Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 28.00 Crs. of Bharat Steel Rolling Mills
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (05 Oct 2021) |
Present | ||
| Fund Based | 28.00 | 28.00 | Long Term |
BWR B+/Stable
Downgrade/ISSUER NOT COOPERATING* |
BWR BB +
/Stable Upgrade |
| Grand Total | 28.00 | 28.00 | (Rupees Twenty Eight Crores Only) | ||
BWR has upgraded the long term rating of M/s Bharat Steel Rolling Mills to BWR BB+(Stable) deriving its strength from the experience of the management and growth in Sales and net worth. However the rating is constrained by the Modest Financial Risk Profile, Low Profitability Margins, Cyclicity inherent in the Iron & Steel industry, Highly fragmented and competitive industry.
KEY RATING DRIVERSCredit Strengths:
The partners of the firm Mr. Sharad Goel (>20 years experience) and Mr. Shahwar Khan (>13 years experience) are highly experienced in the iron & steel industry which enables the firm to maintain healthy relations with the buyers and suppliers
The Firm is located in Muzaffarnagar cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective.
Net worth of the company and turnover is increasing Y-O-Y due to retention of profits. Turnover has increased from Rs 237.09 Cr in FY20 to Rs 292.89 Cr in FY21.Networth has increased from Rs 11.59 Cr in FY20 to Rs 12.59 Cr in FY21. Both are estimated to increased in FY22.
The financial risk profile of the firm is modest as marked by the high gearing ratio of 3.25 for FY 21. The tangible net worth of the firm stood at Rs. 12.57 Cr. in FY21. The debt protection metrics of the firm are low with an ISCR of 1.30 times and DSCR of 1.13 times in FY21. The current ratio of the firm is also low at 1.38 times for FY 21.
The steel industry is sensitive to the shifting business cycles, including changes in the general economy, interest rates and seasonal changes in the demand and supply conditions in the market.
The iron & steel sector in India is highly competitive and fragmented with the presence of a large number of players in the industry which put pressure on the profitability of the company as there is no scope of price differentiation because the end products are the same.
Being a partnership firm, the firm is exposed to inherent risk of withdrawal of capital by the partners due to personal exigencies which may impact the capital structure of the firm and consequently the business operations of the firm.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the firm to improve its scale of operations, profitability margins, overall credit risk profile and efficiently manage its term loan obligations would be the key rating sensitivities.
Positive : The rating outlook may be revised to positive if the firm is able to significantly improve its profitability and also substantially improve its order book.
Negative : The rating may be downgraded if there is a delay in debt servicing, substantial decline in revenues and deterioration in the liquidity profile of the firm
LIQUIDITY INDICATORS - Stretched
Hence, the Liquidity of the company is stretched.
ABOUT THE ENTITYBharat Steel Rolling Mills was established in 1990 as a proprietorship concern by Shri Purushottam Singhal for manufacturing /trading of Steel & Allied Products. The firm is situated at Meerut Road, Muzaffarnagar. It got converted into a partnership firm. The firm has a production capacity of 5500 MT/day and 66000 MT/annum considering the factory runs 24*7 a day and 300 days in the year. At present the partners are Mr, Sharad Goel, Shahawar Khan and Kalptaru Metals Pvt. Ltd.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 292.89 | 237.09 |
| EBITDA | Rs.Crs. | 9.40 | 3.85 |
| PAT | Rs.Crs. | 1.26 | 0.49 |
| Tangible Net Worth | Rs.Crs. | 12.57 | 11.59 |
| Total Debt/Tangible Net Worth | Times | 3.25 | 2.79 |
| Current Ratio | Times | 1.38 | 1.22 |
NA
NA
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 | 28.00 |
BWR BB+/Stable
(Upgrade) |
05Oct2021 |
BWR B+Stable
(Downgrade/ISSUER NOT COOPERATING*) |
06Jul2020 |
BWR BB-Stable
(Upgrade) |
30Mar2019 |
BWR B+Stable
(Upgrade) |
| Grand Total | 28.00 | (Rupees Twenty Eight Crores Only) | |||||||
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 | |
|---|---|
|
Moni Sharma Ratings Analyst moni.s@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Punjab National Bank | Cash CreditSanctioned | 28.00 | _ | 28.00 | |
| Total | 28.00 | 0.00 | 28.00 | |||
| TOTAL (Rupees Twenty Eight Crores Only) | ||||||
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