: CRISIL Ratings :

May 03, 2011
Mumbai

CRISIL upgrades rating on RAIPUR POWER AND STEEL to
‘BB-/Stable’

Rs.250 Million Term Loan

BB-/Stable (Upgrade from ‘B+/Stable’)

CRISIL has upgraded its rating on the long-term bank facility of Raipur Power and Steel Ltd (RPSL) to ‘BB-/Stable’ from ‘B+/Stable’. The rating upgrade is driven by expectation of sustained improvement in RPSL’s financial performance, supported by the commencement of commercial operations of its third sponge iron kiln with capacity of 30,000 tonnes per annum (tpa). Furthermore, its 12-megawatt (MW) power plant is expected to commence operations shortly, thereby enabling the company to further improve its profitability through the generation of revenues from sale of power.

The rating continues to reflect RPSL’s small scale of operations in the intensely competitive sponge iron industry, susceptibility to volatility in raw material prices, and below-average financial risk profile marked by high gearing. These rating weaknesses are partially offset by RPSL’s healthy raw material sourcing capability, and its promoters’ experience in the steel industry.

Outlook: Stable
CRISIL believes that RPSL will increase the capacity utilisation of its sponge iron kilns, over the medium term. This, along with the revenues generated from sale of power, is expected to improve the company’s cash accruals. The outlook may be revised to ‘Positive’ if the company significantly scales up its operations and generates significant revenues from sale of power, leading to marked improvement in its cash accruals and capital structure. Conversely, the outlook may be revised to ‘Negative’ if RPSL reports lower-than-expected cash accruals or if its debt protection metrics weaken significantly.

About the Company
RPSL is a closely held company, set up in October 2007 by Mr. Narsi Dass Garg and Mr. Balraj Garg. The company manufactures sponge iron, and has production capacity of 90,000 tpa. RPSL commenced commercial operations in June 2009 at Borai Industrial Growth Centre Village in Durg (Chhattisgarh).

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Last updated: March 31, 2011

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May 03, 2011	http://www.crisil.com

Raipur Power and Steel Ltd