Rating Rationale

Brickwork Ratings (BWR) has assigned a Long-Term Rating of BWR BBB-/Stable and Short-Term Rating of BWR A3 for the Bank Loan Facilities of Rs. 52.75 Crores of M Tek Copper Limited.

The rating reflects the promoters' extensive hands-on experience in the copper wire and metal trading industries, which supports strong operational continuity and longstanding client relationships. The rating is further supported by a steady ramp-up in core manufacturing operations and a controllable debt structure with functional coverage metrics. However, the rating remains constrained by highly intensive working capital requirements reflected in around 90% utilization of Cash Credit limits and the presence of pending regulatory and litigation matters.

The rating outlook is assigned as “Stable,” reflecting BWR’s expectation that M Tek Copper Limited will sustain its operations, navigate short-term working capital pressures, and maintain steady financial performance over the medium term. A stable outlook indicates a low probability of a rating change during this period.

The key covenants are the standard terms as stipulated in the sanction letters of the rated facilities.

• Significant Scale-Up in Revenue Base :

  Revenue from operations grew substantially from Rs. 35.50 crore in FY24 to Rs. 234.20 crore in FY26. This top-line expansion is driven by volume growth across core copper conductor products and firm realized copper prices. Furthermore, the company maintained strong top-line momentum into Q1 FY27, recording quarterly operational revenue of Rs. 80.26 crore. Overall, this consistent revenue growth shows a healthy production setup and growing market demand for their products.

• Established Customer Relationships with Reputed PSUs & OEMs :

  The company has built solid, long-standing relationships with reputed OEMs, transformer manufacturers, and major public sector engineering firms, which helps bring in a steady flow of repeat orders. On top of that, they have built a regular stream of international orders to strengthen their presence in global markets. These lasting partnerships reduce customer acquisition costs and make future business much more predictable. Having a growing export base also proves that their product quality holds up well against international competitors.

• Conservative Term Debt Profile and Comfortable Overall Leverage :

  The company carries zero long-term term debt on its balance sheet as of March 31, 2026, keeping its non-current capital structure fully debt-free. Total debt consists almost entirely short-term bank borrowings for working capital which stands at a manageable level relative to its capital base, with a Total Debt / Total Net Worth (TNW) ratio of 0.83x. By avoiding long-term bank loans, the business eliminates fixed repayment obligations and protects its long-term financial flexibility. This overall financial discipline gives the company a reliable cushion to absorb market ups and downs or fund future expansions on its own terms.

• Extensive Domain Expertise and Proven Management Leadership :

  The executive leadership team brings rich hands-on experience and specialized industry knowledge that directly supports the company's daily operations and growth strategy. Chairman Mr. Nileshbhai Patel contributes deep expertise in international LME copper trading, efficient raw material procurement, and strategic marketing. Managing Director Mr. Rohitbhai Chauhan offers over ten years of core technical experience in copper wire manufacturing, backed by his prior operational leadership at other major wire firms. This blend of strong commercial procurement skills and technical manufacturing leadership ensures stable execution across changing market conditions.

• Susceptibility to Raw Material Price Volatility & Input Costs :

  Earnings remain exposed to sharp price fluctuations in international LME and domestic MCX copper spot prices, which directly impact inventory valuations and short-term operational cash flows. Raw material consumption forms the largest component of total operating expenses, rendering operating margins sensitive to sudden shifts in base metal purchasing costs.While the company generally passes these cost changes on to customers, slight delays in pricing adjustments can temporarily squeeze profit margins.

• Working Capital Intensity & Reliance on Short-Term Credit :

  The nature of the business requires significant working capital to maintain raw material inventory and give standard credit terms to customers. To support these inventory and receivable needs, short-term working capital borrowings stood at Rs. 41.07 crore as of March 31, 2026. Carrying high current assets adds to interest costs, which absorbed Rs. 3.27 crore in FY26 and Rs. 1.06 crore in Q1 FY27. Management continues to work on speeding up collections from customers to keep day-to-day liquidity smooth and balanced.

• Significant Off-Balance Sheet Tax Litigation Exposure :

  The company currently has pending income tax demands under appeal at the CIT(A) in Ahmedabad, totaling Rs. 55.78 crore for financial years 2017-18 through 2021-22. Management remains fully committed to resolving these issues through the legal appeal process at the earliest opportunity. While a negative final outcome could put pressure on liquidity, the company is actively contesting these demands based on professional legal counsel.

Positive Sensitivity Factors:

• Sustained scale-up in Total Operating Income (TOI) exceeding Rs. 250 crore, along with operating margins consistently maintained above 5.0% through improved capacity utilization

• Sustained improvement in debt protection metrics, specifically maintaining a Debt Service Coverage Ratio (DSCR) above 2.60x and Interest Service Coverage Ratio (ISCR) above 3.25x while holding the current ratio at existing levels

Negative Sensitivity Factors:

• A continuous decline in operating profit margins below 4.5%, or a significant stretch in the cash conversion cycle beyond 100 days driven by delayed customer collections or high inventory holding

• Any unfavourable outcome in ongoing tax/legal proceedings that results in material cash outflows, thereby straining the company's liquidity, net worth, and overall debt-servicing ability

The Company maintains an adequate liquidity position, strongly supported by robust gross cash accruals of Rs. 6.15 crore against zero long-term debt obligations. The absence of fixed repayment commitments results in a healthy debt service coverage ratio (DSCR) of 2.88x and ensure cash accruals are entirely available to support operations. The liquidity buffer is further bolstered by a comfortable Current Ratio of 1.65x. However, the liquidity profile is constrained by an elongated cash conversion cycle of 86 days and 18% of receivables age beyond 90 days, indicating working capital lock-up and potential collection delays. Consequently, the company's reliance on its Rs. 44 Cr CC limits remains high, with average utilization at ~90% leaving a limited unutilized cushion. Additionally, the overall liquidity position remain sensitive to the resolution and final liability on the company. 

The company demonstrates an adequate ESG profile based on its environmental, social, and governance practices.

Environmental: The company operates in the non-ferrous metals sector which is energy-intensive and inherent environmental risks regarding water usage and waste generation. However, this risk is partially mitigated by the company's ISO 14001:2015 certification, indicating the presence of a structured Environmental Management System. Moving forward, expanded disclosures on water consumption, waste-management practices, and the integration of renewable energy remain critical to assessing long-term environmental sustainability.

Social: The company employs a total workforce of 140 personnel, comprising 20 office staff and 120 factory workers. It adheres to strict labour laws and accident prevention frameworks as validated by ISO certification. While comprehensive metrics on workforce diversity (male/female mix) and granular safety performance are currently not available, maintaining a safe industrial environment and continuing employee training initiatives remain central to the company's operational resilience.

Governance: The company's governance framework is supported by a clean statutory audit report for FY26 with no qualifications, adverse remarks, or instances of fraud reported. In line with statutory guidelines, the company maintains compliance with all mandatory committee requirements, including the Audit Committee, Nomination & Remuneration Committee, and Stakeholders Relationship Committee. Following the statutory auditor's resignation in August 2026 due to pre-occupation, the Board is actively addressing the casual vacancy. However, the governance profile remains constrained by past regulatory penalties levied by stock exchanges for non-compliance regarding minimum board composition strength. The company has since paid and settled all fines and fully rectified the non-compliance by appointing the required director to restore total board strength.

M Tek Copper Ltd, a Company of the Madhav Group, operates four world-class manufacturing facilities accredited with ISO 9001:2015 (Quality Management System), ISO 45001:2018 (Occupational Health and Safety Management System), and ISO 14001 (Environmental Management System). The Madhav Group boasts a diverse product portfolio that includes ferrous products such as steel, round bars, and ingots, as well as ventures in ship breaking, construction, textiles, diamonds, and jewelry.

M Tek Copper Ltd is dedicated to innovation in the production of a wide range of copper products, including copper busbars, copper rods, profiles, fabricated products, enamelled copper wire, paper-covered copper conductors, poly wrap submersible winding wire, fiberglass copper conductors, tapped insulated copper conductors, bare copper wire, and copper strips. The company utilizes state-of-the-art manufacturing facilities and the latest PC-based equipment to uphold high-quality standards. Their advanced tools include a Dielectric Dissipation Factor (Tan δ) measurement device, a spectrometer for metallographic analysis of copper, and an oxygen analyzer that ensures oxygen content remains below 5 ppm. Additionally, rigorous corrosion tests and well-equipped quality testing laboratories guarantee the consistent production of flawless copper rods.

M Tek Copper Ltd offers an extensive range of products suitable for various applications, including pumps, motors, transformers, generators, hydro generators, alternators, wind generators, panels, and switchgear. These wires and copper products are also designed for use in high-speed automatic coil winding machines and for fabrication on automatic CNC machines. All copper fabricated products and winding wires are manufactured in compliance with national and international standards such as IS, IEC, NEMA, BS, ASTM, EN, and JIS. The copper rods are made from 100% LME (London Metal Exchange) registered grade 'A' copper cathode, while the copper conductors are produced from 99.997% pure Electrolytic Tough Pitch (ETP) and Oxygen-Free Copper (OFC) grade copper. They are insulated with high thermal-class engineered insulation materials, providing excellent dielectric properties and resistance to cracking.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Creadit Rating Agency	Status and Reason for Non-Cooparation	Date of Press Release
CRISIL	'ISSUER NOT COOPERATING' as the rating is arrived at without any management interaction and is based on best available or limited or dated information on the company.	25Sep2025

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