RATING RATIONALE
01Feb2022
Kashmir Steel Rolling Mills
Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 40.00 Crs. of Kashmir Steel Rolling Mills
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (03 Sep 2021) |
Present | ||
| Fund Based | 40.00 | 40.00 | Long Term |
BWR BB+/Stable
Upgrade |
BWR BBB -
/Stable Upgrade |
| Grand Total | 40.00 | 40.00 | (Rupees Forty Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
BWR has upgraded the long term rating to “BWR BBB- with “Stable” outlook for the bank loan facilities of Kashmir Steel Rolling Mills (‘KSRM’ or ‘the firm’).
The rating draws strength from the experienced partners, long operational track record, long term revenue visibility and moderate financial risk profile. However, the rating is constrained on account of vulnerability to cyclical nature of industry & raw material price fluctuations, intense competition, risk of capital withdrawal.
The rating outlook has been assigned as "Stable" as BWR believes that Kashmir Steel Rolling Mills 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 there is improvement in revenues and profitability margins of the firm. The rating outlook may be revised to 'Negative' if there is any deterioration in financial risk profile or any liquidity issues.
KEY RATING DRIVERSCredit Strengths:
-
Long operational track record and experienced partners :
Being incorporated in 1981, KSRM has a long operational track record. There are 9 partners in the firm. The firm is mainly managed by the partners Mr. Tarun Singla (18 years experience), Mr. Varun Singla (18 years experience) and Mr. Krishan Gopal (40 years experience) having wide business experience in steel industry. And, they are assisted by a team of qualified & experienced personnel. Thus, aiding in having established healthy relations with customers and suppliers.
-
Moderate Financial Risk Profile :
The firm has moderate financial risk profile with revenues of Rs 132.33 crores in FY21 (Audited), Further the firm has achieved revenues of Rs 234.00 crores till December 2021, the firm has orders of Rs 70.00 crores which is to be executed before March 2022, and projected to achieve revenues of Rs 350.00 crores in FY22 (Projections) The firm has moderate net worth of Rs 29.41 crores in FY21 (Audited), market with low gearing level (TD/TNW) of 1.67 Times in FY21 (Audited). The firm has moderate debt service indicators with Interest Service Coverage Ratio of 2.78 Times and Debt Service Coverage Ratio of 3.02 Times in FY21 (Audited). The firm has moderate profitability margins with Net Profit Margins of 3.99% and Operating Profit Margins of 5.23% in FY21 (Audited) marked with moderate current ratio of 1.54 Times in FY21 (Audited).
-
Long term revenue visibility :
The company has achieved revenues of Rs 234.00 crores till December 2021 against the projections of Rs 350.00 crores in FY22. Recently, During the current year the company has added new customers in their bucket with the name of M/s Virat Ambuja and National Highways & Infrastructure Development Corporation Limited. With the engagement of above customers and long term contract of high values the company is expecting to achieve revenues of Rs 650.00 crores in FY23 (Projections). The company are also procuring long term contracts from IRCON, Konkan Railway, Military Engineering Services, CPWD, PWD, JK Housing Board and JK Police Housing Division.
-
Vulnerability to cyclical nature of industry and raw material price fluctuations :
Demand for its product is linked to the performance of end-user industries such as real estate and infrastructure segments which are cyclical and strongly correlated with economic cycles. However, the firm has contracts with M/s Virat Ambuja, NHIDCL, JK Power Development Corporation, SICOP, Indian Railways for the ongoing projects from Kishtwar to Banihal and other Governmental Departments for diversification and better pricing. Further, the firm is also exposed to raw material price fluctuations, thus, affecting their profitability margins.
-
Intense Competition :
Steel industry is highly fragmented and competitive. KSRM faces intense competition from other large players in the market and thus, restricting their pricing power leading to thin profitability margins.
-
Risk Of Capital Withdrawal :
Given the partnership nature of the KSRM's constitution, there is an inherent risk of the possibility of withdrawal of partner’s capital for any personal contingency that could adversely impact the capital structure of the firm.
For arriving at its ratings, BWR has considered the standalone performance of KSRM. 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 financial risk profile and maintaining adequate liquidity will remain the key rating sensitivities.
Positive: The rating may be upgraded if the company interalia, is able to achieve its projected revenue , improve profitability margins, improve debt service coverage ratios, maintain gearing levels or on account of any other favourable factor.
Negative: The rating may be downgraded if inter alia, there is any deterioration in financial risk profile, fails to maintain adequate liquidity or on account of any unforeseen unfavourable events.
LIQUIDITY INDICATORS - Adequate
The firm has associate concern with the name of Singla Cables but there is no operational linkages between them. The firm has cash and cash equivalent balance of Rs 0.68 crores and current investments of Rs 1.54 crores included FDRs. The current ratio is moderate and stood at 1.54x as on 31.03.2021.The company has average cash credit utilisation of 97% in last six months. Long term borrowings of Rs. 5.84 crs as on 31.03.2021 includes interest free unsecured loans from related parties of Rs. 5.77 cr as on 31.03.2021 and remaining balance is car loan outstanding, The company has generated net cash accruals of Rs 5.88 crores in FY21 against the Nil CPLTD. Long Term Borrowings comprises in FY22 (Projections) of Rs 10.82 crores include interest free unsecured loans from related parties of Rs 5.62 crores and GECL loan of Rs 5.20 crores. The company has projected net cash accruals of Rs 11.22 crores in FY22 against the CPLTD of Rs 5.00 crores. The firm has an average Interest service coverage ratio (ISCR) of 2.78x in FY21 and 3.02 x in FY21. Conversion cycle is at 194 days in FY21 (Audited).
ABOUT THE ENTITYKashmir Steel Rolling Mills (KSRM) is a partnership firm incorporated in the year 1981 with the aim to run an iron & steel rolling mill and also acting as a trader, commission agent, and dealer for the purchase and sale of iron and steel material both in raw and the finished form. The firm is engaged in the manufacturing of TMT bars, TOR Steel, MS-Angles, MS-Flats and MS-Rounds as per BIS standards. The manufacturing unit is located at SIDCO Industrial Complex, Bari Brahmana, Jammu (J&K). The total manufacturing capacity of the plant is 101000 MT p.a. The firm has 9 partners with Ms. Asha Singla & Ms. Mittul Singla holding major profit sharing of 25% each. The firm is mainly managed by the partners- Mr. Tarun Singla, Mr. Varun Singla and Mr. Krishan Gopal.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 132.33 | 128.69 |
| EBITDA | Rs.Crs. | 6.92 | 4.81 |
| PAT | Rs.Crs. | 5.28 | 5.51 |
| Tangible Net Worth | Rs.Crs. | 29.41 | 20.82 |
| Total Debt/Tangible Net Worth | Times | 1.67 | 1.47 |
| Current Ratio | Times | 1.54 | 1.52 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
N.A.
ANY OTHER INFORMATIONNote : The firm has a group concern namely M/s Singla cables. KSRM purchases cables from M/s Singla Cables.
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 | 40.00 |
BWR BBB-/Stable
(Upgrade) |
03Sep2021 |
BWR BB+Stable
(Upgrade) |
04Aug2020 |
BWR BBStable
(Upgrade) |
05Dec2019 |
BWR BB-Stable
(Assignment) |
| Non Fund Based | ST | NA |
NA
|
03Sep2021 |
BWR A4+
(Withdrawal) |
04Aug2020 |
BWR A4+
(Reaffirmation) |
05Dec2019 |
BWR A4+
(Assignment) |
| Grand Total | 40.00 | (Rupees Forty 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.
| Analytical Contacts | |
|---|---|
|
Aman sharma Rating Analyst Board : +91 172 5032 295 / 6 aman.s@brickworkratings.com |
V.K.Kukreja Associate Director - Ratings Board : +91 11 2341 2232 kukreja.vk@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 | Jammu and Kashmir Bank | Cash CreditSanctioned | 40.00 | _ | 40.00 | |
| Total | 40.00 | 0.00 | 40.00 | |||
| TOTAL (Rupees Forty Crores Only) | ||||||
The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.
About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
Disclaimer
Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.
BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR"s best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).
BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.
The ratings assigned by BWR are only an expression of BWR"s opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.
BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user"s financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.
BWR"s ratings reflect BWR"s opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.
Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.
BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR"s public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR"s rating criteria are also generally made available without charge on BWR"s website.
This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.
BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.