Rating Rationale

Brickwork Ratings has assigned the long-term of BWR BBB-/Stable  for the bank loan facilities of Rs.38.00 Crores of M Nellaiyah Rolling Mill Private Limited.

The ratings assigned to the bank facilities of M Nellaiyah Rolling Mill Private Limited. continue to derive strength from its improving track record of operations and the extensive experience of the company. The rating also factors in the growing scale of operations and profitability, a healthy financial risk profile, and an adequate liquidity position. The assessment is based on the audited financial statements of FY 2025 and FY 26 provisionals.

The rating outlook has been assigned as "Stable" as BWR believes that M Nellaiyah Rolling Mill Private Limited. 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 revenue and profitability margins show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.

The terms of sanction include standard covenants normally stipulated for such facilities.

• Experienced promoters :

  The promoters have over four decades of experience in the steel trading and TMT manufacturing business, providing the company with strong industry knowledge, established market relationships and operational expertise.

• Improvement in Operating Scale and Profitability :

  The company’s TOI increased by 23.8% to Rs.240.10 crore in FY26 from Rs.193.97 crore in FY25, supported by higher sales volumes and improved realisations. OPBDIT increased from Rs.8.60 crore to Rs.12.68 crore, while the operating margin improved from 4.43% to 5.28%. The company is projected to achieve TOI of Rs.300.11 crore in FY27 and Rs.330.12 crore in FY28, with operating margin expected to improve to 5.31% and 5.46%, respectively, supported by higher capacity utilisation.

• Improved Capitalisation and Debt Protection :

  The company’s TNW improved significantly from Rs.6.69 crore in FY25 to Rs.22.45 crore in FY26, supported by equity infusion and profit accretion. Adjusted TNW also improved from Rs.16.21 crore to Rs.41.92 crore, resulting in improvement in Total Debt/Adjusted TNW from 3.79x to 1.67x. Further, DSCR improved from 0.44x in FY25 to 1.81x in FY26, indicating a significant improvement in debt-servicing capability.

• Geographical concentration :

  The company’s sales are entirely concentrated in Tamil Nadu, exposing it to regional economic conditions, construction activity and competitive pressures in the state. Limited geographical diversification remains a key monitorable.

• Cyclical nature of the steel industry :

  The company operates in the cyclical steel industry, where demand, selling prices and profitability are influenced by economic activity, infrastructure and construction demand, as well as fluctuations in raw material prices. Any downturn in the steel cycle could adversely impact the company’s revenues, margins and cash accruals.

• Working Capital Intensive Operations :

  The company operates with a high working-capital intensity, with average CC utilisation at around 98.72% during August 2025–July 2026 and closing utilisation at around 98%. The working-capital cycle remained elevated at around 71 days in FY26, primarily due to higher inventory and receivables, leaving limited cushion in the sanctioned working-capital limits.

Going forward, the Company's ability to improve the scale of operations, improve and maintain profitability, the debt servicing capacity and manage its working capital efficiently will be the key rating sensitivities.

Positive :

• Improvement in operating scale and profitability, with Operating Margin above 5.5% and Total Debt/TNW below 2.0x.

• Strengthening of the company’s financial profile through improved cash accruals, liquidity and debt-servicing capability, supported by sustained growth in business operations.

Negative :

• Decline in financial performance, with Operating Margin falling below 4.0% and Total Debt/TNW exceeding 3.5x on a sustained basis.

• Any significant weakening in business performance or liquidity due to lower demand, margin pressure or higher working-capital requirements, adversely affecting the company’s debt-servicing ability.

The company’s liquidity position remains comfortable, supported by healthy cash accruals and adequate debt repayment capacity. The company had cash and bank balances of Rs. 0.72 crore as on March 31, 2026 (provisional). Net cash accruals stood at Rs. 6.23 crore against CPLTD of Rs.1.29  crore in FY25-26, providing sufficient cushion for debt repayments. The current ratio remained comfortable at 1.32x in FY25-26. The company’s debt servicing ability was also satisfactory, with ISCR and DSCR at 2.40x and 1.81x, respectively. Working capital limits were utilised at around 98%, which is considered reasonable considering the scale of operations. Timely recovery of trade receivables is expected to support the company’s working capital requirements and ensure smooth business operations. The liquidity position is further supported by tangible net worth of Rs. 22.45 crore and promoter net worth of Rs. 13.13 crore as on March 31, 2026, providing additional financial flexibility. Overall, the company’s liquidity position remains comfortable.

The company demonstrates a Adequate ESG profile based on its environmental, social, and governance practices.

Environmental: Environmental considerations are significant given the company’s steel manufacturing operations, which involve energy consumption, emissions, water usage and generation of industrial waste. The company has obtained regulatory consent for air and water-related operations. Going forward, effective management of energy consumption, emissions, water usage, waste disposal and adherence to applicable environmental regulations will remain important, particularly in view of the proposed expansion of its manufacturing capacity.

Social: Social factors are primarily linked to employee health and safety, adherence to applicable labour laws, workplace safety practices and human-resource development. Given the manufacturing-intensive nature of operations, maintaining a safe working environment, providing appropriate safety measures and training, and ensuring employee welfare are important for operational continuity.

Governance: Governance assessment focuses on the company’s management and board structure, statutory compliance, internal controls, financial reporting practices and risk-management framework. The company is an active private limited company incorporated in 2014 and has a defined board structure. Continued adherence to statutory and regulatory requirements, timely financial disclosures and effective internal controls remain important from a governance perspective.

M Nellaiyah Rolling Mill Private Limited, operating under the MCR TMT brand, is a steel manufacturing company based in Gummidipoondi, Tamil Nadu, engaged in the manufacture of Thermo-Mechanically Treated (TMT) steel bars for construction and structural applications. The company manufactures MCR TMT 550 and MCR TMT Fe 550 SD bars in various sizes ranging from 8 mm to 32 mm. The products are designed to provide high strength, ductility, bendability, weldability and durability and conform to BIS specifications. The company follows stringent quality-control procedures, with chemical and physical testing conducted at various stages of production. The manufacturing process involves procurement and testing of MS scrap and sponge iron, followed by melting in a 20 MT induction furnace, chemical analysis and continuous billet casting. The billets are subsequently tested, reheated and processed through roughing, intermediate and finishing mills, followed by quenching, cutting, cooling, straightening and bundling. The finished TMT bars undergo batch control, tagging and final quality testing, including spectrometer analysis, tensile strength, bend and re-bend tests, before dispatch. The company has ISI and ISO 9001:2015 certifications, reflecting its focus on standardized manufacturing processes and consistent product quality.

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.

Not Applicable

BWR Board of Directors have no influence over rating decisions, nor do they sit on the rating committee or review, discuss or evaluate any credit rating during the Board meetings.

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI]. BWR is the 5th agency to get a credit rating registration in India in 2009 and its corporate office in Bengaluru. It has a country-wide presence with representatives in 150+ locations. Canara bank is an institutional investor in Brickwork.

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