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CRISIL has assigned its ‘BB-/Stable/P4+’ ratings to the bank facilities of Sponge Sales India Pvt Ltd (SSIPL), which is part of the Meenakshi group. The ratings reflect the Meenakshi group’s below-average financial risk profile, marked by a small net worth, large working capital requirements, and weak debt protection metrics, small scale of operations, and susceptibility to volatility in sponge iron prices. These rating weaknesses are partially offset by the Meenakshi group’s diversified supplier profile and promoters’ experience in the steel trading business.
For arriving at its ratings, CRISIL has combined the business and financial risk profiles of SSIPL and Meenakshi Enterprises (Meenakshi). This is because the two entities, together referred to as the Meenakshi group, are in similar businesses, and have common promoters, and operational and financial linkages with each other.
Outlook: Stable
CRISIL believes that the Meenakshi group will maintain its business risk profile, on the back of its relationships with its multiple suppliers and its well-entrenched position in the North Indian markets of Punjab, Himachal Pradesh, and Jammu & Kashmir (J&K). However, the group’s financial risk profile is expected to remain weak because of its large working capital requirements and small net worth. The outlook may be revised to ‘Positive’ if the group’s financial risk profile strengthens, primarily because of improvement in its capital structure. Conversely, the outlook may be revised to ‘Negative’ in case of further deterioration of the group’s profitability, or if it undertakes debt-funded capital expenditure programme, thereby weakening its capital structure.
About the Group
Meenakshi was incorporated in 2004 by Mr. Pramod Goyal and his father. It trades in sponge iron, steel ingots and ferro alloys. Meenakshi is based in Mandi Gobindgarh (Punjab), and is currently managed by Mr. Pramod Goyal, Mr. Rajesh Goyal, Mr. Kuldeep Garg and Mr. Pankaj Khetan.
The promoters of Meenakshi group also own and manage SSIPL, which was established in 1993. The company trades in sponge iron and steel ingots.
The group is an authorised trader of sponge iron for the companies such as Welspun Power and Steel Ltd, Tata Sponge Iron Ltd, Bihar Foundry and Castings Ltd, Adhunik Alloys and Power Ltd, and Bhushan Steel Ltd, all based in North India.
SSIPL reported a profit after tax (PAT) of Rs.2.3 million on net sales of Rs.263 million for 2008-09 (refers to financial year, April 1 to March 31), against a net loss of Rs.0.7 million with no sales in 2007-08.
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Disclaimer: A CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a recommendation to buy, sell, or hold the rated instrument; it does not comment on the market price or suitability for a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this product. CRISIL Ratings’ rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (+91 22) 3342 3000.
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