Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AA-/Stable/Crisil A1+’ ratings to the bank facilities of Evonith Value Steel Limited (EVSL; part of the Evonith Steel group).

 

Crisil Ratings has combined the business and financial risk profiles of EVSL and Evonith Metallics Ltd (EML) due to their close managerial, operational, and financial linkages. Both entities operate within an integrated steel complex, with EML as the upstream unit focused on producing hot metal and pig iron, and EVSL as the downstream unit that processes this hot metal to manufacture finished flat steel products. These plants belong to the erstwhile distressed Uttam Galva group and were acquired by Nithia Capital through the National Company Law Tribunal (NCLT) process in December 2020.

 

The ratings take into account the marked turnaround and ramp-up in the assets since being taken over by Nithia Capital. The group has healthy operating performance, driven by efficient operations, strategic location in central India with proximity to raw material sources, and a strong financial risk profile. The rating also considers the group's status as an Ultra Mega Project under the Government of Maharashtra's Package Scheme of Incentives 2013, which makes it eligible for incentives of upto Rs 371 crore per annum.

 

During fiscal 2025, the group's operational efficiency was enhanced by the recommissioning of a 0.6 metric tonne per annum (MTPA) blast furnace in November 2024, resulting in a total blast furnace capacity increasing from 0.8 MTPA to 1.4 MTPA. Hot metal production is projected to increase from 0.9 MT in FY25 to 1.2 MT in FY26, assuming ~90% utilization. The group's revenue for the first quarter of fiscal 2026 was Rs 1,635 crore, with earnings before interest, tax, depreciation and amortization (EBITDA) of Rs 301 crore, supported by higher volumes and favorable realizations. Going forward, Crisil Ratings expects the group's performance to sustain, driven by robust demand from the domestic end-user industry and stable steel industry realizations. Furthermore, the commissioning of a new 0.3 MTPA ductile iron (DI pipe) plant in last quarter of fiscal 2026 is expected to incrementally add to the EBITDA. In fiscal 2026, the group is likely to generate revenue of Rs 7,000-7,100 crore (FY25: Rs 5,008 crore, Rs FY24: Rs 5,167 crore) with EBITDA of Rs 1,000-1,100 crore (FY25: Rs 586 crore, Rs FY24: Rs 724 crore).

 

The rating also reflects the group's strong financial profile, driven by a healthy capital structure and comfortable coverage indicators. As of August 31, 2025, the group had a term loan debt of Rs 1,705 crore. Gross debt is expected to remain at Rs 1,400-1,700 crore on a steady state, with net leverage ratios improving as accruals strengthen. The net debt/EBITDA is expected to remain comfortably below 1.5x over the next three fiscals. The rating also considers the group's healthy cost of borrowing post-refinancing exercise in fiscal 2025. Crisil Ratings notes the management’s articulation of increasing installed capacity from present 1.4 MTPA to 3.0 MTPA by FY30 through brownfield expansion, which is expected to be prudently funded.

 

The ratings also factor in the technical, operational and managerial expertise the Evonith steel group receives from its sponsor, Nithia Capital, whose founders have an established track record of turning around and scaling up metals and mining businesses in emerging markets for decades.

 

However, these strengths are constrained by relatively moderate size, lack of raw material integration (though partially offset by proximity to raw material sources), and susceptibility to demand and price risk due to the inherently cyclical nature of the steel industry.

Analytical Approach

For arriving at its ratings, Crisil Ratings has combined the business and financial risk profiles of EML & EVSL, collectively referred to as the Evonith steel group. This is because these entities are under common management and have strong business and financial linkages.

Key Rating Drivers - Strengths 

Business risk profile supported by healthy operational performance

EML and EVSL operate in an integrated steel complex in Wardha, Maharashtra. The assets are strategically located near major customer markets in central and western parts of the country. The location provides access to key raw materials sources, such as iron ore mines in Jabalpur, Gadchiroli and Chhattisgarh (within 300 km radius of the Evonith’s plants) reducing both transportation cost and transit time. Moreover, power requirement is fully tied-up through dedicated power plants in and around the Wardha complex. The requirement of coking coal is satisfied via imports from Australia and New Zealand. The group has short-term coking coal procurement contracts, based on index-based pricing which reduces the price risk and provides operational flexibility by allowing payments to be based on consumption. Moreover, the plant premises have a dedicated railway siding for transportation of raw materials and finished products.

 

The plants have healthy capacity utilization, with both blast furnaces fully operational at ~90% utilization in YTD fiscal 2026. In fiscal 2025, the domestic sales were Rs 5,008 crore (Q1FY26: Rs 1,635 crore, FY24: Rs 5,167 crore, FY21: 2,633 Rs crore) with EBITDA margin at 11.7% (Q1FY26: 18.4%, FY24: 14%, FY21: 12.9%). Margins were lower in fiscal 2025, due to lower hot rolled coil (HRC) realization (in line with the other primary steelmakers) constrained by subdued international steel prices and increased imports. However, realization improvement has been observed in Q1FY26, post imposition of safeguard duty. EBITDA per tonne stood at Rs 9,741 during Q1FY26 (Q4FY25: Rs 7,086 per tonne, Q3FY25: Rs 5,771 per tonne) driven by recovery in steel realisations across the industry. The majority of the hot metal produced is consumed internally for production of HRC, cold rolled steel (CRC), and other value-added products, with the rest sold externally as pig iron. As the portfolio of value-added products increases, more hot metal is expected to be consumed in-house, driving growth and improving margins. Strategic upgrades, such as the increase in pulverized coal injection rate, have also contributed to better operating efficiencies.

 

Benefits available under the Government of Maharashtra’s mega projects incentives

As an Ultra Mega Project under the Government of Maharashtra's package scheme of incentives, EML is entitled to a 9% state goods and services tax (SGST) refund on the first sale of eligible products within the state of Maharashtra. The refund is linked to the percentage of the company's fixed capital investment, with currently a maximum amount of Rs 371 crore per annum. Although the refunds are received with a lag, the group has a healthy track record of receiving these benefits every year. This trend is expected to continue, with the group cumulatively receiving Rs 2,600–2,800 crores of incentives over the period of eligibility, enhancing its per-tonne profitability. Any further capex addition by the company will also be eligible for this benefit.

 

Healthy financial risk profile

As on March 31, 2025, the group had a term loan debt of Rs.1,705 crore. The leverage is expected to be managed prudently, with a net debt/EBITDA ratio comfortably below 1.5x and interest coverage above 5x over the medium term, despite sizable capex plans. The group successfully refinanced its debt in October 2024, converting high-coupon non-convertible debentures into a term loan of Rs 1,700 crore, reducing interest costs from approximately 19% to 11% in fiscal 2025 and further to below 10% in fiscal 2026. The refinancing has eased liquidity pressures by extending the repayment timeline over a seven-year period, allowing the company to better manage its cash flows. The group maintains a robust working capital cycle with a healthy inventory of 1.5-2 months, with majority sales done on a cash basis, minimizing reliance on working capital requirements. The working capital facilities of Rs 800 crore, largely unutilized, provide additional comfort to overall liquidity.

 

Established track record of the sponsors

Nithia Capital has a proven track record of successfully reviving multiple metal and mining assets across emerging markets. The founder, Mr Jai Saraf, and other senior management personnel have held leadership positions in renowned companies, providing valuable guidance and expertise. Since acquiring these assets at a significant haircut from NCLT, the sponsors have invested significantly in debottlenecking and expansion, increasing the hot metal capacity from 0.5 MTPA to 1.4 MTPA over a three-year period.  Nithia's strategy of reinvesting profits rather than distributing dividends has been instrumental in driving this growth.

Key Rating Drivers - Weaknesses 

Relatively moderate scale of operations; likely to increase over the medium term

The Evonith steel group's scale of operations is relatively moderate compared to other established domestic flat steelmakers, which may limit its bargaining power with suppliers and customers. However, the group plans to increase its capacity through brownfield expansion, aiming to reach 3.0 MTPA by 2030, which will improve its market position. The successful commissioning of this expansion will be a key monitorable, as it exposes the group to project risk and requires prudent funding.

 

Susceptibility to volatility in key raw material prices and cyclicality associated with the steel industry

The inherent cyclicality in the steel industry and nuances in demand in the end-user industry expose steelmakers to a high degree of volatility in operating margins and, in turn, to debt protection metrics. In fiscal 2025, the margin was impacted due to moderation in realization resulting from higher low-cost imports, while in fiscal 2023, the cost of production was affected by unfavorable raw material price movements. The group's lack of captive iron or coal mines and limited backward integration in raw materials make it more vulnerable to sharp volatility in profitability. Any significant variation in demand and pricing scenarios will remain a key monitorable.

Liquidity Strong

As on August 31, 2025, the group had cash and other liquid investments of ~ Rs. 300 crore. The utilisation of working capital limits for 12 months ended August 2025 has been moderate and below 10% providing sufficient cushion to meet short-term needs, if any. Against this repayment obligations over the next 12 months will be Rs 224 crore and interest payments will be Rs 165 crore.

Outlook Stable

The group will benefit from efficient operations and healthy balance sheet over the medium term.

Rating sensitivity factors

Upward factors

• Timely commissioning and ramp up of planned capex without material cost overrun, ramping up of newer capacities supporting healthy volume growth and increased level of integration resulting in NCA rising beyond Rs 1,200 crore on a steady basis
• Sustenance of strong debt metrics while maintaining healthy liquidity

 

Downward factors

• Deterioration in operating performance due to weakened demand and intense competition, leading to significant decline in operating profitability
• Time and/or cost overruns or higher-than-expected debt-funded capex/acquisition leading to deterioration in debt metrics, with net debt/EBITDA of over 1.5x on sustained basis
• Delay in receipt of receivables and/or mega benefits

About the Company

Both EML and EVSL part of Evonith steel group are located at Wardha (spread across 1000 acres land) in Maharashtra and formerly belonged to the Uttam Galva group. The assets were acquired at significant haircut (> 60%) for ~Rs 2000 crore. Nithia Capital and CarVal Investors acquired both the companies in December 2020 from NCLT and rebranded them as Evonith Metallics and Evonith Value Steel. Since then, CarVal investors have exited the company.

 

EML is an upstream unit focused on iron-making, producing hot metal and pig iron, while EVSL is the downstream unit that processes this hot metal to manufacture finished flat steel products. EML is engaged in the manufacturing of hot metal/pig iron from iron ore, which are intermediate products for manufacturing of value-added steel in EVSL.

 

Post NCLT resolution, Wardha Steel Holding Pte Ltd (WSL) is the promoter entity for both the companies. WSL, a Singapore-based special purpose vehicle (SPV) held by Nithia (~87.9%) and Vonix Pte Ltd (~12.1%) a Singapore based private equity fund.

Key Financial Indicators - EVSL and EML combined*

Particulars	Unit	2025	2024
Operating income	Rs crore	4,951	5,117
Profit after tax (PAT)	Rs crore	(54)	70
PAT margin	%	(1.1)	1.4
Adjusted debt/adjusted networth	Times	0.54	0.54
Interest coverage	Times	2.06	2.64

*as per analytical adjustments made by Crisil Ratings

Any other information: Not applicable