CRISIL has assigned its ‘BB+/Stable’ rating to the bank facilities of Sagar Roofings Pvt Ltd (SRPL, part of the Sagar group). The rating reflects the Sagar group’s small net worth, and large working capital requirements. These rating weaknesses are partially offset by the group’s established business risk profile marked by wide range of products, and stable operating margins in the past.

For arriving at its rating, CRISIL has combined the business and financial risk profiles of SRPL, Sagar Steels, Bajrangbali Ispat Pvt Ltd (Bajrangbali), and Sagar Hardware & Steel Pvt Ltd (Sagar Hardware), collectively referred to as the Sagar group. This is because the entities are in the same line of business, are under a common management, and there are instances of inter group sale and purchase transactions.

Outlook: Stable
CRISIL believes that the Sagar group will maintain its market position in the north-eastern market on the back of its diverse product range, and established relationships with suppliers and customers. The outlook may be revised to ‘Positive’ in case of a significant and sustained improvement in the company’s profitability, thereby resulting in improvement in its financial risk profile. Conversely, the outlook may be revised to ‘Negative’ if the profitability deteriorates steeply, or if the group lends financial support to any of its other businesses, thereby adversely affecting its liquidity or debt protection metrics.

About the Group
SRPL was started by Mr. Hemant Kumar Agarwal and Mr. Madhu Kumar Agarwal in 1999. The company trades in flat and long steel products, such as Cold Rolled Coils (CR), Hot Rolled Coils (HR) coils, TMT bars, Wire Rods, MS angle and MS pipes. Sagar Steels is authorised distributor of flat products for TATA Steel Ltd in the North East India. The other group entities trade in steel products.

The Sagar group reported a profit after tax (PAT) of Rs.5.9 million on net sales of Rs.1332.5 million for 2008-09 (refers to financial year, April 1 to March 31), against a PAT of Rs.5.7 million on net sales of Rs.1103.6 million for 2007-08.