CRISIL has assigned its ‘B+/Stable’ ratings to ZV Steels Pvt Ltd’s (ZVS’s) bank facilities. The ratings reflect ZVS’s below-average financial risk profile, marked by a small net worth, high gearing and weak debt protection metrics, low value-addition nature of business and susceptibility to intense competition in the steel trading business. These rating weaknesses are partially offset by ZVS’s promoters’ experience in steel trading business.

Outlook: Stable
CRISIL believes that ZVS will continue to benefit from its promoters’ experience over the medium term. The outlook may be revised to ‘Positive’ if ZVS’s financial risk profile improves, driven by equity infusion leading to improvement in capital structure, or higher-than-expected profitability leading to improvement in debt protection metrics. Conversely, the outlook may be revised to ‘Negative’ if ZVS undertakes large, debt-funded capital expenditure, resulting in further deterioration in capital structure, or if a significant decline in turnover or profitability constrains its debt protection metrics.

About the Company
Mumbai-based ZVS was set up as a partnership firm in 1978 by Mr. Riyaz Lokhandwala and his father Mr. Kareem Lokhandwala. Subsequently, it was reconstituted as a private limited company in 1998 and renamed. ZVS trades in cold-rolled commercial anneal (CRCA) and hot-rolled (HR) coils and sheets. The promoters have more than three decades of experience in steel trading business. ZVS is an authorised dealer of JSW Steel Ltd for its CRCA products. The company has its stock point at Taloja (Maharashtra) from where it caters to customers, mainly in Maharashtra.

ZVS reported a profit after tax (PAT) of Rs.1.89 million on net sales of Rs.631.19 million for 2009-10 (refers to financial year, April 1 to March 31), against a PAT of Rs.1.13 million on net sales of Rs.415.10 million for 2008-09.