Key Rating Drivers & Detailed Description

Strengths:

• Extensive experience of the promoters: The five-decade-long experience of the promoters has enabled them to establish strong relationships with customers. The company sells thermo-mechanically treated (TMT) bars under the TORCON brand to steel manufacturers. The distribution channel is concentrated in eastern India.

• Sound operating efficiency backed by partially integrated operations: Installed capacity of the TMT manufacturing facility is 2 lakh tonne per annum (tpa) and of the ferro alloy facility is 42,500 tpa. Billet output is used in the rolling mill (3 lakh tpa) to manufacture TMT, while the excess billets are sold in the open market. The billet plant, rolling mill and ferro alloy unit have led to integrated operations. Billets are also used to manufacture wire rods.

• Healthy financial risk profile: Gearing and networth were strong estimated at 0.57 time and Rs 166.7 crore, respectively, as on March 31, 2021. Debt protection metrics were robust, indicated by interest coverage and net cash accrual to total debt ratios of 4.7 times and 0.39 time, respectively, in fiscal 2021. Healthy cash accrual and the promoters' resourcefulness have led to small debt, with the company using promoter funding and cash accrual to meet the working capital and capital expenditure (capex) requirement.

Weakness:

• Exposure to intense competition and cyclicality in the steel industry: The domestic steel industry is highly fragmented, with several small players entering the business on account of low capital requirement. Furthermore, with large, integrated players increasing capacity, the pricing power of secondary steel producers such as BDG in the billet and long product segment will likely remain limited.

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