CRISIL has assigned its ‘B+/Stable’ rating to Vishwarupa Tubes Pvt Ltd’s (VTPL’s) bank facilities. The rating reflects VTPL’s constrained business risk profile because of the start-up phase of its operations, weak financial risk profile, marked by a small net worth, high gearing, and weak debt protection metrics, and exposure to risks related to intense competition in the electronic-resistance-welded (ERW) pipes segment, and geographical concentration in revenue profile. These rating weaknesses are partially offset by the experience of VTPL’s promoters in the steel industry.

Outlook: Stable
CRISIL believes that VTPL’s scale of operations will remain small and its financial risk profile, weak, over the medium term, as the company’s operations are in the start-up phase. The outlook may be revised to ‘Positive’ if VTPL scales up its operations, leading to more-than-expected cash accruals, thereby improving its financial risk profile. Conversely, the outlook may be revised to ‘Negative' if the company fails to increase its scale of operations or contracts large quantum of debt to fund its capital expenditure.

About the Company
VTPL manufactures ERW pipes and tubes. The company has recently set up a manufacturing unit in Howrah (West Bengal), with a capacity of 45,000 tonnes per annum. The plant commenced commercial production in May 2010. VTPL is part of the Sarkar Gray group, which manufactures, and trades in, steel products. The group, promoted by Mr. Dhiraj Thard, includes Sarkar Gray Iron Products (rated ‘B+/Stable’ by CRISIL), Shree Radhe Krishna Smelters Pvt Ltd (BB-/Stable), and Vishwarupa Steel Pvt Ltd (BB-/Stable/P4+).