RATING RATIONALE
12Nov2024
Mangalam Worldwide Ltd.
Brickwork Ratings reaffirms and withdraws the ratings for the Bank Loan Facilities of Rs. 129.38 Crs. of Mangalam Worldwide Ltd.
Particulars| Facilities/Instruments** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (14 Aug 2023) |
Present | ||
| Fund Based | 130.00 | 119.38 | Long Term |
BWR BBB /Stable
Assignment |
BWR BBB
/Stable Reaffirmation/Withdrawal |
| (15.00) | (15.00) | ||||
| (15.00) | (15.00) | ||||
| Non Fund Based | 10.00 | 10.00 | Short Term |
BWR A3
Assignment |
BWR A3
Reaffirmation/Withdrawal |
| Grand Total | 140.00 | 129.38 | (Rupees One Hundred Twenty Nine Crores and Thirty Eight lakhs Only) | ||
**Complete details of Bank facilities / NCDs is provided in Annexure-I
RATING ACTION / OUTLOOK / WITHDRAWAL
Brickwork Ratings (BWR) reaffirms and simultaneously withdraws the bank loan rating of BWR BBB/Stable/A3 for a debt size of Rs. 139.38 Crores based on the best available information.
The withdrawal of the bank loan rating is based on Mangalam Worldwide Ltd. (MWL)'s request for withdrawal and upon receiving No Objection Certificates (NOC) from its lenders in this regard. The withdrawal ratings are in line with BWR's policy, and the relevant documents are held on record. The rating has been reviewed based on the publicly available information at the time of withdrawal.
The rating factors, inter alia, experienced & competent management with a diversified revenue profile, a robust demand outlook for the steel industry, and MWL’s improved operations along with a stable financial risk profile in FY24 and H1FY25. The rating is however constrained by the commoditized nature of the business and revenue and profitability are vulnerable to volatility in the prices of raw materials. BWR notes that the Company's adequate liquidity will enable it to meet the requirements of debt repayments.
KEY COVENANTS OF THE INSTRUMENT / FACILITY RATEDThe terms of sanction include standard covenants normally stipulated for such facilities.
KEY RATING DRIVERS
Credit Strengths:
-
Experienced & competent management: :
The company is promoted by Ahmedabad-based Mangalam Group. The business operations of Mangalam Group have been headed by Mr. Vipin Prakash Mangal and his family for around 3 decades. 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 dealers, distributors, and stockists.
-
Improved operations and profitability: :
The operating income has increased to Rs. 818.11 crores in FY24 as compared to Rs 644.49 crores in FY23. As of 30th September 2024, the company reported a revenue of Rs. 466.87 Crs. The increase in revenue was mainly from the product SS Billets. The company acquired Agarwal Mittal Concast Private Limited, Vicor Stainless Private Limited, and the Steel division of H.M. Industrial Private Limited through NCLT Process in the last three fiscals. The additions in capacities have helped to improve the scale of operations. Further, the operating profit margin improved to 4.58% in FY24 (FY23: 2.87%) & 5.20% in H1FY25 whereas the net profit margin remained almost the same at 2.46% (FY23: 2.59%), 2.91% in H1FY25 due to increased finance costs.
-
Stable financial risk profile: :
The company has an adequate net worth of around Rs 171.39 Crores as of 31st March 2024. The financial risk profile is moderate marked by gearing of 0.59x in FY24 (FY23: 0.66X) and total outside liabilities to net worth of around 1.35 times for FY24 (FY23: 0.93X). Debt coverage is comfortable indicating ISCR at 2.48x, and DSCR at 2.62x for FY24. (ISCR FY23:; 5.05X & DSCR : 6.88X)
-
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.
-
Exposure to Intense Competition :
The steel trading industry is dominated by many unorganized players catering to local demand to save on high transportation costs, as price is the main differentiating factor. The intense competition restricts the bargaining power of MWL with customers and suppliers, resulting in a modest operating margin The intense competition will continue to constrain the scalability, pricing power, and profitability of MWL.
For arriving at its ratings, BWR considered the standalone financials (Published on NSE) of Mangalam Worldwide Ltd. and has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Not Applicable
LIQUIDITY INDICATORS - Adequate
The cash and bank balance is Rs.2.45 crores as of 31st March 2024. The liquidity position is adequate with improved net cash accruals of Rs. 25.04 crores in FY24 (FY23: 20.49 Crs) against the current debt obligation around Rs. 3-4 Crores. The current ratio has slightly worsened to 1.44X yet remained comfortable in FY24 (FY23: 1.61X). The conversion cycle is elongated to 70 days in FY24 (FY23: 41 days), though it is considered normal in the steel industry. During FY24, the cash credit limits are enhanced from Rs. 100 Crores to Rs. 161 Crores.
COMPANY's / FIRM's PROFILE| Macro Economic Indicator | Sector | Industry | Basic Industry |
|---|---|---|---|
| Industrials | Capital Goods | Industrial Products | Iron & Steel Products |
Mangalam Worldwide Limited (Mangalam the Company) established in 1995, is a fully integrated stainless steel manufacturing company with an in-house Melting plant, Rolling Mill, Bright Bar manufacturing, and seamless & welded pipes manufacturing facility. With its end-to-end manufacturing prowess, Mangalam provides a complete range of products to its customers ranging from Billets, Ingots, and Bright bars to Pipes & Tubes. The Company was listed on “NSE Emerge” in July, 2022 with an IPO size of ₹ 66 Cr.
The company markets its stainless steel products under the brand names 'Mangalam Saarloh' and 'Mangalam Tubicore.’ The Company’s Manufacturing plants are located at Halol (Unit-I), Changodar (Unit-II), and Kapadvanj (Unit-III and Unit-IV). Unit-I, located in Halol, has an installed manufacturing capacity of 66,000 metric tons per annum for Stainless Steel Billets and ingots, encompassing various series such as 200 series, 300 series and 400 series. Changodar is equipped with an installed rolling capacity of 90,000 metric tons per annum for SS Flat / Round bars. The Bright Bar Unit and Seamless Pipe Unit at Kapadvanj are equipped with state-of-the-art machinery to manufacture high-value-added products such as Bright Bars, Seamless pipes & tubes.
Mangalam Worldwide Ltd vide its announcement dated 25th April 2023 on the NSE website, disclosed that the board of directors has considered and approved the scheme of amalgamation of Mangalam Saarloh Private Limited (Transferor company) with the company and their respective shareholders and creditors, subject to required statutory and regulatory approvals.
The Mangalam Saarloh Private Limited is already a subsidiary of Mangalam Worldwide Ltd with a 60% holding.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 22 - 23 (Audited - Annual) |
FY 23 - 24 (Audited - Annual) |
FY 24 - 25 (Unaudited - Midterm-H1) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 644.49 | 818.11 | 237.73 |
| EBITDA | Rs.Crs. | 18.52 | 37.49 | 12.36 |
| PAT | Rs.Crs. | 16.69 | 20.10 | 6.91 |
| Tangible Net Worth | Rs.Crs. | 127.58 | 171.39 | 196.84 |
| Total Debt / Tangible Net Worth | Times | 0.66 | 0.59 | 0.85 |
| Current Ratio | Times | 1.61 | 1.44 | 1.34 |
Not Applicable
RATING HISTORY FOR THE PREVIOUS THREE YEARS(including withdrawal and suspended)| Name of Instrument (NCD/Bank Loan /Non- Fund Based facilitates/ Commercial Paper etc.) | Current Rating (2024) | 2023 | 2022 | 2021 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 119.38 |
BWR BBB/Stable
(Reaffirmation/Withdrawal) |
19Jan2023 |
BWR BB Stable
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
09Nov2021 |
BWR BBB- Stable
(Assignment) |
| 0.00 |
NA
|
17Feb2023 |
BWR Withdrawal
(Withdrawal) |
NA |
NA
|
NA |
NA
|
||
| 0.00 |
NA
|
14Aug2023 |
BWR BBB Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
||
| FB SubLimit | LT | (15.00) |
BWR BBB/Stable
(Reaffirmation/Withdrawal) |
14Aug2023 |
BWR BBB Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
| (15.00) |
BWR BBB/Stable
(Reaffirmation/Withdrawal) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 10.00 |
BWR A3
(Reaffirmation/Withdrawal) |
19Jan2023 |
BWR A4
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
09Nov2021 |
BWR A3
(Assignment) |
| 0.00 |
NA
|
17Feb2023 |
BWR Withdrawal
(Withdrawal) |
NA |
NA
|
NA |
NA
|
||
| 0.00 |
NA
|
14Aug2023 |
BWR A3
(Assignment) |
NA |
NA
|
NA |
NA
|
||
| Grand Total | 129.38 | (Rupees One Hundred Twenty Nine Crores and Thirty Eight lakhs Only) | |||||||
- General Criteria
- Approach to Financial Ratios
- Short Term Debt
- BWR Withdrawal Policy
- Manufacturing Company
| Analytical Contacts | |
|---|---|
|
KunjalDabhi Ratings Analyst kunjal.d@brickworkratings.com |
Niraj Kumar Rathi Director Ratings niraj.r@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.) | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| 1 | Canara Bank | Cash CreditSanctioned | 50.00 | _ | 50.00 | Simple## |
| 2 | Canara Bank | ILC/FLCSanctioned | _ | 5.00 | 5.00 | Simple## |
| 3 | State Bank Of India (SBI) | Bank GuaranteeSanctioned | _ | 4.00 | 4.00 | Simple## |
| 4 | State Bank Of India (SBI) | Credit Exposure Limit (CEL)Sanctioned | _ | 1.00 | 1.00 | Simple## |
| 5 | State Bank Of India (SBI) | Term LoanSanctioned | 19.38 | _ | 19.38 | Simple## |
| 6 | State Bank Of India (SBI) | Cash CreditSanctioned | 50.00 | _ | 50.00 | Simple## |
| Sub-Limit (EPC/FBD) Sanctioned | (15.00) | |||||
| Sub-Limit (PCFC/EBR) Sanctioned | (15.00) | |||||
| Total | 119.38 | 10.00 | 129.38 | |||
| TOTAL (Rupees One Hundred Twenty Nine Crores and Thirty Eight 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.
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| Mangalam Saarloh Private Limited | 60 | Full | Subsidiaries of Mangalam Worldwide Ltd |
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