Viraj Profiles Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 1700.86 Crs. of Viraj Profiles Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (07 Apr 2020)	Present
Fund Based	70.30	12.00	Long Term	BWR BBB+ /Stable	BWR BBB + /Stable Reaffirmation
Fund Based	1404.05	1101.86	Short Term	BWR A2	BWR A2 Reaffirmation
Non Fund Based	949.28	587.00	Short Term	BWR A2	BWR A2 Reaffirmation
Grand Total	2423.63	1700.86	(Rupees One Thousand Seven Hundred Zero Crores and Eighty Six 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

The reaffirmation of ratings take into account the successful reduction of debt levels,, through monetisation of non core assets, enhanced profitability and improvement of overall financial risk profile. These rating strengths are partially offset due to price volatility risk associated with major raw material and finished goods owing to presence in cyclical industry, government policies & regulations, reputational risk associated with promoter and competition in export markets.

BWR believes that Viraj Profiles Ltd’s (VPL) 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 DRIVERS

Credit Strengths:

Improvement in financial risk profile:
Improvement in financial risk profile: VPL has reported growth in Operational profit margins and PAT margins over last year on account of better realization, The increase in profitability and decrease in leverage has led to the company achieving robust coverage and leverage ratios during FY21. While the operating income has remained stable, the EBITDA and PAT have increased significantly to Rs. 504.91 crores and Rs. 192.65 crores respectively in FYe21 as against Rs 367.13 crores and Rs. 32.14 crores in FY20(A). The improvement in TNW has also improved the capital structure in FYe21 - TD/TNW of 0.7x (FY20: 0.85x) and TOL / TNW of 1.09x (FY20: 1.50x)
Diversified clientele in terms of geographic location: Viraj Profiles Limited (VPL) has a well-diversified clientele with its clients based out of around 90 different countries. Capabilities to manufacture a wide variety of grades across all series of stainless steel (SS) (mainly 200, 300 and 400 series – classified based on exact content of nickel and other alloys) has helped the company cater to a diversified end-user base, comprising automobile-railway-transportation,architecture-building-construction , process industries (food and pharma), consumer goods (durables, kitchenware),and healthcare (equipment).
Experienced promoters with long track record of operations: :Mr. Neeraj Kochhar has over four decades of experience in the stainless steel manufacturing industry. He is accompanied by a team of qualified and experienced Board of Directors and management team under which the company has increased its scale of operations. VPL, incorporated in 1996, has long standing presence in the industry which has helped the Company establish relationship with customers and suppliers.

Credit Risks:

Reputational Risk: :
The Promoter is part of a CBI investigation for alleged bribing of CBI officers for probing a corruption case against an Indian Revenue Service Officer and the case is pending in court. Though the company has clarified that the Promoter’s participation in the case is limited to that of a prosecution witness, the reputational risk shall persist till the legal proceedings come to a conclusion.
Volatility risks relating to input cost, realisations, and cyclicality in the SS industry: :
Prices of key raw materials such as SS scrap and finished SS products are largely linked to nickel prices, which tend to be highly volatile. This has led to unfavorable price cycles for the sector in the past. More than 60% of cost of sale is related to nickel;, nickel prices being volatile, the company covers major raw materials as soon as they receive the order, thus helping the company to mitigate the price volatility risk to a certain extent.
Foreign Exchange Volatility Risk: :
Majority of the procurement (around 80-85% of the total raw material requirement) is through imports around more than 85% of its revenue was from exports in FYe21, which exposes VPL to exchange rate fluctuation. The risk is mitigated to a certain extent as all imports are in USD and 70% of Exports are in USD thus providing a natural hedge. Further, the company uses forward covers to hedge the cross currency legs as soon as the orders are booked.

ANALYTICAL APPROACH - Standalone

BWR has factored into standalone business and financial risk profile of the company to arrive at the rating. Reference may be made to the Rating Criteria hyperlinked below.

RATING SENSITIVITIES

Positive: Sustenance of improvement in the leverage and coverage indicators over the long term and promoter being acquitted from all legal proceedings would be positive for the rating.

Negative: Deterioration in the leverage as against the envisaged levels, significant decline in revenue and profitability negatively affecting the coverage indicators, sharp reversal in industry operating conditions and promoter being convicted of legal charges would be negative for the rating.

LIQUIDITY INDICATORS - Adequate

Cash & cash equivalent in FYe21 stands at INR 69.97 Crs. and other bank balances which are deposits for margin money with banks of INR 36.11 Crs. Interest service coverage ratio stood at 4.16 times in FYe21 vis-à-vis 2.28 times in FYe20. DSCR is comfortably placed at 3.58 times in FYe21 (FYe20: 1.26 times). The strong credit metrics are mainly on account of reduced debt level and relatively lower financing cost. The liquidity of the company is likely to remain adequate over the medium term on account of adequate cash accrual and no major repayments over the medium term.

ABOUT THE ENTITY

VPL, incorporated in 1996 is engaged in the business of manufacturing stainless steel engineering products that include wire rods, bright bars, wires, flanges, sections & profiles, fasteners/screws. The company is promoted by Mr. Neeraj Kochhar with an experience of around 30 years in the stainless-steel industry. The promoter had started a Stainless Steel Melting (Billets) unit in the name of M/s. Viraj Alloys Ltd (VAL) in the year 1992. Then in 1995 they started Viraj Impoexpo Ltd for manufacturing Bright Bars (VIEL) & Viraj Forgings Ltd for manufacturing Flanges (VFL) then in year 2000, they started Viraj Profiles Ltd for manufacturing Sections and Profiles, in 2001 they started VSL Wires Ltd. for wires manufacturing. In 2005 VAL & VFL merged into VAL. In November 2006 under slump sale mechanism, industrial undertakings of VAL, VIEL & VSL transferred to VPL. From April, 2007 VAL, VIEL and VSL merged into VPL.

The operations of VPL are segregated in following divisions:- Steel Melting, Wire Rods, Wires, Bright Bars, Sections & Profiles, Flanges, Fasteners and Waste Processing.

Its products have applications across diverse industries including petrochemicals, oil pipelines, ships, food processing, structural designs, high utensils, springs, cables, pressure vessels, liquid storage terminals, liquid cargo ships & surgical instruments.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	5376.62	5429.66
EBITDA	Rs.Crs.	504.91	367.13
PAT	Rs.Crs.	192.65	32.14
Tangible Net Worth	Rs.Crs.	1715.12	1494.97
Total Debt/Tangible Net Worth	Times	0.70	0.85
Current Ratio	Times	1.41	1.23

KEY COVENANTS OF THE FACILITY RATED

Not Applicable

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	12.00	BWR BBB+/Stable (Reaffirmation)	07Apr2020	BWR BBB+/Stable ()	NA	NA	NA	NA
Fund Based	ST	1101.86	BWR A2 (Reaffirmation)	07Apr2020	BWR A2 ()	NA	NA	NA	NA
Non Fund Based	ST	587.00	BWR A2 (Reaffirmation)	07Apr2020	BWR A2 ()	NA	NA	NA	NA
Grand Total		1700.86	(Rupees One Thousand Seven Hundred Zero Crores and Eighty Six lakhs Only)

Rating Advisory, as on 08Apr2021
Press Release, as on 31May2021
Brickwork Ratings (BWR) had assigned the ratings of BWR BBB+/Stable, BWR A2 for the bank loan facilities of Rs.2423.63 crore of Viraj Profiles Limited in April 2020. The ratings have become due for surveillance and the review is under process.As 12 months have lapsed since the last ratings, BWR hereby informs that it has not been possible to review the ratings within the stipulated time and the review process is underway. This advisory should not be construed as a rating reaffirmation.

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Sagar Harendra Desai Ratings Analyst sagar.d@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Viraj Profiles Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank of Baroda	Export Packing Credit (EPC) - Sanctioned	_	41.00	41.00
2	Bank of Baroda	Foreign Bill Discounting - Sanctioned	_	65.00	65.00
3	Bank of Baroda	Cash Credit - Sanctioned	4.00	_	4.00
4	Bank of Baroda	ILC/FLC/BG - Sanctioned	_	74.00	74.00
5	Bank of India	Export Packing Credit (EPC) - Sanctioned	_	51.88	51.88
6	Bank of India	Foreign Bill Discounting - Sanctioned	_	59.98	59.98
7	Bank of India	ILC/FLC/BG - Sanctioned	_	68.00	68.00
8	Central Bank of India	Export Packing Credit (EPC) - Sanctioned	_	178.40	178.40
9	Central Bank of India	Foreign Bill Discounting - Sanctioned	_	68.60	68.60
10	Central Bank of India	ILC/FLC/BG - Sanctioned	_	206.00	206.00
11	Indian Overseas Bank	Export Packing Credit (EPC) - Sanctioned	_	247.00	247.00
12	Indian Overseas Bank	Foreign Bill Discounting - Sanctioned	_	98.00	98.00
13	Indian Overseas Bank	ILC/FLC/BG - Sanctioned	_	194.00	194.00
14	Union Bank of India	Export Packing Credit (EPC) - Sanctioned	_	202.50	202.50
15	Union Bank of India	Foreign Bill Discounting - Sanctioned	_	89.50	89.50
16	Union Bank of India	Cash Credit - Sanctioned	8.00	_	8.00
17	Union Bank of India	ILC/FLC/BG - Sanctioned	_	45.00	45.00
Total			12.00	1688.86	1700.86
TOTAL (Rupees One Thousand Seven Hundred Zero Crores and Eighty Six lakhs Only)

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