Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 49.35 Crs. of Riddhi Steel and Tube Ltd
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (23 Jul 2020) |
Present | ||
Fund Based | 49.10 | 49.10 | Long Term |
BWR BB- (Stable) Issuer not cooperating*
Downgrade |
BWR BB +
/Stable Upgrade |
Non Fund Based | 0.25 | 0.25 | Short Term |
BWR A4 Issuer not cooperating*
Downgrade |
BWR A4 +
Upgrade |
Grand Total | 49.35 | 49.35 | (Rupees Forty Nine Crores and Thirty Five lakhs Only) |
BWR has essentially relied on Audited financials upto FY20, provisional financial for FY21, projected financial, publicly available information and information and clarifications provided by management.
The rating draws comfort from experienced promoters with long standing established relationships with clients, above average financial risk profile and improving operating performance. However, the rating is constrained by cyclical nature of industry and raw material price fluctuation and intense competition.
BWR believes that Riddhi Steel and Tube Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
The promoter Mr. Rajesh Mittal has over 25 years of experience in the steel business. With over 20 years of established track record in this industry, the company has positioned itself as one of the key manufacturer and exporter of EWR steel tubes and pipes.
First quarter of FY2021 was sharply affected by pandemic induced lockdown, however the company's operating performance is improving supported by large price hike in response to favourable international steel prices and rising domestic demand. The company has achieved the revenue of Rs. 239.76 Crs till Dec 2020. Despite increase in iron ore prices BWR expects the company to report healthy profitability in FY21 due to incraese in steel tubes and pipes prices.
The financial risk profile of the company is moderate as evident from moderate analyzed debt equity of 1.32 times with tangible net worth of Rs.45.27 Crs. in FY20. Modest debt protection metrics.
Credit Risks:
The steel industry is sensitive to the shifting business cycles including changes in the general economy, interest rates and seasonal changes in the demand and supply conditions in the market. Demand for its product is linked to the performance of end-user industries as the firm primarily caters to the automobile sector which are cyclical and strongly correlated with economic cycles. Further, the firm is also exposed to raw material price fluctuations, thus, affecting their profitability margins.
Steel industry is highly fragmented and competitive. Rohit Iron & Steel faces intense competition from other large players in the market and thus, restricting their pricing power leading to thin profitability margins.
Positive: An overall improvement in the Total operating income, EBITDA, profit margins while maintaining adequate liquidity.
Negative: Significant deterioration in the business revenue, working capital cycle and financial risk profile of the company.
LIQUIDITY INDICATORS - Adequate
Net cash accruals for FY20 were Rs. 6.36 Crs and analyzed net cash accruals to long term debt of 21%. Current ratio are healty at 1.98 times on March 31, 2020. Moderate gearing and moderate net worth support it's financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business.
ABOUT THE ENTITYStarted in 2001, Riddhi Steel and Tube Ltd was promoted by Mrs Preeti Mittal and Mr Rajesh Mittal based out of Ahmedabad. RSTL manufactures MS ERW pipes and tubes used mainly in various infrastructure and engineering projects, water supply and irrigation projects. In September 2016 the company got listed on SME. The company has an installed capacity of 60,000 MTPA and the manufacturing facility located at Kamod village Gujarat.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 291.69 | 376.54 |
EBITDA | Rs.Crs. | 17.35 | 19.26 |
PAT | Rs.Crs. | 3.06 | 4.98 |
Tangible Net Worth | Rs.Crs. | 45.27 | 42.20 |
Total Debt/Tangible Net Worth | Times | 2.19 | 2.45 |
Current Ratio | Times | 1.88 | 1.99 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 49.10 |
BWR BB+/Stable
|
23Jul2020 |
BWR BB- (Stable) Issuer not cooperating*
|
07Aug2019 |
BWR BBB- (Stable) Issuer not cooperating*
|
NA |
NA
|
Non Fund Based | ST | 0.25 |
BWR A4+
|
23Jul2020 |
BWR A4 Issuer not cooperating*
|
07Aug2019 |
BWR A3 Issuer not cooperating
|
NA |
NA
|
Grand Total | 49.35 | (Rupees Forty Nine Crores and Thirty 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.
Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Siddharth Shah Rating Analyst siddharth.s@brickworkratings.com |
Dileep Narayan Singh Director Ratings dileep.s@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | ||
---|---|---|---|---|---|---|
1 | Cash CreditSanctioned | 44.50 | _ | 44.50 | ||
2 | Term LoanSanctioned | 4.60 | _ | 4.60 | ||
3 | Bank GuaranteeSanctioned | _ | 0.25 | 0.25 | ||
Total | 49.10 | 0.25 | 49.35 | |||
TOTAL (Rupees Forty Nine Crores and Thirty Five lakhs Only) |
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About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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