Rating Rationale
May 15, 2018 | Mumbai
Bajaj Steel Industries Limited
Rating outlook revised to 'Stable'; ratings reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.63.58 Crore
Long Term Rating CRISIL BBB-/Stable (Outlook revised from 'Negative' and rating reaffirmed)
Short Term Rating CRISIL A3 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has revised its rating outlook on the long-term bank facilities of Bajaj Steel Industries Limited (BSI) to 'Stable' from 'Negative', while reaffirming the rating at 'CRISIL BBB-'. The rating on the short-term facilities has been reaffirmed at 'CRISIL A3'.
The outlook revision reflects the expectation of sustenance of business risk profile of the company. Outstanding orders worth Rs 140 crore, including export orders of nearly Rs 100 crore provide revenue visibility over the near term, mitigating the seasonality risk associated with the domestic cotton ginning machinery business. Revenue is estimated to have improved 12% in fiscal 2018, while operating margin is estimated to have increased significantly to 9.4% from 1.7% in fiscal 2017. Sustenance of the improved operating performance will remain a key rating sensitivity factor.
Liquidity pressure has eased with bank limit utilisation at below 75% for the six months through January 2018 as against 95% in fiscal 2017. Unencumbered cash and cash equivalents also augmented marginally to Rs 5.8 crore as on March 31, 2018 from Rs 4.5 crore a year back. Debt protection metrics have improved in fiscal 2018 and are expected to remain adequate.
The ratings continue to reflect BSI's established market position and the extensive experience of its promoters in the cotton ginning machinery business, and moderate capital structure. These strengths are partially offset by its susceptibility to economic downturns and to volatility in cotton demand-supply and price metrics.

Analytical Approach

CRISIL has consolidated the business and financial risk profiles of BSI and its wholly-owned subsidiaries, Bajaj Coneagle LLC, USA, and Bajaj Steel Industries (U) Ltd, Uganda, because of strong financial and operational linkages among them.

Key Rating Drivers & Detailed Description
* Established market position and extensive experience of the promoters
BSI is the only integrated ginning machinery manufacturer in India and has a significant market share, reflecting the high acceptability of its products. Besides a strong domestic presence, BSI also exports to various countries in the Indian subcontinent, South East Asia, Africa, and Europe. Further, the company also benefits from the extensive experience of its promoters i.e. the Bajaj family, who have been in the cotton business for more than 100 years.
* Moderate capital structure
Outstanding debt was Rs 81 crore as on March 31, 2017, while it is estimated at Rs 76 crore as on March 31, 2018. Further, unsecured loans from promoters form nearly 50% of the total debt reflecting the low dependence on external debt. Total outside liabilities to tangible networth is estimated at 2.1 times as on March 31, 2018.
* Susceptibility to economic downturns and to volatility in cotton demand-supply and price metrics
Demand for BSI comes from new ginning capacities being set up, and replacement demand from existing ones. Domestic demand has remained weak in the past three years due to declining cotton production and sales in the market. Further, unfavourable regulatory and macroeconomic factors, such as demonetisation, adversely impacted the capital expenditure plans of players in the cotton industry, constraining the business risk profile of the company.
Outlook: Stable

CRISIL believes BSI will maintain its established position in the cotton ginning machine manufacturing business. The outlook may be revised to 'Positive' in case of sustenance of the improved operating performance while maintaining the financial risk profile. The outlook may be revised to 'Negative' in case of deterioration of operating performance due to subdued demand in the industry, or if any large debt-funded capital expenditure weakens debt protection metrics.

About the Company

Incorporated in 1961, BSI manufactures cotton ginning automation and cotton pressing machinery and spare parts, and master batches. The company is one of the few players with operations across the entire ginning process value chain. It also sells pre-engineered buildings and electrical panels. Its registered office and four manufacturing units are in Nagpur.

In 2012, BSI acquired Continental Eagle Corporation, USA to set up Bajaj Coneagle LLC as its wholly-owned subsidiary in USA. The company also owns another wholly-owned subsidiary in Uganda named Bajaj Steel Industries (U) Ltd, which sells cotton ginning machines to cotton development organisation in the country. 

Includes sublimit of standby letter of credit to an extent of Rs 2.84 crore.

On a standalone basis, for the nine months ended December 31, 2017, profit after tax was Rs 5.5 crore on net sales of Rs 168 crore, as against a loss of Rs 10.1 crore and net sales of Rs 181 crore for the previous corresponding period.

Key Financial Indicators *
Financials as on / for the period ended March 31   2017 2016
Revenue Rs crore 244 312
Profit after tax Rs crore -9.0 -2.9
PAT margin % -3.7% -0.9%
Adjusted debt/adjusted networth Times 1.46 1.26
Interest coverage Times 0.65 1.93
*Revenue is estimated to be around Rs 270 crore for the fiscal ended March 31, 2018.

Status of non cooperation with previous CRA: Not applicable

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. 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 (Rs Cr) Rating outstanding with Outlook
NA Bank guarantee NA NA NA 0.5 CRISIL A3
NA Cash credit@ NA NA NA 30 CRISIL BBB-/Stable
NA Cash credit NA NA NA 14 CRISIL BBB-/Stable
NA Letter of credit NA NA NA 6 CRISIL A3
NA Letter of credit & Bank Guarantee# NA NA NA 7 CRISIL A3
NA Term loan* NA NA 02-May-2019 4.25 CRISIL BBB-/Stable
NA Term loan NA NA 18-Nov-2018 1.83 CRISIL BBB-/Stable
@Includes sublimit for packing credit/post-shipment credit/export packing credit/pre-shipment credit in foreign currency/foreign bill purchase/post-shipment credit in foreign currency to an extent of Rs 10 crore
#Includes sublimit of bank guarantee of Rs 5.0 crore
* Includes sublimit of standby letter of credit to an extent of Rs 2.84 crore
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  50.08  CRISIL BBB-/Stable      15-11-17  CRISIL BBB-/Negative  11-07-16  CRISIL A-/Negative  17-02-15  CRISIL A/Stable  CRISIL A/Stable 
            07-03-17  CRISIL BBB/Negative           
Non Fund-based Bank Facilities  LT/ST  13.50  CRISIL A3      15-11-17  CRISIL A3  11-07-16  CRISIL A2+  17-02-15  CRISIL A1  CRISIL A1 
            07-03-17  CRISIL A3+           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee .5 CRISIL A3 Bank Guarantee .5 CRISIL A3
Cash Credit@ 30 CRISIL BBB-/Stable Cash Credit@ 30 CRISIL BBB-/Negative
Cash Credit 14 CRISIL BBB-/Stable Cash Credit 14 CRISIL BBB-/Negative
Letter of Credit 6 CRISIL A3 Letter of Credit 6 CRISIL A3
Letter of credit & Bank Guarantee# 7 CRISIL A3 Letter of credit & Bank Guarantee# 7 CRISIL A3
Term Loan* 4.25 CRISIL BBB-/Stable Term Loan^ 4.25 CRISIL BBB-/Negative
Term Loan 1.83 CRISIL BBB-/Stable Term Loan 1.83 CRISIL BBB-/Stable
Total 63.58 -- Total 63.58 --
@Includes sublimit for packing credit/post-shipment credit/export packing credit/pre-shipment credit in foreign currency/foreign bill purchase/post-shipment credit in foreign currency to an extent of Rs 10 crore
#Includes sublimit of bank guarantee of Rs 5.0 crore
* Includes sublimit of standby letter of credit to an extent of Rs 2.84 crore
^Includes sublimit for standby letter of credit/letter of undertaking of Rs 2.84 crore
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000

Sachin Gupta
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3023

Sushmita Majumdar
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3162

Santosh Paila
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3170
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit https://www.crisil.com/en/home/privacy-and-cookie-notice.html. You can view the Company’s Customer Privacy at https://www.spglobal.com/corporate-privacy-policy

Last updated: April 2016


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL