| Deem Roll-Tech Limited | ||||||
| Ratings downgraded to 'Crisil BB+ / Stable / Crisil A4+ ' | ||||||
| Rating Action | ||||||
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| 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 downgraded its ratings on the bank facilities of Deem Roll-Tech Ltd (DRTL) to ‘Crisil BB+/Stable/Crisil A4+’ from ‘Crisil BBB-/Stable/Crisil A3’.
The rating downgrade factors in the decline in the company’s revenue and profitability in fiscal 2025, coupled with a stretch in its working capital cycle. Subdued demand in the steel industry, with weaker domestic demand and competition from cheaper imports affecting prices and sales volumes, moderated the revenue by 8% on-year to Rs 93 crore in fiscal 2025 (Rs 101 crore in fiscal 2024 and Rs 103 crore in fiscal 2023). The company’s operating margin declined in fiscal 2025 due to sharp rising input costs, and intensified competition, exacerbated by major fixed costs incurred for delayed capital expenditure (capex). The margin remained volatile over the past five years and declined to 6.24% in fiscal 2025 (14.01% in fiscal 2024 and 12.66% in fiscal 2023). Additionally, high inventory holding of ~175 days and elongated receivables of ~130 days led to stretched working capital cycle, with high bank limit utilisation of 90% on average in the five months through August 2025 which weakened liquidity. Recovery in demand, supported by commencement of new capacities, will likely lead to improvement in revenue; however, revenue growth amid improvement in the operating margin with better liquidity will remain monitorable.
The ratings reflect the extensive experience of DRTL’s promoter in the industrial machinery and consumables industry, the company’s established customer base and comfortable financial risk profile. These strengths are partially offset by susceptibility of profitability to intense competition and to volatility in raw material prices, and large working capital requirement. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of DRTL. |
Key Rating Drivers - Strengths Extensive experience of the promoter and established clientele: The promoter has more than three decades of experience in the industry. Their strong understanding of the market dynamics and healthy relationships with suppliers and customers should continue to support the business. The company deals with reputed players such as Steel Authority of India, Rashtriya Ispat Nigam Ltd and Durgapur Steel Plant. The company booked revenue of Rs 93 crore in fiscal 2025, though moderated from the previous year. The business risk profile is expected to remain steady over the medium term on the back of addition of customers and revival of demand leading to increased order flow. Any adverse impact of regulatory changes or demand scenario in the overseas market on the scale of operations and profitability shall remain monitorable.
Comfortable financial risk profile: DRTL has a comfortable capital structure owing to low reliance on external funds, as indicated by gearing of 0.30 time and total outside liabilities to tangible networth ratio of 0.62 time as on March 31, 2025. The financial risk profile improved in fiscal 2024 because of listing of shares at a premium. Steady debt and buildup in networth through accretion supported the capital structure in the past three fiscals. Debt protection metrics were adequate, as reflected in interest coverage and net cash accrual to total debt ratios of 2.01 times and 0.15 time, respectively, in fiscal 2025. The company has incurred large capex in fiscal 2025, which was funded mainly through proceeds from initial public offering (IPO) and term loan. Financial risk profile is expected to remain comfortable in the absence of any large, debt funded capex. |
Key Rating Drivers - Weaknesses Susceptibility of profitability to intense competition and to volatility in raw material prices: The industry is highly fragmented because of low capital requirement. Furthermore, with large, integrated players increasing their capacities, secondary steel producers may have limited pricing power in the segments. Also, the company faces intense competition from other players in the segment. Timely completion and successful stabilisation of operations of the new capacities remain key rating sensitivity factors.
Cost of production and profit margin are heavily dependent on raw material prices (iron scrape/steel scrape/ferroalloys). On account of variation in raw material prices, the operating margin has also been volatile. Fluctuations in input prices have led to volatility in the operating margin, at 6–14% for last three fiscals (operating margin declined to 6.24% in fiscal 2025 from 14.01% in fiscal 2024). Operating performance will remain susceptible to volatility in raw material prices, and offtake by key user sectors.
Large working capital requirement: Gross current assets were at 186–317 days over the three fiscals through 2025 (317 days as on March 31, 2025) owing to sizeable receivables of ~130 days and inventory of ~175 days as on March 31, 2025. Any large, unprecedented stretch in the working capital cycle shall remain monitorable. |
Liquidity Stretched Bank limit utilisation was moderate at 77.76% on average for the 12 months through August 2025, however, it remained over 90% in the five months through August 2025. Annual cash accrual is expected to be over Rs 4 crore against term debt obligation of Rs 1.65 crore in fiscal 2026 and Rs 1.36 crore in fiscal 2027. In addition, it will cushion liquidity. The current ratio was healthy at 1.99 times as on March 31, 2025. |
Outlook Stable Crisil Ratings believes DRTL will continue to benefit from the extensive experience of its promoter and established relationships with clients. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 2003, DRTL manufactures cast iron and steel rolls such as hot rolling mills, alloy steel bases, ring rolls, indefinite chill alloy cast iron and alloy rolls. The company’s manufacturing facilities are in Chhatral and Mehsana in Gujarat and in Hooghly in West Bengal. It is promoted by Mr Jyoti Bhattacharya. |
Key Financial Indicators – Crisil Ratings - adjusted numbers
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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