrate purchasing as well as stocking decisions. The experience of promoters and longstanding relationship with customers is also reflected through its increasing scale of operations with revenues of Rs.307.14 Cr in FY2023 as against Rs.221.31 Cr in FY2022. The revenue has been improved in FY2023 and is primarily driven by increase in volume sales in TMT bars, MS Billets during the period along with increase in average realization. Apart from that, the company has has a media division under the name of “Bansal News” through which it runs a regional news channel in Madhya Pradesh and Chhattisgarh. However, the operating margin of the company stood at 5.17 percent for FY2023 as against 5.87 percent for FY2022. The PAT margin also stood at 2.59 percent in FY2023 as against 2.80 percent in FY2022. 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 debt protection metrics. The tangible net worth stood at Rs.48.45 crore as on 31 March, 2023 as against Rs.40.51 crore as on 31 March, 2022. The total debt of the company stood at Rs.46.12 crore includes Rs.1.62 crore of long term debt, Rs.31.94 crore of short term debt, Rs.11.80 crore of unsecured loans and Rs.0.77 crore of CPLTD as on 31 March, 2023. The gearing (debt-equity) stood low at 0.95 times as on 31 March, 2023 as compared to 0.62 times as on 31 March, 2022. Interest Coverage Ratio stood at 5.36 times for FY2023 as against 9.33 times for FY2022. Debt Service Coverage Ratio (DSCR) stood at 3.62 times in FY2023 as against 5.47 times in FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 1.94 times as on 31 March, 2023 as against 1.31 times as on 31 March, 2022. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.23 times for FY2023 as against 0.36 times for FY2022.
Acuité believes that the financial risk profile of SDBISPL will remain moderate in near to medium term due to its improving operating performance and low debt levels.
|
| Weaknesses |
| Moderately Intensive Working Capital Operations
The working capital management of the company is moderately intensive marked by GCA days of 141 days in FY2023 as against 100 days in FY2022. The debtor days stood at 54 days in FY2023 as against 56 days in FY2022. The average credit period allowed to customers of 30-40 days. The creditor days stood at 46 days in FY2023 and FY2022 as against 52 days in FY2021 which is in line with the average credit period allowed by suppliers of 45-50 days. The inventory holding period of the company stood at 37 days in FY2023 as against 29 days in FY2022. The inventory days increased as the company procures some material from Europe and Dubai. The average inventory holding period is around 45-60 days.
Acuité believes that the company's working capital operations in the medium term due to the nature of the industry, will remain a key rating sensitivity. Susceptibility of profitability margins to volatility in raw material prices
SDBISPL will remain susceptible to seasonality in steel prices. The improvement in revenue in FY2023 is primarily driven by increase in steel prices in the wider market. Any volatility in the steel prices will adversely impact SDBISPL’s revenue and profitability. Any significant changes in raw material prices due to import pressure and over supply are likely to have an adverse impact on margins of the company. 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 capitalintensive. 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 is linked to the steel industry which is cyclical in nature as well as end user industries such as real estate, infrastructure and construction. However, this risk is mitigated as the infrastructure industry in booming and the demand is much on a higher side backed by government initiatives for the upcoming years. |
| Rating Sensitivities |
|
| All Covenants |
| None |
| Liquidity Position |
| Adequate |
|
The company’s liquidity position is adequate, marked by sufficient net cash accruals against its maturing debt obligations. The company has net cash accruals in the range of Rs.5.18-Rs.10.71 Crore from FY 2021- 2023 against its maturing debt obligations in the range of Rs.0.48-0.77 crore in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.9.76-11.69 crore against the maturing repayment obligations of around Rs.0.61-0.77 crore over the medium term. The working capital management of the company is moderately intensive marked by GCA days of 141 days in FY2023 as against 100 days in FY2022. The company maintains unencumbered cash and bank balances of Rs.2.66 crore as on March 31, 2023. The current ratio stands at 1.30 times as on March 31, 2023. The average bank limit utilization for the past 11 months ending November 2023 is ~ 98.79 percent.
Acuité believes that the liquidity of SDBISPL is likely to remain adequate over the medium term on account of adequate cash accruals against its maturing debt obligations
|
| Outlook: Stable |
|
Acuité believes that SDBISPL will maintain 'Stable' outlook over the medium term on account of its experienced management, moderate financial risk profile, increase in scale of operations and longstanding relationship with customers. The outlook may be revised to 'Positive' in case of significant and sustained growth in revenue and profitability while effectively managing its working capital cycle and keeping the debt levels moderate. Conversely, the outlook may be revised to 'Negative' in case of lower than expected growth in revenue or deterioration in the financial and liquidity profile most likely as a result of higher than envisaged working capital requirements.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 307.14 | 221.31 |
| PAT | Rs. Cr. | 7.95 | 6.20 |
| PAT Margin | (%) | 2.59 | 2.80 |
| Total Debt/Tangible Net Worth | Times | 0.95 | 0.62 |
| PBDIT/Interest | Times | 5.36 | 9.33 |
| 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
|
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||
|
| |
|
Contacts |
|
|
|
About Acuité Ratings & Research |
