Press Release

Press Release

December 05, 2025

VANRAJ STEELS PRIVATE LIMITED
Rating Assigned

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	40.00	ACUITE BBB- \| Stable \| Assigned	-
Total Outstanding	40.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuite has assigned the long-term rating of “ACUITE BBB-” (read as ACUITE triple B minus) on the proposed bank facility of Rs.40 crore of Vanraj Steels Private Limited (VSPL). The Outlook is “Stable”.

Rationale for Rating:

The assigned rating reflects VSPL’s experienced management with over two decades in the industry and its long-term facility user agreement with Bihar Sponge Iron Limited (BSIL), ensuring operational continuity. Despite a decline in net revenues in FY2025 due to changes in accounting treatment and lower price realization, profitability improved slightly supported by better cost control. The company’s financial risk profile stood comfortable in absence of any bank line, working capital management stood efficient, and Liquidity remains adequate. Further comfort is derived from the revised facility agreement effective September 2025, halving monthly rent payable by VSPL to BSIL, which is expected to reduce operating expenses and support EBITDA in the medium term.

About the Company

Vanraj Steels Private Limited (VSPL), incorporated on 20th January 2020 and headquartered in Jamshedpur is in a 10 year-long term facility user agreement with BSIL for manufacturing sponge iron in the latter’s unit since December 2020. The facility is located at Umesh Nagar, Chandil, Jharkhand. Following extensive repairs and maintenance, VSPL successfully commenced production in January 2022.

Unsupported Rating

Not Applicable.

Analytical Approach

Acuité has considered the standalone business and financial risk profile of VSPL to arrive at the rating.

Key Rating Drivers

Strengths

Befitted from Experianced Management:

VSPL's operations are supported by experienced management, which has more than two decades of experience in the same line of business. Also, the company has a locational advantage for procuring the raw materials. The company has built healthy relationships with their customers as well as suppliers. Futhemore the long term facility user agreement with BSIL supports its revenue sustainilibiity. Acuite believes that the VSPL will continue to benefit from experienced management in the medium term.

Moderate Financial Risk Profile:

VSPL’s financial risk profile is expected to remain moderate over the medium term, supported by improvement in net worth and capital structuring. The net worth stood at Rs. 33.38 Cr. in fy 25 supported by infusion of unsecured loan Rs.40 Cr. by group entity and other body corporates against negative net worth of Rs.12.09 Cr. in FY 24. The negative net worth, was due to one- time losses in FY 2023 for operationalizing its sponge iron plant, As per management undertaking, the unsecured loan will be retained in the business for a long term. As of now their debt structure is mainly comprised of unsecured loans from promoters and related parties. The gearing stood stable at 0.50 times in FY 2025. The debt protection metrices stood stable in the absence of any major debt, with ICR and DSCR at 9.78 times and 7.07 times in FY 2025. Further, VSPL has already taken a LAP loan of Rs.7.5 crore and is also going to take a working capital loan of Rs.40 crore for working capital management in the current financial year. The NCA/TD ratio stood at 0.38 times in FY 2025. Debt/EBITDA stood at 1.67 times in FY 2025. The TOL/TNW ratio stood at 2.11 times in FY 2025. Acuite expects that the financial risk profile will remain moderate in the medium term, backed by enhancement of the capital base and accretion to reserve but moderation in debt protection metrices due to expected loans.

Moderate Working Capital Management:
VSPL exhibited moderate yet improving working capital management in FY 2025, marked by a sharp reduction in Gross Current Asset (GCA) days to 62 days from 116 days in FY 2024, primarily driven by a significant improvement in debtor days to 21 days in FY 2025 from 71 days in FY 2024, as receivables from Bihar Sponge Iron Limited, previously 71% of total debtors, declined due to reduced raw material sales. Inventory days also improved to 1 days in FY 2025 from 5 days in FY 2024. Other current assets decreased to Rs.42.66 crore from Rs.54.66 crore, driven by reduced advances to related parties and lower GST receivables. However, creditor days rose to 45 days in FY 2025 from 31 days in FY 2024, attributed to high year-end booking. To support operational expansion and inventory buildup, VSPL plans to avail a Rs.40 crore working capital loan. Acuité expects VSPL’s working capital cycle to remain stable, underpinned by improved collection efficiency and disciplined inventory planning.

Weaknesses

Decline in Operational Performance albeit slight improvement in profitability:
VSPL experienced a consistent decline in operating revenue over the past three fiscal years, falling to Rs.406.89 crore in FY 2025 from Rs.525.13 crore in FY 2024 and Rs.672.69 crore in FY 2023, due to changes in accounting treatment related to sales and also a decline in price realization of sponge iron. Earlier, VSPL was procuring raw materials and was supplying the same to BSIL for manufacturing sponge iron, this sponge iron was sold back to VSPL, and then VSPL was selling it in outside market. However, VSPL has changed this practice, and is now providing advances to BSIL to procure raw material from vendors for manufacturing sponge iron, which is sold to VSPL and VSPL in turn is selling it to outside parties. Despite a 34% increase in sponge iron production in FY 2025, revenue was further impacted by lower price realization amid correction in steel market prices. The company has recorded Rs. 172 Cr. in revenue in H1FY26. Nevertheless, VSPL has been able to sustain its operating margin at 2.36% in FY 2025 vis-à-vis 2.27% in FY 2024, and PAT margin rose to 1.34% in FY 2025 from 0.80% in FY 2024, supported by reduced finance costs following partial repayment of unsecured loans. Additionally, the revised Facility User Agreement reduced monthly rent from Rs.2.20 crore to Rs.1.10 crore effective September 2025, which is expected to enhance EBITDA. Acuite believes that the improvement in operations and profitability will remain a key monitorable.

Exposure to cyclicality in the steel industry

The steel industry is cyclical in nature and witnessed prolonged periods where it faced a downturn due to excess capacity leading to a downtrend in the prices. However, the outlook for the steel industry in the short to medium term appears to be good with expected robust demand in the domestic markets driven by various government initiatives and expected improvement in the infrastructure and real estate sector. However, any adverse fluctuations in the prices of finished products or any downturn in the steel sector may impact the company adversely.

Rating Sensitivities

1, Movement in topline and profitability
2. Working capital management

Liquidity Position

Adequate

Liquidity remained adequate with Rs.6.36 crore net cash accruals and absence of debt repayments in FY 2025. The net cash accruals are expected to meet their LAP repayment which is going to start by FY 2027. The company holds Rs.1.92 crore in unencumbered cash as on March 25 and plans to obtain working capital limits of Rs.40 crore over the near term. Promoter support via quasi equity of Rs.40 crore further strengthens liquidity. The current ratio stood at 1.25x in FY 25. Acuité expects liquidity to improve, backed by rising accruals, efficient collections, expectation of obtaining bank lines and absence of major capex.

Outlook: Stable

Other Factors affecting Rating

None.

Key Financials

Particulars	Unit	FY 25 (Actual)	FY 24 (Actual)
Operating Income	Rs. Cr.	406.89	525.13
PAT	Rs. Cr.	5.47	4.22
PAT Margin	(%)	1.34	0.80
Total Debt/Tangible Net Worth	Times	0.50	(7.49)
PBDIT/Interest	Times	9.78	2.08

Status of non-cooperation with previous CRA (if applicable)

None.

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 :

Not Applicable.

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	40.00	Simple	ACUITE BBB- \| Stable \| Assigned

Contacts

Mohit Jain
Chief Analytical Officer - Rating Operations

Shreya Banerjee
Analyst-Analytical 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.

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