Hi-Tech Pipes Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 429.00 Crs. of Hi-Tech Pipes Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (13 Aug 2021)	Present
Fund Based	277.65	332.00	Long Term	BWR A- /Stable Reaffirmation	BWR A - /Stable Reaffirmation
Non Fund Based	122.00	97.00	Short Term	BWR A2 Reaffirmation	BWR A2 Reaffirmation
Grand Total	399.65	429.00	(Rupees Four Hundred Twenty Nine Crores 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 A-, with a ‘Stable’ outlook, and short-term rating at BWR A2, for the bank loan facilities of Hi-Tech Pipes Ltd (HTPL or ‘the company’). The reaffirmation in the ratings takes into account experienced promoters and an established track record of over three decades with demonstrated execution capability. The ratings further derive strength from the diversified product portfolio with a widespread distribution network spread across multiple states and scale-up of operations in FY22 with improved profitability and debt protection metrics.

These rating strengths are however partially offset by the dynamic volatility in the raw material prices, and the inherent risk associated with the industry coupled with competitive nature of the industry.

BWR has principally relied on the consolidated audited financial results of HTPL upto 31 March 2022 and projected financials for FY23 and FY24, and publicly available information/ clarifications provided by the company’s management.

KEY RATING DRIVERS

Credit Strengths:

Established Track Record of operation and Experienced Management :
The company commenced its operations in 1985 and has a successful track record of more than three decades in the existing business line. HTPL’s long track record and the extensive experience of promoters have helped establish relations with various stakeholders for its business. The company was established and is managed by the Bansal family, holding a 59.31% equity stake in HTPL as of 31st March 2022. Furthermore, the promoters are assisted by a team of experienced professionals for managing the company’s daily business operations.
Diversified Product Profile and Widespread distribution network through established relations with distributors: :
The company manufactures and sells steel tubes and pipes, cold rolled products and various engineering products, such as metal crash barriers and structures, which cater to varied industries and reduce the risk from a slowdown in a specific industry. The company’s strong distributorship emanates from a strong network of 390 plus registered dealers and distributors across the Northern, Western and Southern regions of India. They also marginally export to countries such as Nepal, Germany, Italy, Srilanka and Singapore.
Scale-up of operations in FY22 with improved profitability and debt protection metrics: :
The operating income achieved by the company has grown at a healthy rate of ~40 % in FY22 to INR 1878.85 crores from INR 1336.64 crore in FY21. This was on the back of increase in product prices in the market and growth in total quantiy sold.. The operating margins of the company also improved marginally from 5.28% in FY2021 to 5.35% in FY2022, while the PAT margins showed substantial improvement from 1.70% in FY2021 to 2.15% in FY2022. HPL’s debt protection metrics have improved as shown by ISCR which improved to 2.76x in FY22 from 2.19x in FY21.
Satisfactory capital structure and moderate working capital requirement : :
The Company’s capital structure is moderate as shown by overall gearing in FY22 at 1.41x compared to 1.54x in FY21. Net cash accruals/total debt improved from 0.11x in Fy21 to 0.15 times in Fy22. Conversion cycle days have shortened to 62 days in FY22 as compared to 73 days in FY21. This is mainly due to reduction in receivable and inventory days during the period. The management is not planning for any major debt funded capex in the medium term.

Credit Risks:

Exposure to volatility in raw material prices : :
Though the operating margins of the company improved on a year-on-year basis in FY22, they continued to remain thin. Hot rolled coil (HRC) is the key raw material used for producing MS black pipe. Also, Zinc is required in small quantities for the galvanisation process to convert MS black pipe into galvanized iron (GI) pipe. Considering the scarcity of coal in the domestic market, the company remains exposed to significant volatility in prices of key raw materials.
Inherent risk of the industry and intense competition : :
The industry is highly fragmented, with the presence of both organized and unorganized players providing similar products/services. Hence, the company faces competition from regional players, leading to intense competition and pricing pressures, which in turn affects the company’s profitability margins.

ANALYTICAL APPROACH - Consolidated

For arriving at its ratings, BWR has applied its rating methodology as detailed in the rating criteria below (hyperlinks provided at the end of this rationale). BWR has analyzed HTPL’s credit profile by considering the consolidated financial statements of the company owing to financial and operational linkages between the parent and subsidiaries, common management and fungible cash flows. The entities considered in the consolidated financial statements are HTL Metal Pvt. Ltd [HMPL] HTL Ispat Pvt. Ltd [HIPL] and Hitech Metalex Pvt Ltd [HTMPL].

RATING SENSITIVITIES

Upward Factors

Significant & sustained improvement in the revenue & profitability, leading to an improvement in debt protection parameters, along with improvement in liquidity profile and overall financial risk profile.

Downward Factors

Significant decline in the overall revenue or profitability due to market price fluctuation or any other constraints which leads to deterioration in overall financial risk profile.

LIQUIDITY INDICATORS - Adequate

Bank limit utilization was moderate at 65% for the last 12 months till February-2022. The cash accrual for FY22 stood at Rs.53.76 cr against CPLTD of Rs.21.89 Cr for the year. For FY23, the company has a repayment obligation of ~Rs.30 cr., which is expected to be met through the internal accruals. The current ratio stood at a moderate level of 1.43 times, as on March 31, 2022. The cash and bank balance amounted to Rs.0.90 Crore as on 31st March 2022.

ABOUT THE ENTITY

Hi-Tech Pipes Ltd (HTPL) was incorporated as Ram Lal Harbans Lal Ltd on 2nd January 1985, and the name of the company was changed to Hi-Tech Pipes Ltd on 15 October 1986. It is engaged in the manufacturing of steel tubes and pipes, cold rolled products and various engineering products, such as metal crash barriers and structures. The corporate office is located at Pitampura, Delhi. It has three manufacturing units with two units located at Sikandrabad, Uttar Pradesh and one at Sanad, Gujarat. The installed capacity to manufacture cold rolled products is 1,20,000 metric tonnes per annum (MTPA) , engineered products is 15,000 MTPA and steel tubes and pipes is 4,40,000 MTPA. The company got listed on NSE in February 2018 and is an ISO certified company.

The company has four subsidiaries, HTL Metal Pvt Ltd (HMPVL), HTL Ispat Pvt Ltd (HIPL) and Hitech Metalex Pvt Ltd & Hitech Saw Limited.

HMPVL and HIPL is engaged into the same business, However Hitech Metalex Private Limited is currently non operational.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	1511.89	1026.49
EBITDA	Rs.Crs.	74.09	51.17
PAT	Rs.Crs.	29.87	15.04
Tangible Net Worth	Rs.Crs.	216.66	173.67
Total Debt/TNW	Times	1.11	1.22
Current Ratio	Times	1.33	1.33

KEY FINANCIAL INDICATORS (Consolidated)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	1878.85	1340.63
EBITDA	Rs.Crs.	100.52	70.80
PAT	Rs.Crs.	40.33	30.99
Tangible Net Worth	Rs.Crs.	258.60	205.18
Total Debt/TNW	Times	1.41	1.54
Current Ratio	Times	1.43	1.37

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	332.00	BWR A-/Stable (Reaffirmation)	13Aug2021	BWR A- Stable (Reaffirmation)	20Mar2020	BWR A- Stable (Reaffirmation)	03Jan2019	BWR A- Stable (Upgrade)
		0.00	NA	NA	NA	08Jul2020	BWR A- Stable (Reaffirmation)	NA	NA
Non Fund Based	ST	97.00	BWR A2 (Reaffirmation)	13Aug2021	BWR A2 (Reaffirmation)	20Mar2020	BWR A2 (Reaffirmation)	03Jan2019	BWR A2 (Upgrade)
		0.00	NA	NA	NA	08Jul2020	BWR A2 (Reaffirmation)	NA	NA
Grand Total		429.00	(Rupees Four Hundred Twenty Nine Crores 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
Aditya Singh Ratings Analyst adityasingh@brickworkratings.com	Sudeep Sanwal Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Hi-Tech Pipes 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	Axis Bank Ltd.	Cash Credit - Sanctioned	10.00	_	10.00
2	Axis Bank Ltd.	Working Capital Demand Loan - Sanctioned	15.00	_	15.00
3	Axis Bank Ltd.	GECL - Sanctioned	9.00	_	9.00
4	Canara Bank	GECL - Sanctioned	7.18	_	7.18
5	Canara Bank	Working Capital Demand Loan - Sanctioned	20.00	_	20.00
6	Canara Bank	Letter of Credit - Sanctioned	_	10.00	10.00
7	Canara Bank	Cash Credit - Sanctioned	5.00	_	5.00
8	Canara Bank	Bank Guarantee - Sanctioned	_	2.00	2.00
9	HDFC Bank	Term Loan - Sanctioned	8.78	_	8.78
10	HDFC Bank	Cash Credit - Sanctioned	77.00	_	77.00
11	HDFC Bank	GECL - Sanctioned	30.72	_	30.72
12	IDFC First Bank Limited	ILC/IBG - Sanctioned	_	_	0.00
13	IndusInd Bank	Cash Credit - Sanctioned	15.50	_	15.50
14	ShamRao Vitthal Co-operative Bank	Cash Credit - Sanctioned	1.50	_	1.50
15	ShamRao Vitthal Co-operative Bank	Term Loan - Sanctioned	11.21	_	11.21
16	ShamRao Vitthal Co-operative Bank	GECL - Sanctioned	3.00	_	3.00
17	ShamRao Vitthal Co-operative Bank	Working Capital Demand Loan - Sanctioned	23.00	_	23.00
18	ShamRao Vitthal Co-operative Bank	ILC/IBG - Sanctioned	_	7.00	7.00
19	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	40.00	40.00
20	State Bank Of India (SBI)	GECL - Sanctioned	12.50	_	12.50
21	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	8.00	8.00
22	State Bank Of India (SBI)	Cash Credit - Sanctioned	57.50	_	57.50
23	Un tied portion	Proposed loan - Proposed	17.61	_	17.61
24	Yes Bank	Cash Credit - Sanctioned	5.00	_	5.00
25	Yes Bank	Term Loan - Sanctioned	2.50	_	2.50
26	Yes Bank	Letter of Credit - Sanctioned	_	30.00	30.00
Total			332.00	97.00	429.00
TOTAL (Rupees Four Hundred Twenty Nine Crores Only)

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