Shirdi Steel Traders

Brickwork Ratings has assigned a long-term rating of BWR BB/Stable and short-term rating of BWR A4+ to Shirdi Steel Traders for its bank loan facilities amounting to Rs. 91.75 crore.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	11.00	Long Term	BWR BB /Stable Assignment
	(80.75)	Short Term	BWR A4 + Assignment
Non Fund Based	80.75	Short Term	BWR A4 + Assignment
	(80.75)
Grand Total	91.75	(Rupees Ninety One Crores and Seventy Five lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

Brickwork Ratings has assigned a long-term rating of BWR BB/Stable and short-term rating of BWR A4+  to the bank loan facilities of Shirdi Steel Traders. The rating is supported by factors such as the promoters’ extensive industry experience, strategic yard location in Alang, a comfortable capital structure with adequate liquidity, strong promoter net worth, diversified earnings with stable non-operating income and a favourable position relative to peers. However, the rating remains constrained by the inherent cyclicality of the iron and steel industry, pressure on profitability, and exposure to regulatory and environmental risks.

The outlook has been retained as Stable, as BWR believes that the business risk profile of the Company will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term. 

For assigning the rating, BWR has relied upon the last 3 years of audited financials till FY24, Provisional financials for FY25, projected financials for FY26 & FY27, and publicly available information and clarification provided by management.

KEY RATING DRIVERS

Credit Strengths:

• Experienced Promoters with Established Industry Presence :

  Shirdi Steel Traders is promoted by Mr. Honey Rajkumar Bansal, who has decent experience in the ship breaking and recycling industry. The management possess strong market knowledge, particularly in pricing dynamics, and maintain well-established relationships with ship suppliers, enabling the company to acquire vessels at competitive rates. Mr. Bansal (31 years), a graduate with more than 13 years of business experience, is also serves as a Director in Shanti Ship Breakers Private Limited, a family-owned enterprise engaged in ship-breaking activities. Beyond ship recycling, he has diversified business interests spanning oxygen gas manufacturing, real estate development, and trading of metals, scrap, and machinery.

• Optimal yard placement in Alang  :

  The company’s operations are strategically located within the Alang ship recycling yard, providing a significant advantage through direct access to a large and immediate market comprising numerous re-rolling mills and steel profile cutters in the region. Alang, which handles nearly 90% of India’s ship-breaking activity and is recognized as the country’s largest ship-breaking cluster, ensures consistent demand for the company’s output. In addition to this strong market ecosystem, the company benefits from Alang’s distinct geographical features, such as a high tidal range, wide continental shelf, favorable slope, and mud-free coastline that create ideal conditions for beaching a wide variety of ships during high tide. These factors together enhance the company’s operational efficiency and reinforce its competitive positioning in the ship-breaking industry.

• Diversified Earnings with Steady Non-Operating Income :

  In addition to operating cash flows, the company benefits from diversification in earnings through non-operating revenues. Fixed deposits created for ship procurement via LCs are later channelled as loans and advances to family and relatives, generating steady interest income. This practice not only supports liquidity but also helps sustain profitability, particularly during challenging market conditions.

• Strong Promoter Net Worth and Industry Experience :

  The promoter has a robust capital base and brings extensive experience in the ship recycling industry, being actively engaged as a director in Shanti Ship Breakers Private Limited, a company engaged in ship breaking activities and owned by Mr. Bansal along with his family members. The promoter has consistently demonstrated commitment by extending timely support through equity infusions, ensuring stability and growth.

• Comfortable Capital Structure and Adequate Liquidity Buffer :

  The company enjoys a debt-free profile with no long-term obligations going further, while the sanctioned working capital limits of Rs.11 crore (CC) have remained largely unutilised over the past 12 months. This provides an adequate liquidity cushion and financial flexibility to meet any unforeseen requirements.

Credit Risks:

• Cyclicality in the Iron and Steel Industry and Impact on Profitability :

  The iron and steel industry is inherently cyclical and closely linked to overall economic activity, making its performance highly sensitive to macroeconomic trends. The company procures ships through a bidding process, with fixed payments made upfront, while the dismantling and sale of components typically take several months. During this period, fluctuations in iron and steel prices directly impact realizations, thereby influencing the company’s profitability. However, the risk is mitigated to some extent by use of forward cover to partly hedge its foreign exchange exposure.

• Exposure to regulatory and environment hazard risk :

  The ship-breaking industry, particularly within Gujarat's Alang-Sosiya belt, operates under a stringent regulatory framework, mandating rigorous adherence to both working and safety standards for its labor force, alongside comprehensive environmental compliance. This highly regulated environment necessitates significant investment and continuous oversight from ship-breakers to ensure the well-being of their employees and minimize ecological impact. Despite these stringent measures, the industry remains inherently susceptible to pollution risks. The dismantling process inherently involves hazardous substances, including but not limited to lead, asbestos, various acids, and hazardous paints. The presence of these materials demands meticulous handling and disposal protocols to prevent environmental contamination and safeguard public health, underscoring the ongoing challenges and responsibilities associated with managing such complex industrial operations.

ANALYTICAL APPROACH - Standalone

To arrive at its ratings, BWR has considered a standalone approach. Reference may be made to the Rating Criteria hyperlinked below.

RATING SENSITIVITIES

Moving ahead, the concern's ability to expand its operational scale, boost profitability, and enhance liquidity and credit standing will be critical factors influencing its rating. 

Positive factors:-

• Enhancement in the scale of operations characterized by a topline growth of 15% or greater, coupled with operating profitability margins exceeding 2%.
• Sustained improvement in TNW, maintaining it above Rs. 27.00 crore.

Negative factors:-

• A 5% decrease in the gross revenue generated by the concern.
• A 5% decrease in the profitability margins.
• Any significant capital investment that further jeopardizes the company's liquidity position, which leads to a current ratio of below unity.

LIQUIDITY INDICATORS - Adequate

The bank limits have remained largely unutilised over the past 12 months. The company’s liquidity position is comfortable, supported by adequate net cash accruals of around Rs. 1.40 crore in FY25. With no long-term debt obligations going forward, liquidity remains strong and is further backed by cash and bank balances of Rs. 1.05 crore as on March 31, 2025. Ship procurement for dismantling is carried out through Letters of Credit (LCs), with maturities depending on the size and weight of the vessel. To support these transactions, the company creates fixed deposits, ensuring adequate liquidity. Upon closure of the LCs, the matured FDs are extended as loans and advances to family and relatives, generating interest income and thereby contributing to non-operating revenues, which adds diversification. The promoters also provide timely support through equity infusion and unsecured loans, as and when required, to meet working capital needs and debt obligations.

ABOUT THE ENTITY

Incorporated in 1978, Shirdi Steel Traders is a proprietorship concern engaged in ship breaking at the Alang belt of Bhavnagar, Gujarat. The business was originally established and managed by the late Mr. Rajkumar Bansal. Following his demise in February 2021, the entire business, along with its assets and liabilities, was transferred to his son, Mr. Honey Rajkumar Bansal. Mr. Honey Bansal, aged 31 years, is a graduate with over 13 years of business experience and currently holds a 100% stake in the concern.

KEY COVENANTS OF THE FACILITY RATED

The key covenants are the standard terms as stipulated in the sanction letters of the rated facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	11.00	BWR BB/Stable (Assignment)	NA	NA	NA	NA	NA	NA
FB SubLimit	ST	(80.75)	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	80.75	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
NFB SubLimit	ST	(80.75)	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		91.75	(Rupees Ninety One Crores and Seventy Five lakhs Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Trading Entities
• Short Term Debt
• Approach to Financial Ratios
• Manufacturing Company

Analytical Contacts
Prajwal Biraj Rating Analyst prajwal.b@brickworkratings.com	Ravi Rashmi Dhar Associate Director - Ratings ravi.d@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com	Customer Support | CustSupport@brickwrokratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Indian Overseas Bank	Cash Credit - Sanctioned	11.00	_	11.00	Simple##
2	Indian Overseas Bank	Foreign Letter of Credit (FLC) - Sanctioned	_	80.75	80.75	Simple##
	Sub-Limit (Cash Credit ) - Sanctioned		(80.75)
	Sub-Limit (Letter of Guarantee) - Sanctioned		(80.75)
Total			11.00	80.75	91.75
TOTAL (Rupees Ninety One Crores and Seventy Five lakhs 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.