| Garg Furnace Limited | ||||
| Rating reaffirmed at 'Crisil BBB- / Stable' | ||||
| 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 reaffirmed its ‘Crisil BBB-/Stable’ rating on the long-term bank facility of Garg Furnace Ltd (GFL).
Crisil Ratings makes note of the acquisition of 51.27% stake by GFL in Vaneera Industries Ltd (VIL) during August 2025, at a cost of Rs 36.27 crore. This was funded with 72.5% of equity from the promoters and the rest through internal accrual. The acquisition would aid GFL in making a foray into the alloy steel segment over the medium term. However, timely commencement of operations in the business and its stabilisation would remain monitorable.
The rating continues to reflect the extensive experience of the promoters and healthy financial risk profile. These strengths are partially offset by the company’s modest scale of operations, exposure to intense competition and susceptibility of operating margin to fluctuations in raw material prices. |
Analytical approach: Consolidated Against the earlier standalone approach, Crisil Ratings is now consolidating the business and financial risk profiles of GFL and VIL on account of acquisition of majority stake in VIL by GFL during August 2025. |
Key Rating Drivers - Strengths Extensive experience of the promoters: Presence of more than four decades in the steel industry has enabled the promoters to develop a strong understanding of the market dynamics and establish longstanding relationships with customers and suppliers. The promoters’ extensive experience has also enabled the company to expand into new markets and innovate within the steel products manufacturing space. With the acquisition of majority stake in VIL, GFL will now diversify into the alloy steel segment. Moreover, the company plans to set up an alloy rolling mill and enhance its furnace capacity over the next three fiscals. The promoters have been instrumental in driving the new initiatives and positioning the company for sustained growth.
Healthy financial risk profile: Capital structure is strong, with total outside liabilities to tangible networth (TOLTNW) ratio of less than 0.5 time and networth of Rs 62.25 crore, as on March 31, 2025. The debt protections metrics were also robust, with interest coverage and net cash accrual to adjusted debt ratios of 77 times and 6.62 times, respectively, for fiscal 2025. The financial risk profile is also supported by the company’s ability to raise funds from the capital markets and the promoters’ ability to infuse equity without much reliance on external debt. In the second quarter of fiscal 2026, Rs 26.5 crore of equity was infused by the promoters for the acquisition of VIL. This conservative financial strategy continues to support a strong financial risk profile. |
Key Rating Drivers - Weaknesses Modest scale of operations and exposure to intense competition: Revenue was muted at Rs 262 crore in fiscal 2025 (similar to fiscal 2024 level) despite existing facilities operating at full capacity. GFL has added new capacities in the alloy steel products segment through acquisition of 51.27% stake in VIL, which is expected to improve the scale. GFL also plans to add more capacity to its furnace and set up an alloy rolling mill, which will improve turnover in the long term. However, the pace of scaling up and stabilisation would remain monitorable. The Indian secondary steel industry comprises numerous unorganised players; the consequent intense competition may continue to constrain scalability, pricing power, and profitability. The performance of the company also remains vulnerable to cyclicality in the steel sector, given the close linkage between demand for steel products and domestic and global economies.
Susceptibility to fluctuations in raw material prices: Material cost comprises 85-88% of the total revenue and any sharp fluctuation in raw material prices could adversely impact profitability. Operating margin improved to 3.28% in fiscal 2025 from 2.63% in fiscal 2024, but remains susceptible to changes in input costs. With the inclusion of value-added products such as alloy round steel bars in the business, the operating profitability is likely to improve over the medium term, though this will remain monitorable. |
Liquidity Adequate Cash accrual is estimated at Rs 9.28 crore for fiscal 2025 and is likely to improve further to Rs 11-12 crore over the medium term, supported by steady growth expected in the business. In the absence of any major term debt obligation, the accrual will aid the liquidity. No reliance on bank limit due to efficient working capital management further supports the liquidity. Cash and equivalent stood at Rs 9.9 crore as on March 31, 2025, while current ratio was healthy at 3.91 times. The ability of the promoters to extend equity or unsecured loans further backs the liquidity. |
Outlook Stable Crisil Ratings believes the business risk profile of GFL will continue to benefit from the extensive experience of its promoters. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the company Incorporated in December 1973 and promoted by Mr Devinder Garg, Ms Vaneera Garg,Mr Toshak Garg,and Mr. Daksh Garg. GFL manufactures non-alloy steel round bars, wire rods, and billets. It has annual installed capacity of 40,000 tonne per annum. |
Key financial indicators
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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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