Rating Rationale

BWR reaffirms the ratings of 'BWR B+/Stable' and 'BWR A4' for the bank loan facilities of Rs 50.00 Crs.

The ratings are supported by the concern's strategic location in the Alang-Sosiya ship recycling area, the proprietor's extensive industry knowledge, and a strategic shift toward domestic industrial plant dismantling and metal trading that has successfully diversified its revenue streams. However, the ratings are constrained by the shipbreaking sector's inherent cyclicality, intense international competition, and vulnerability to fluctuations in steel market prices and foreign exchange rates. Furthermore, a moderately leveraged capital structure, debt coverage indicators that necessitate careful monitoring, and the need to navigate strict regulatory compliance and environmental hazards impact the overall credit profile.

The rating outlook is assigned as “Stable,” reflecting BWR’s expectation that Yagachi Education and Research Trust’s business risk profile will remain steady over the medium term. A stable outlook indicates a low probability of a rating change during this period. The outlook may be revised to “Positive” if the company achieves sustained improvement in revenue and profitability margins, while it may be revised to “Negative” in the event of a deterioration in its financial risk profile.

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

• Strategic Location at Alang-Sosiya: :

  Hatimi Steels' ship recycling yard is located in the Alang-Sosiya area of Bhavnagar, a major hub handling approximately 90% of India's ship recycling. The region's natural advantages, including a high tidal range (10-11 meters) and gradually sloping beaches, allow for the efficient beaching of large vessels. This established infrastructure supports the large-scale recovery of steel for India's secondary markets.

• Managed by a Seasoned Proprietor: :

  Established in 1999, Hatimi Steels operates as a sole proprietorship led by Mr. Amit Jain, who possesses over 30 years of industry experience. He is supported in daily management by his brother, Mr. Tarun Jain. Mr. Amit Jain also serves as a director for Tradewin Mercantile Company Private Limited (steel trading) and Kamanwala Housing Construction Limited (construction), providing the concern with broad market insights.

• Diversified Revenue Streams: :

  Hatimi Steels is highly susceptible to detrimental shifts in steel market prices and foreign exchange (forex) rates. Declining steel prices directly erode revenue and profitability from the sale of recovered steel, while also creating inventory risks during the lengthy dismantling process. Anticipation of lower steel prices can also weaken their bidding power for end-of-life vessels. Simultaneously, a depreciating Indian Rupee against the US dollar, the primary currency for ship purchases, inflates vessel acquisition costs and increases liabilities associated with foreign currency-denominated financial instruments like Letters of Credit. Although hedging strategies exist, they incur costs and are not foolproof.

• Cyclic Industry and International Competition: :

  The global ship recycling sector is highly cyclical, with vessel availability largely dependent on global freight rates and economic conditions. Furthermore, Indian yards face intense competition from neighboring countries like Bangladesh and Pakistan, which often benefit from lower labor costs and less stringent regulations. However, Hatimi Steels is actively mitigating this vulnerability by expanding its domestic industrial dismantling operations.

• Exposure to Steel Prices and Forex Rates: :

  The concern remains susceptible to fluctuations in steel market prices and foreign exchange rates. Declining steel prices can reduce revenue from recovered scrap and create inventory risks during the dismantling process. Simultaneously, a depreciating Indian Rupee inflates the cost of acquiring foreign vessels and increases the liabilities associated with foreign currency-denominated Letters of Credit.

Moving forward, the concern's ability to expand its operational scale, boost profitability, and improve liquidity and credit standing will be critical factors influencing its rating.

Positive Factors

• Total operating income surpasses Rs. 50.00 crores.

• The current ratio improves to above 1.30x, and the ISCR rises above 1.20x.

Negative Factors

• Total operating income drops below Rs. 40.00 crores.

• The current ratio decreases to below 1.10x, and the ISCR falls below unity.

Tightly matched accruals to repayment obligations, with moderately utilized bank limits and modest cash reserves.

Throughout the recent financial years, the concern has maintained a stretched liquidity position. To support its operations, it relies on a cash credit facility and a non-fund-based Letter of Credit provided by Punjab National Bank. The average utilization of the cash credit limit remained at approximately 12.98 percent between March and September 2026, which provides significant financial flexibility. The concern does not have any fixed-term loans or EMI-based debt, meaning it does not face strict, immediate repayment pressures. The current ratio improved from 1.07 times in FY25 to a comfortable 1.28 times in FY26, showing that the concern has enough short-term assets to cover its short-term liabilities. The Interest Service Coverage Ratio (ISCR) also improved from 0.99 times in FY25 to 1.12 times in FY26, indicating better ability to cover interest expenses. Furthermore, the management has the capacity to inject capital if needed. This support, combined with steady revenue from the new industrial dismantling contracts and regular metal trading, provides sufficient financial flexibility and stability for the concern.

Based on the assessment, the entity’s ESG profile is not expected to materially affect its creditworthiness

Hatimi Steels (HS) is a sole proprietorship founded in 1999 by Mr. Amit Jain. The concern specializes in ship recycling, the trading of steel and associated products, as well as the dismantling of outdated plants and machinery in the Alang-Sosiya area of the Bhavnagar region in Gujarat. Hatimi Steels has adeptly recycled a diverse array of ships, including Reefers, LPG carriers, tankers, bulk carriers, general cargo vessels, tugs, and others. Since the commencement of its first project in 2019 with LML Limited, the concern has expanded its range to include Paper Mills, Textile factories, Power Plants, Steel factories, Sugar Mills, and additional projects. HS also imports and sells high-grade steel plates and coils, with its end users primarily from the construction, manufacturing, and infrastructure development sectors in India.

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

NIL

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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