Rating Rationale
March 27, 2025 | Mumbai
 
Alaknanda Sponge Iron Limited
'Crisil BBB/Stable/Crisil A3+' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.156 Crore
Long Term Rating Crisil BBB/Stable (Assigned)
Short Term Rating Crisil A3+ (Assigned)
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

 

Detailed Rationale

Crisil Ratings has assigned its ‘Crisil BBB/Stable/Crisil A3+’ ratings to the bank loan facilities of Alaknanda Sponge Iron Limited (ASIL).

 

The rating reflects ASIL's extensive industry experience of the promoters, strong association with the principal and sole manufacturer of Kamdhenu TMT in West Bengal and healthy financial profile. These strengths are partially offset by its susceptibility of operating margin to volatility in raw material prices, and vulnerability to cyclicality in the infrastructure and real estate sectors.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of ASIL.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive industry experience of the promoters: The two decade-long experience of the promoters, their strong understanding of local market dynamics, and healthy relationships with customers and suppliers, should continue to support the business risk profile. Longstanding presence in the iron and steel industry, helps the promoters anticipate price trends and calibrate purchasing and stocking decisions. ASIL has around 400 dealers, distributors and stockists in West Bengal.

 

  • Strong association with the principal and sole manufacturer of Kamdhenu TMT in West Bengal: ASIL has been associated with Kamdhenu Ltd and Kamdhenu Concast Ltd since fiscal 2010, with a consistent track record of continuity of agreement. The company is also the sole manufacturer of Kamdhenu and KAY2 thermo-mechanically treated bars (TMT) bars/rolls for the state of West Bengal. Hence, Crisil Ratings believes ASIL will continue to benefit from its strong association with its principal.

 

  • Healthy financial profile: ASIL capital structure have been at healthy level due to lower reliance on external funds yielding gearing expected to be around 0.25x and low total outside liabilities to adj tangible net worth (TOL/ANW) of 0.67x for year ending on 31st March 2025. ASIL debt protection measures have also been at healthy level due to leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at over 4.5 times and 0.4 times for fiscal 2025. ASIL debt protection measures are expected to remain at similar level over medium term.

 

Weakness:

  • Susceptibility of operating margin to volatility in raw material prices, and vulnerability to cyclicality in the infrastructure and real estate sectors: Cost of production and profit margin are heavily dependent on raw material prices (sponge iron and mild steel scrap). On account of variation in raw material prices, operating margin has also been volatile around 1.6-3.8% in last three fiscals. The profitability is expected to remain modest around 2-3% over the medium term. Furthermore, profitability is linked to the fortunes of the inherently cyclical steel industry, which has strong correlation with overall growth in gross domestic product. Operating performance will remain susceptible to volatility in raw material prices, and offtake by key user sectors

Liquidity: Adequate

Bank limit utilisation is low at around 37 percent for the past thirteen months ended January-25. Cash accruals are expected to be over Rs 12 crores which are sufficient against nil repayment obligations over the medium term. In addition, it will act as a cushion to the liquidity of the company.

 

Current ratio is moderate at 1.32 times on March 31, 2024. High or moderate cash and bank balance of around Rs. 17 crores as on March 31, 2024.

 

Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

Crisil Ratings believe ASIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Sustained improvement in margins over 4% and scale of operations leading to higher cash accruals
  • Sustenance of financial and liquidity profile

 

Downward factors:

  • Decline in scale of operations leading to fall in revenue by and profitability margin hence leading to net cash accrual lower than Rs 8 crores
  • Large debt-funded capital expenditure weakens capital structure
  • Witnesses a substantial increase in its working capital requirements thus weakening its liquidity & financial profile

About the Company

ASIL was incorporated in 2003 as private limited and was subsequently converted into public limited in 2011. The company has been engaged in manufacturing of TMT reinforcement bars and MS rounds, which are marketed under its own brand and also under Kamdhenu TMT and KAY2 TMT brand for which it pays royalty. ASIL manufacturing facility is located in Durgapur, West Bengal with an installed capacity of 197,000 MTPA of Billets and 114,400 MTPA for Rolled products.

 

ASIL is owned & managed by Mr. Anand Kumar Saraogi, Mr. Vishal Saraogi and Mr. Sandeep Agarwal.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

898.4

880.9

Reported profit after tax

Rs crore

2.24

7.14

PAT margins

%

0.25

0.81

Adjusted Debt/Adjusted Net worth

Times

0.24

0.50

Interest coverage

Times

4.69

6.40

Status of non cooperation with previous CRA:
ASIL has not cooperated with Credit Analysis & Research Ltd. (CARE) which has classified it as non-cooperative vide release dated 28th March 2024. The reason provided by CARE is non-furnishing of information for monitoring of ratings.
 

ASIL has not cooperated with India Ratings And Research Private Limited which has classified it as non-cooperative vide release dated 14th September 2017. The reason provided by India Ratings And Research Private Limited is non-furnishing of information for monitoring of ratings.

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 40.30 NA Crisil A3+
NA Cash Credit NA NA NA 100.59 NA Crisil BBB/Stable
NA Letter of Credit NA NA NA 11.00 NA Crisil A3+
NA Proposed Non Fund based limits NA NA NA 4.11 NA Crisil A3+
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 100.59 Crisil BBB/Stable 27-01-25 Withdrawn (Issuer Not Cooperating)* 11-04-24 Crisil B /Stable / Crisil A4 (Issuer Not Cooperating)* 10-02-23 Crisil B /Stable / Crisil A4 (Issuer Not Cooperating)*   -- Crisil B /Stable / Crisil A4 (Issuer Not Cooperating)*
Non-Fund Based Facilities ST 55.41 Crisil A3+ 27-01-25 Withdrawn (Issuer Not Cooperating)* 11-04-24 Crisil A4 (Issuer Not Cooperating)* 10-02-23 Crisil A4 (Issuer Not Cooperating)*   -- Crisil A4 (Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 5 Kotak Mahindra Bank Limited Crisil A3+
Bank Guarantee 6 HDFC Bank Limited Crisil A3+
Bank Guarantee 14 HDFC Bank Limited Crisil A3+
Bank Guarantee 12.8 ICICI Bank Limited Crisil A3+
Bank Guarantee 2.5 ICICI Bank Limited Crisil A3+
Cash Credit 47 HDFC Bank Limited Crisil BBB/Stable
Cash Credit 31 Kotak Mahindra Bank Limited Crisil BBB/Stable
Cash Credit 22.59 ICICI Bank Limited Crisil BBB/Stable
Letter of Credit 11 Kotak Mahindra Bank Limited Crisil A3+
Proposed Non Fund based limits 4.11 Not Applicable Crisil A3+
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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