Purohit Steel India Private Limited

Brickwork Ratings revises and upgrades the long-term rating and reaffirms the short-term rating for the Bank Loan Facilities of Rs. 24.70 Crs. of Purohit Steel India Private Limited

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (14 Feb 2020)	Present
Fund Based	9.55	19.70	Long Term	BWR BB /Stable Reaffirmed /ISSUER NOT COOPERATING*	BWR BB + /Stable Upgrade
Fund Based	(0.50)	(0.50)	Short Term		BWR A4 Reaffirmation
Non Fund Based	8.00	5.00	Short Term	BWR A4 Reaffirmed /ISSUER NOT COOPERATING*	BWR A4 Reaffirmation
Non Fund Based	(0.50)	(1.00)	Short Term	BWR A4 Reaffirmed /ISSUER NOT COOPERATING*	BWR A4 Reaffirmation
Grand Total	17.55	24.70	(Rupees Twenty Four Crores and Seventy 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 upgraded the long term rating at BWR BB+ (Stable) and reaffirmed the short-term rating at BWR A4 for the Bank Loan Facilities of Rs. 24.70 Crs of Purohit Steel India Pvt. Ltd. BWR believes that Purohit Steel India Pvt. 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. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement backed by a favourable industry scenario. The rating outlook may be revised to 'Negative' if the revenues and profit margins show lower than expected figures.

BWR has essentially relied upon the audited financial statements of Purohit Steel India Pvt. Ltd. for FY18, FY19 and FY20, provisional of FY21 and projections of FY22 and publicly available information and information / clarifications provided by the entity’s management.

The rating draws strength from the experienced management, favourable location, moderate financial risk profile and increase in revenue. The rating is constrained by the stretched working capital cycle, intense competition in the industry and foreign exchange fluctuation risk.

Going forward the ability of the company to improve its margins, scale of operations, working capital cycle, gearing, along with strengthening its overall financial risk profile would be its key rating sensitivity.

KEY RATING DRIVERS

Credit Strengths:

Revenue from Operations :
It is almost stable during the last 2 years. TOI has touched a level of Rs. 47.10 In FY21 (Prov) as compared to Rs. 55.21 Crs in FY20. TOI of Rs. 51.27 Crs was achieved in FY19 on account of higher realisation prices. But as per 12MFY21 monthly sales figures, Purohit Steel achieved TOI of Rs. 56.15 Crs in FY21. Taking tax into consideration, they have still over achieved their projections of Rs. 47.10 Crs.The company has projected to achieve sales of Rs. 51.00 Crs in FY22 and it is achievable in view of the past trend of sale.
Liquidity Position :
Current ratio is moderate level at 1.58x in FY21 v/s 1.60x in FY20.
Extensive experience of promoters :
The promoters' have extensive experience of over three decades in this industry. Their experience has benefited the company by developing healthy relationships with their customers and suppliers.
Modest scale of operations :
Gearing has improved to 0.61x in FY21 as compared to 0.75x in FY20. TOL/TNW stands at 1.38x in FY21.
Debt Protection Metrics :
Debt protection metrics are moderate & at of 3.16x and 3.08x in FY21, indicating the internal accruals are just adequate to service its debt obligations.

Credit Risks:

Exposure to intense competition and cyclicality in the steel industry :
Company is engaged in the manufacturing of TMT bars and ingots, the industry of which is characterized by high fragmentation mainly due to presence of a large number of unorganized players. The company markets its products in Central India, which is a hub of steel plants, on account of proximity to the mineral rich states of Chhattisgarh. Low level of product differentiation further intensifies the competition, leading to lower bargaining power vis-a-vis the customers. The moderate scale of operations continue to limit AIRMPL’s ability to benefit from economies of scale available to players with larger volumes. The company is exposed to intense competitive pressures from large number of organised and unorganised players along with its exposure to inherent cyclical nature of the steel industry. Demand for the products is linked to Capex programs of end-users such as the real estate sector, civil construction, and engineering industries; which are cyclical.
Working capital intensive nature of operations :
Working capital is stretched. Cash conversion cycle is stretched having increased to 257 days in FY21 as compared to172 days in FY20. This is driven by high days receivables of 234 days and inventory of 166 days. Cash conversion cycle projected to further increase to 282 days in FY22 due to increase in days receivables to 234 days.
Vulnerability to fluctuations in the prices of raw material and finished goods :
Operating margins are vulnerable to fluctuations in input prices. The prices and supply of the main raw materials viz. steel ingots/billets and coal, directly impacts the realizations of finished goods and any sharp variation in input prices with the absence of almost similar variation in realizations is likely to dent profitability significantly.
Profit Margins :
Operating Margin though at a moderate level of 13.30% in FY 21 ,but showing a declining trend in the last 3 years. Similarly, NPM is at a moderate level of 9.63% but is showing a declining trend for the last 3 years.

RATING SENSITIVITIES

Going forward the ability of the firm to improve its margins and debt servicing metrics, improve its scale of operations along with strengthening its overall financial risk profile would be its key rating sensitivity.

Positive: The rating will be upgraded if the company is able to maintain/improve its financial risk profile by improving its scale of operations, profitability and coverage ratios.

Negative: The rating may be downgraded if there is a decline in revenues affecting the profitability margins, coverage ratios, liquidity and gearing ratios adversely.

LIQUIDITY INDICATORS - Stretched

The company has cash accruals of Rs. 4.21 Crs in FY20 and Rs. 4.49 Crs in FY21 as opposed to CPLTD of Rs.17.59 Crs and Rs. 21.46 Crs respectively.

The company has unencumbered cash balance of Rs. 0.03 in FY21 as compared to Rs. 0.02 Crs in FY20.

Total debt/TNW is standing at 1.04x in FY20 as compared to 0.98x in FY19, whereas the same is standing at 0.74x in FY21.

TOL/TNW stands at 1.53x in FY20 as compared to 1.93x in FY19, whereas the same is standing at 1.38x in FY21.

Moderate debt protection metrics with ISCR and DSCR standing at 2.83x and 3.04x respectively in FY20 as compared to 5.01x and 3.19x respectively in FY19, and in FY21 the same is standing at 3.08x and 3.16x respectively.

Moderate profit margins with the OPM and NPM standing at 12.40% and 7.09% in FY20 respectively as compared to 15.65% and 10.05% in FY19, the same is expected to be standing at 13.30% and 9.63% in FY21.

Adequate liquidity profile with the current ratio standing at 1.60x in FY20 as compared to 1.47x in FY19, whereas in FY21 the current ratio is standing at 1.58x.

ABOUT THE ENTITY

M/s Purohit Steel India Pvt Ltd, is a Private Limited company incorporated on 29th Nov. 2013. PSIPL’s registered office is at Plot. No. 7 & 8, S. No. 283, Behind Johnson Motors, Range Office, Vasai (E) Thane. The company provides heat treatment solutions to the mould and dies manufacturers besides providing the basic processing of pre hardened steel used in manufacture of the Moulds and Dies. The company provides the basis operations such as Cutting, Machining/ Grinding, Quality check and Logistics. The company has the install capacity of around 2000 MTPA.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	55.21	51.27
EBITDA	Rs.Crs.	6.85	8.03
PAT	Rs.Crs.	3.91	5.15
Tangible Net Worth	Rs.Crs.	21.42	17.51
Total Debt/Tangible Net Worth	Times	1.04	0.98
Current Ratio	Times	1.60	1.47

KEY COVENANTS OF THE FACILITY RATED

N/A

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Purohit Steel India Private Limited has cooperated with BWR and provided the documents for surveillance of the rating.

The entity is also getting rated by CRISIL. CRISIL has rated Purohit Steel India Private Limited for Bank Loan Facility of Rs. 30.00 Crs on 11.09.2020 and the long-term rating was reaffirmed at CRISIL BB+ (Stable) and short-term rating was reaffirmed at CRISIL A4+.

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	19.70	BWR BB+/Stable (Upgrade)	14Feb2020	BWR BB /Stable (Reaffirmed /ISSUER NOT COOPERATING*)	NA	NA	29Jun2018	BWR BB /Stable (Upgraded)
FB SubLimit	ST	(0.50)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	5.00	BWR A4 (Reaffirmation)	14Feb2020	BWR A4 (Reaffirmed /ISSUER NOT COOPERATING*)	NA	NA	29Jun2018	BWR A4 (Reaffirmed)
NFB SubLimit	ST	(1.00)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
Grand Total		24.70	(Rupees Twenty Four Crores and Seventy lakhs Only)

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
Mita Ghanshyam Gupta Ratings Analyst mita.g@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Purohit Steel India Private Limited

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	Canara Bank	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	13.50	_	13.50
	Sub-Limit (SL - BULC) - Sanctioned		(1.00)
2	Canara Bank	Term Loan - Sanctioned	2.76	_	2.76
3	Canara Bank	GECL - Sanctioned	2.87	_	2.87
4	Canara Bank	COVID Funded Interest Term Loan - Sanctioned	0.57	_	0.57
5	Canara Bank	Inland Letter of Credit (ILC) - Sanctioned	_	5.00	5.00
	Sub-Limit (Bank Guarantee) - Sanctioned		(0.50)
Total			19.70	5.00	24.70
TOTAL (Rupees Twenty Four Crores and Seventy lakhs Only)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork 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.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, 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. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.