RATING RATIONALE
14Aug2023
Mangalam Worldwide Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 140.00 Crs. of Mangalam Worldwide Ltd.
Particulars| Facilities** | Amount(Rs.Crs.) | Tenure | Rating# | |
|---|---|---|---|---|
| Fund Based | 130.00 | Long Term |
BWR BBB
/Stable Assignment |
|
| (15.00) | ||||
| (15.00) | ||||
| Non Fund Based | 10.00 | Short Term |
BWR A3
Assignment |
|
| Grand Total | 140.00 | (Rupees One Hundred Forty Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
Brickwork Ratings has relied upon the Audited Financial statements of the company for FY23, Projections for FY24 & FY25, as well as information / clarifications provided by the company's management and its bankers, to carry out the rating exercise.
BWR has assigned the rating for the long-term bank loan facilities of Mangalam Worldwide Ltd of "BWR BBB/ Stable" and the rating for their short term bank loan facilities of "BWR A3" for an amount aggregating to Rs.140 crores. The current rating factors in the experienced & competent management and established relationships with suppliers and customers, diversified revenue profile, positive demand outlook for the steel industry and revenue growth.
The rating is however constrained by revenue and profitability remain vulnerable to volatility in prices of raw materials due to cyclicality associated with steel industry and business concentration risk.
The outlook has been retained at "Stable" as BWR believes that the business risk profile of Mangalam Worldwide Ltd will be maintained over the medium term, and thus the Stable outlook indicates a low likelihood of a rating change over the medium term. The rating outlook may be revised to "Positive" in case of substantial growth in revenue and EBITDA, or to "Negative" if there is any decline in cash accruals or stretch in working capital or business concentration risk.
KEY RATING DRIVERSCredit Strengths:
-
Experienced & competent management and established relationships with suppliers and customers :
The company is promoted by Ahmedabad-based Mangalam Group. The business operations of Mangalam Group are headed by Mr. Vipin Prakash Mangal, aged 56 years having vast Business experience of more than 3 decades. The next generation i.e. his elder son Mr. Chanakya Prakash Mangal, aged 28 years and younger son Mr. Chandragupt Prakash Mangal aged 26 years have joined the business as directors, who are managing the company under able guidance of Mr. Vipin Prakash Mangal. Apart from this, the company has a management team of qualified and experienced professionals adding value to the organization through their expertise. Benefits from the three-decade-long experience of the key promoter, his keen insights into industry dynamics, and healthy relationships with customers, suppliers and dealers, distributors and stockists, should continue to support the business risk profile.
-
Positive demand outlook for the steel industry :
The domestic steel prices have increased significantly from H2FY21 onwards and are currently at an all-time high, driven by the spurt in global steel prices. BWR believes that the significant improvement in steel demand and realizations will result in considerable growth in the company’s revenue, profits and cash accrual in the current fiscal.
-
Revenue growth :
The operating income has increased to Rs.644.48 crores in FY23 as compared to Rs.523.05 crores in FY22. The increase in revenue was mainly from product SS Billets. The Company is into manufacturing Stainless Steel (billets) of all the grades i.e., 200, 304, 316 and 400 etc. Earlier, the Company was majorly doing production of 200 grade billets and then processing it into flat bars. The Company was manufacturing 304, 316 and 400 grade on job work basis as it requires huge working capital for own production.
With the sanction of working capital limits, the Company started its own production of these higher grades as the profit margins are also high in these grades. With these, the Company has focused more on its own full-fledged production of 300 series billets and 400 series billets and thus, there is an increase in sales of billets in FY 2022-23 as compared to FY 2021-22.
-
Revenue and profitability remain vulnerable to volatility in prices of raw material due to cyclicality associated with steel industry :
The steel industry is marked by low product differentiation and limited value addition. The commoditized nature of the products renders the company vulnerable to volatility in raw material prices. Besides, production costs and profit margins extensively depend on raw material prices, as raw material costs constitute above 85% of net sales.
-
Business concentration risk :
The 40.57% of revenue is generated from only two customers which indicates a business concentration risk. This can be mitigated if the company dilute the percentage of the concentration by increasing sales to other customers or entering new markets.
BWR considers standalone financials of Mangalam Worldwide Ltd. The reason for considering the standalone financials is that the other group entity has a negligible business.
RATING SENSITIVITIES
Positive: BWR may revise the ratings upward if the company’s scale of operations and profitability improve on a sustained basis.
- Substantial growth in revenue and EBITDA margin
- Improvement in the overall financial risk profile
Negative: BWR may revise the ratings downwards if there is a deterioration in the company's revenue, profitability, and liquidity.
- Decline in cash accruals or stretch in working capital
- Business concentration risk
LIQUIDITY INDICATORS - Adequate
The Company's s liquidity position is adequate with ISCR of 5.86x, DSCR of 7.58x, cash accruals of Rs.19.98 crores, current ratio of 1.69 times. The company has only one Term loan facility of Rs.30 crores which is repayable from January 2024 and the average utilization of working capital limits (CC) is 80-85%. EBITDA is Rs.18.14 crores which is sufficient to pay finance cost of Rs.3.10 crores. Cash accruals of Rs.19.98 crores is adequate to pay current year debt obligation of Rs.0.75 crores (TL first installment due in January 2024). The cash and bank balance is Rs.12.30 crores.
ABOUT THE ENTITYIncorporated in 1995, MWPL is promoted by Ahmedabad based ‘Mangalam’ Group. Presently there are 3 directors in the Company namely Mr. Chanakya Prakash Mangal, Mr. Chandragupt Prakash Mangal & Vipin Prakash Mangal. The company was earlier engaged in the trading of Dyes and Dyes Intermediaries. From FY19, the company is engaged in manufacturing and trading of steel products (S.S. Billets, S.S. Flat Bars, Steel and other products).
The company has acquired steel division (Tubes and pipes) of M/s H.M. Industrial Pvt Ltd (HMIPL) w.e.f 20/09/2022.
The company also started its own production of higher grades as the profit margins are also high in those grades. With these, the company has focused more on its own full-fledged production of 300 series billets and 400 series billets.
The company got listed on NSE emerge platform on 11th July 2022.
Another group company is Mangalam Global Enterprise Limited (MGEL) [rated BWR BBB-/Stable/A3 on 03 July 2023] which is a Public Limited company. On 27th November 2019 the company went for SME – IPO issue and got listed on NSE – Emerge. The Company was migrated to NSE main board on 23rd December 2020. MGEL is mainly into the Manufacturing and Trading of Agricultural Products such as Castor Oil, Castor Seed, Castor Oil cake, High Protein Oil Cake, Cotton Bales, Cotton Seeds etc. The company has also started manufacturing and trading of Mustard seed, Mustard oil, Mustard cake, Soya seed, Soya refined oil, Soya cake, Wheat and Rice and other agri products from FY21.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 21-22 (Audited) |
FY 22-23 (Audited) |
FY 23-24 (Unaudited) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 523.05 | 644.48 | Not Available |
| EBITDA | Rs.Crs. | 11.55 | 18.14 | Not Available |
| PAT | Rs.Crs. | 12.39 | 15.75 | Not Available |
| Tangible Net Worth | Rs.Crs. | 45.35 | 127.58 | Not Available |
| Total Debt/TNW | Times | 1.03 | 0.67 | Not Available |
| Current Ratio | Times | 0.92 | 1.69 | Not Available |
| Key Parameters | Units |
FY 21-22 (Audited) |
FY 22-23 (Audited) |
FY 23-24 (Unaudited) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 523.03 | 644.48 | Not Available |
| EBITDA | Rs.Crs. | 11.46 | 18.43 | Not Available |
| PAT | Rs.Crs. | 12.39 | 16.64 | Not Available |
| Tangible Net Worth | Rs.Crs. | 45.37 | 138.63 | Not Available |
| Total Debt/TNW | Times | 1.03 | 0.62 | Not Available |
| Current Ratio | Times | 0.92 | 1.66 | Not Available |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
NA
RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2023) | 2023 (History) | 2022 | 2021 | 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 130.00 |
BWR BBB/Stable
(Assignment) |
19Jan2023 |
BWR BB Stable
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
09Nov2021 |
BWR BBB- Stable
(Assignment) |
NA |
NA
|
| 0.00 |
NA
|
17Feb2023 |
BWR Withdrawal
(Withdrawal) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| FB SubLimit | LT | (15.00) |
BWR BBB/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (15.00) |
BWR BBB/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 10.00 |
BWR A3
(Assignment) |
19Jan2023 |
BWR A4
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
09Nov2021 |
BWR A3
(Assignment) |
NA |
NA
|
| 0.00 |
NA
|
17Feb2023 |
BWR Withdrawal
(Withdrawal) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Grand Total | 140.00 | (Rupees One Hundred Forty Crores Only) | |||||||||
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Anitha More Rating Analyst anithamore@brickworkratings.com |
Nagaraj K Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Canara Bank | Cash CreditSanctioned | 50.00 | _ | 50.00 | |
| 2 | Canara Bank | ILC/FLCSanctioned | _ | 5.00 | 5.00 | |
| 3 | State Bank Of India (SBI) | Bank GuaranteeSanctioned | _ | 4.00 | 4.00 | |
| 4 | State Bank Of India (SBI) | Credit Exposure Limit (CEL)Sanctioned | _ | 1.00 | 1.00 | |
| 5 | State Bank Of India (SBI) | Term LoanSanctioned | 30.00 | _ | 30.00 | |
| 6 | State Bank Of India (SBI) | Cash CreditSanctioned | 50.00 | _ | 50.00 | |
| Sub-Limit (EPC/FBD) Sanctioned | (15.00) | |||||
| Sub-Limit (PCFC/EBR) Sanctioned | (15.00) | |||||
| Total | 130.00 | 10.00 | 140.00 | |||
| TOTAL (Rupees One Hundred Forty Crores Only) | ||||||
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