RATING RATIONALE
10Jan2022
Ratnesh Metal Industries Pvt. Ltd.
Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 63.18 Crs. of Ratnesh Metal Industries Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (28 Sep 2021) |
Present | ||
| Fund Based | 39.93 | 48.99 | Long Term |
BWR B+ /Stable
Reaffirmation/ISSUER NOT COOPERATING* |
BWR BB
/Stable Upgrade |
| (0.00) | (10.00) | ||||
| (10.00) | (10.00) | ||||
| (4.11) | (4.11) | ||||
| (4.11) | (4.11) | ||||
| Non Fund Based | 15.19 | 14.19 | Short Term |
BWR A4
Reaffirmation/ISSUER NOT COOPERATING* |
BWR A4 +
Upgrade |
| (5.00) | (5.00) | ||||
| (0.00) | (1.00) | ||||
| (0.29) | (0.29) | ||||
| Grand Total | 55.12 | 63.18 | (Rupees Sixty Three Crores and Eighteen lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
BWR has upgraded the long term and short term rating to to BWR BB(Stable)/A4+ the bank loan facilities of Ratnesh Metal industries Pvt Ltd, and removed from ' Issuer Not Cooperating' category.
BWR has essentially relied upon the audited financial results of up to FY20, CA certified provisional financials of FY21, Management certified provisional financials of 7MFY22, Projected Financials for FY22 FY23, and Publicly available information and clarifications provided by the Company’s management.
The rating revision considers the improvement in the revenue and operations backed by better capacity utilization under the efficient leadership of changed management. The rating is supported by efficient liquidity position on the back of financial support by new promoters and improvement in financial risk profile.
The rating, however, factors that RMIPL’s operations are working capital intensive nature of operation, exposed to the fluctuation in the Forex rates, and inherent cyclical in the industry as well as the intense competition. The rating continues to factor the extensive experience of the promoters in the steel industry spanning nearly two decades and its established business relationships with a geographically diversified clientele.
BWR believes the Ratnesh Metal Industries Private Limited’s business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
-
Modest in scale of operation : :
RMIDPL's total operating income deteriorated to Rs. 106 Crs in FY21 as compared to Rs. 164.02 Crs in FY20 due to adverse situations arising during Covid pandemic and major changes happened in the company. However, the sales level increased substantially to Rs. 118.34 Crs as on 31th October 2021; under the leadership of new management and supported by increased export sales. The capacity utilization improved to 70% in FY22 from 50% in FY21. Total operating income consists of 13-14% of exports to Italy, Dubai, Istanbul and other foreign countries during the last two fiscals. BWR expects that improvement in revenue and profitability remains critical for generating higher cash accrual and will remain key rating sensititivity.
-
Experienced new management : :
The company was promoted and previously managed by Mr. Rajesh Sanghvi, and recently it underwent a management change to new promoters Mr. Kaushal Bhanshali and family (owns around 88% of shareholding). Mr. Kaushal Bhanshali's vast experience in the field of Steel helped the company to increase the operation. Also, the new promoters extended financial support by infusing additional funds by the way of USL and capital.
-
Moderate financial risk profile: :
Tangible networth is increased from Rs, 34.75 Crs in FY19 to Rs. 41.60 Crs in FY20 on the back of additional infusion of capital. Further, new management brought unsecured loans in the company i.e Rs. 34.25 crs as per management cetified provisional financials of FY21 against Rs, 3.51 Crs in FY20. Gearing is improved from 2.23x in FY19 to 1.91x in FY20. Debt protection metrics are moderate with ISCR at 1.28x and DSCR at 1.22x in FY20. The promoters are also expected to continue extending timely, need-based funds to support financial flexibility.
-
Susceptibility to volatility in raw material prices and foreign exchange (forex) rates:
:
The company incurred the net loss of Rs. 0.61 Crs in FY20 due to bad debt written off of Rs. 3.44 Crs. As per management certified provisional financial of FY21, the company expects to report profits. However, margins remains susceptible to volatility in prices of key raw materials . Given the competitive nature of the stainless steel business, there is low scope to pass on the price hike to its customers. Being an exporter, the company is also vulnerable to fluctuations in forex rates.
-
Highly fragmented nature of the industry : :
Stainless steel segments are highly fragmented and characterized by intense competition from numerous players, which limits the pricing flexibility . In addition, the company’s profitability and cash flows remain vulnerable to the cyclicality inherent in the steel business.
For arriving at its ratings, BWR has considered standalone financials of the company and applied its rating methodology as detailed in the Rating Criteria.
RATING SENSITIVITIES
Positive:
- Consistent growth in scale of operations with improvement in profitability margins on a sustained basis.
- Improvement in overall gearing below 1.50x.
- Financial support by management as and when required.
Negative :
- Lower profitability or stretched receivables leading to weak liquidity on a sustained basis.
- Deterioration of overall gearing above 2.00x and Elongated working capital cycle.
- Withdrawal of unsecured loans.
Net cash accruals are Rs. 2.87 Crs in FY19 & Rs. 2.68 Crs in FY20 and the company doesnt have any major long term liability in the near term. The company operates in a working capital intensive operations, which reflects in high conversion cycle of 128 and 235 days and the receivables cycle from 78 to 91 days in the last two financial years. Average working capital utilization is around 85% for the last six months as on 31st October, 2021. The current ratio is 1.10x as on 31st March 2020. The company has availed the the GECL of Rs 8.87 Crs and supported by funds infusion by management. BWR expects that efficient working capital management will remain the key rating sensitivity..
ABOUT THE ENTITYRatnesh Metal industries Private Limited concern was incorporated on 15th April 1998 in the name of M/s Ratnesh Steel Pvt. Ltd The registered office and manufacturing plant is located at Vijapur, Dist. Mehsana, Gujarat. The company is engaged in manufacturing of Stainless steel ,Hot Rolled Black Bars and Bright Bars in round, hexagon, square, angles, flat and Various other sections including nut & Bolts, etc. Previously, the company promoted and managed by Mr. Rajesh Sanghvi, thereafter the operation is taken over by Mr. Kushal Bhanshali and family.
KEY FINANCIAL INDICATORS (Standalone)
| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 166.63 | 109.03 |
| EBITDA | Rs.Crs. | 11.47 | 12.00 |
| PAT | Rs.Crs. | -0.61 | 0.48 |
| Tangible Net Worth | Rs.Crs. | 41.60 | 34.75 |
| Total Debt/Tangible Net Worth | Times | 1.91 | 2.25 |
| Current Ratio | Times | 1.10 | 0.99 |
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
Not Applicable
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 | 48.99 |
BWR BB/Stable
(Upgrade) |
28Sep2021 |
BWR B+ Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
11Jun2020 |
BWR B+ Stable
(Reaffirmation) |
20Mar2019 |
BWR B+ Stable
() |
| FB SubLimit | LT | (10.00) |
BWR BB/Stable
(Upgrade) |
28Sep2021 |
BWR B+Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
NA |
NA
|
| (10.00) |
BWR BB/Stable
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| (4.11) |
BWR BB/Stable
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| (4.11) |
BWR BB/Stable
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 14.19 |
BWR A4+
(Upgrade) |
28Sep2021 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
11Jun2020 |
BWR A4
(Reaffirmation) |
20Mar2019 |
BWR A4
() |
| NFB SubLimit | ST | (5.00) |
BWR A4+
(Upgrade) |
28Sep2021 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
NA |
NA
|
| NFB SubLimit | ST | (1.00) |
BWR A4+
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| NFB SubLimit | ST | (0.29) |
BWR A4+
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Grand Total | 63.18 | (Rupees Sixty Three Crores and Eighteen lakhs 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 | |
|---|---|
|
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com |
Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@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 | Bank of India | Cash CreditSanctioned | 10.74 | _ | 10.74 | |
| Sub-Limit (EPC) Sanctioned | (4.11) | |||||
| Sub-Limit (FBP) Sanctioned | (4.11) | |||||
| 2 | Bank of India | Letter of CreditSanctioned | _ | 7.04 | 7.04 | |
| Sub-Limit (Revolving LC in favor of ONGC) Sanctioned | (0.29) | |||||
| 3 | Bank of India | GECLOut-standing | 3.90 | _ | 3.90 | |
| 4 | IDBI Bank | GECLOut-standing | 3.64 | _ | 3.64 | |
| 5 | IDBI Bank | Cash CreditSanctioned | 20.00 | _ | 20.00 | |
| Sub-Limit (EPC/PCFC) Sanctioned | (10.00) | |||||
| Sub-Limit (WCDL) Sanctioned | (10.00) | |||||
| 6 | IDBI Bank | Letter of CreditSanctioned | _ | 7.00 | 7.00 | |
| Sub-Limit (BG) Sanctioned | (5.00) | |||||
| Sub-Limit (LER) Sanctioned | (1.00) | |||||
| 7 | Indian Overseas Bank | Cash CreditSanctioned | 9.00 | _ | 9.00 | |
| 8 | Indian Overseas Bank | Letter of CreditSanctioned | _ | 0.15 | 0.15 | |
| 9 | Indian Overseas Bank | GECLOut-standing | 1.71 | _ | 1.71 | |
| Total | 48.99 | 14.19 | 63.18 | |||
| TOTAL (Rupees Sixty Three Crores and Eighteen lakhs Only) | ||||||
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