­Experienced management and integrated operations
Incorporated in 1992, VAPL is promoted by Mr. Sagar Mal Jain, Mr. Pradeep Kimtee, Mr. Abhay Porwal, Mr. Komal Singh Duggad and their respective families. The promoters have over three decades of experience in the iron & steel manufacturing business in India. The company benefits from the rich experience of its promoters, which is reflected by its long standing relations with both customers and suppliers. Prior to FY2021, the Company was engaged in manufacturing of ingot and billets. It forward integrated its operations and began manufacturing of TMT bars by end of FY2021. However, the operating income of the company stood at Rs.524.06 Cr. in FY2024(Prov.) as against Rs.570.44 Cr. in FY2023. The operating profit margin of the company declined and stood at 2.80% in FY2024(Prov.) as against 3.84% in FY2023.

Acuité believes VAPL will continue to benefit over the medium term from its experienced management and its long track record of operations.

­Moderate Financial risk profile
The financial risk profile of the company is moderate marked by moderate net worth, low gearing level and moderate debt-protection metrics. The tangible net worth of the company stood at Rs.51.15 Cr. as on March 31, 2024(Prov.) as against Rs.46.34 Cr. as on March 31, 2023. The overall gearing stood at  0.74 times as on March 31, 2024(Prov.) as against 1.13 times as on March 31, 2023. The total outside liabilities to total networth(TOL/TNW) stood at 1.05 times as on March 31, 2024(Prov.) as against 1.61 times as on March 31, 2023. The debt-protection metrics are moderate with interest coverage ratio (ICR) of 3.68 times for FY2024(Prov.) as against 4.61 times for FY2023. The debt-service coverage ratio (DSCR) stood at 1.69 times for FY2024(Prov.) as against 1.86 times for FY2023.

Acuite believes that the financial risk profile of VAPL will continue to remain moderate on account of absence of any debt funded capex plan in the near term.

Efficient working capital management
The company’s operations are working capital efficient in nature marked by Gross Current Asset (GCA) days of 37 days in FY2024(Prov) against 53 days in FY2023. The improvement in GCA days is primarily due to lower inventory levels during the year. The inventory levels stood at 21 days in FY2024(Prov.)  compared against 42 days in FY2023. The debtor days stood at 8 days in FY2024(Prov.) as compared to 10 days in FY2023. The creditor days stood at 7 days in FY2024(Prov.) as against 13 days in FY2023. Further, the reliance on bank limits stood moderate with average utilisation of ~ ~34.76% in last 12 months ended July 2024.

­Thin profitability margins
The company has thin profitability margins, which also declined in FY2024(Prov). The operating profit margin declined to 2.80% in FY2024(Prov.) as against 3.84% in FY2023 primarily on account of lower price realisations. The profit after tax (PAT) margin stood at 0.92% in FY2024(Prov.) as against 1.38% in FY2023. The Company's profitability thus, remains susceptible to fluctuations in raw material prices, though the order back-to-back policy of the company hedges the margins to an extent.

Acuite believes that VAPL's ability to maintain and or improve its profitability will remain a key monitorable.

Inherent cyclicality in the steel industry
The steel industry is highly fragmented and unorganized. VAPL is exposed to intense competitive pressure from large number of organized and unorganized players along with its exposure to inherent cyclical nature of the steel industry.