R.S. Infra-Transmission Ltd.

Brickwork Ratings reaffirms the ratings with change in outlook from Stable to Positive for the Bank Loan Facilities of Rs. 78.02 Crs. of R.S. Infra-Transmission Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (28 Sep 2020)	Present
Fund Based	23.00	38.02	Long Term	BWR BBB- /Stable Reaffirmation	BWR BBB - /Stable to Positive Reaffirmation
Fund Based	39.00	29.00	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Non Fund Based	1.00	11.00	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Grand Total	63.00	78.02	(Rupees Seventy Eight Crores and Two 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 (BWR) has reaffirmed the long-term rating at BWR BBB- with a change in the outlook from Stable to Positive and the short-term rating was reaffirmed at BWR A3 for the bank loan facilities of R.S. Infra-Transmission Ltd. (RSITL or the company).The Outlook has been changed from Stable to Positive due to improved performance in H1FY22 and expected better sales and revenue realization in the second half of FY22 considering the fact that the major demand comes from EPC (Engineering, procurement, and construction) companies where Q4 is a peak demand period due to higher execution. .The company registered improved revenue of approximately Rs 255 Crs in 8MFY22 and is likely to over achieve its revenue projections for FY22.

The ratings reaffirmation continues to factor extensive experience of the promoters in the same line of business and and good track record of the company, comfortable financial risk profile as marked by comfortable debt protection metrics, operating cycle, current ratio and Debt/EBIDTA ratio, improved profit margins and scale of operations. However, the rating is constrained by high gearing, vulnerability to adverse fluctuations in raw material prices, intense competition and fragmented industry structure and suppliers concentration risk.

KEY RATING DRIVERS

Credit Strengths:

Experienced promoters and good track record of the company :
Mr. Anil Kumar Gupta, Mr. Abhinav Gupta and Mr. Devender Gupta are the key promoters of the company. Promoters have been in this business for more than 3 decades and their long-standing presence led to good long term relationships with the reputed customers and suppliers, besides the company has an established track record in the steel business.
Improved scale of operations :
The company registered revenue growth with a CAGR of 28.18 % for the last 3 fiscal years (FY19-FY21). The company’s revenue has improved from Rs 275.01 Crs in FY20 to Rs 309.72 Crs in FY21 despite Covid 19 induced lockdowns in the first half of FY21. The company registered revenue of Rs 195.14 Crs in H1FY22 (provisional) and had an order book position of Rs 62.68 Crs as on 03.12.2021 to provide revenue visibility in short term to medium term.
Debt protection metrics :
Company's interest service coverage ratio (ISCR) has moderately improved to 1.79x in FY21 against 1.49x in FY20 and debt service coverage ratio is comfortable at 1.68x in FY21 against 1.44x in FY20 indicates comfortable debt protection metrics of the company.
Improved profit margins :
Net profit margin has improved from 0.74% in FY20 to 1.68% in FY21 and operating profit margin from 5.22% in FY20 to 5.93% in FY21 owing to better sales realization in FY21.
Operating cycle, current ratio and Debt/EBIDTA ratio :
Conversion Cycle is moderate at 80 days in FY21 (53 days in FY20) owing to receivables days of 39 and Inventory days of 43 in FY21. Current ratio is comfortable at 1.37x in FY21 (1.28x in FY20). In addition to that Debt/EBIDTA ratio is reasonable at 4.40x in FY21 (4.20x in FY20).

Credit Risks:

Leverage position :
Gearing (Total Debt/TNW) of the company is high and has increased from 1.85x in FY20 to 2.14x owing to increase in debt due to addition of GECL loan (Rs 10.02 Crs and term loan (Rs 2.59 Crs) from banks, besides increased utilization of short term borrowings in FY21.
Vulnerability to adverse fluctuations in raw material prices :
Raw material constitutes more than 87% of the cost of production, which in turn is 81% of revenue. Steel prices have been highly volatile in the past and any sharp movement in the prices can have a bearing on the company’s profitability in the future.
Competition and fragmented industry structure :
The iron and steel industry is cyclical in nature.The presence of various organised and unorganised players make the industry highly fragmented. Thus, the company faces competition, which limits its bargaining power and exerts pressure on its margins. However, the demand in the steel industry is expected to improve in the medium term as some of the initiatives taken by the Government in the infrastructure sector will provide a boost to the industry, besides improvement in the economy growth after the impact from 1st and 2nd wave of Covid 19 impact.
Concentration risk :
There is supplier and customer concentration risk as the one supplier constitutes more than 90% of the raw material supplies and top 5 customers constitute more than 75% of the sales, However the risk is offset to an extent considering the reputation of the suppliers and customers, besides long term relationship of the company with the suppliers and customers.

ANALYTICAL APPROACH - Standalone

BWR has factored in the standalone business parameters and financial risk profile of the trust to arrive at the rating. Reference may be made to the detailed Rating Criteria hyperlinked

RATING SENSITIVITIES

Upward : The rating may be upgraded if there is sustained and remarkable improvement in the scale of operations and financial risk profile of the company.
Downward : BWR may revise the ratings downwards if the company achieves notably lower revenue than expected and deterioration in debt protection metrics and liquidity.

LIQUIDITY INDICATORS - Adequate

The company had cash accruals of (profit after tax + depreciation) of Rs 9.24 Crs against current portion of long term debt CPLTD) of Rs 1.34 Crs in FY21 and BWR expects cash flows of above Rs 9 Crs against CPLTD of Rs 3.61 Crs for FY22. Average working capital utilization of the company is around 90% for the last 6 months.In addition to that, the firm had a comfortable current ratio of 1.37x in FY21 (1.28x in FY20) indicates the firm's ability to meet its current liabilities from current assets.

ABOUT THE ENTITY

Incorporated as R.S. Industries in 1976, it was converted to R.S. Industries ( Rolling Mill) Pvt Ltd in 1985 and converted into R.S. Infra Transmission Ltd in 2007. The company is managed by Mr. Mahesh Gupta and Mr. Abhinav Gupta. The company is a re-roller engaged in the manufacturing of wide range of special Hot Roller Steel Profiles, Structural Steel, Angles, Channels, Flat. It primarily supplies transmission line towers, primarily to EPC players and its plant is approved by Power Grid Corporation of India. Ltd. (PGCIL).

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	309.72	275.01
EBITDA	Rs.Crs.	18.37	14.35
PAT	Rs.Crs.	5.21	2.04
Tangible Net Worth	Rs.Crs.	37.72	32.51
Total Debt/Tangible Net Worth	Times	2.14	1.85
Current Ratio	Times	1.37	1.28

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

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	38.02	BWR BBB-/Stable to Positive (Reaffirmation)	28Sep2020	BWR BBB- Stable (Reaffirmation)	25Sep2019	BWR BB+Stable (Reaffirmation/Withdrawal)	17Jul2018	BWR BB+Stable (Reaffirmation)
		NA	NA	17Sep2020	BWR BBB- Stable (Assignment)	NA	NA	NA	NA
Fund Based	ST	29.00	BWR A3 (Reaffirmation)	28Sep2020	BWR A3 (Reaffirmation)	NA	NA	NA	NA
		NA	NA	17Sep2020	BWR A3 (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	11.00	BWR A3 (Reaffirmation)	28Sep2020	BWR A3 (Reaffirmation)	25Sep2019	BWR A4+ (Reaffirmation/Withdrawal)	17Jul2018	BWR A4+ (Reaffirmation)
		NA	NA	17Sep2020	BWR A3 (Assignment)	NA	NA	NA	NA
Grand Total		78.02	(Rupees Seventy Eight Crores and Two 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
Raman Thakur Senior Rating Analyst Board : +91 11 2341 2232 raman.t@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

R.S. Infra-Transmission 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	Federal Bank	Term Loan - Sanctioned	10.00	_	10.00
2	IndusInd Bank	Cash Credit - Sanctioned	18.00	_	18.00
3	IndusInd Bank	Bank Guarantee - Sanctioned	_	1.00	1.00
4	IndusInd Bank	Letter of Credit - Sanctioned	_	10.00	10.00
5	IndusInd Bank	Channel Finance Facility - Sanctioned	_	29.00	29.00
6	IndusInd Bank	GECL - Sanctioned	10.02	_	10.02
Total			38.02	40.00	78.02
TOTAL (Rupees Seventy Eight Crores and Two lakhs Only)

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