| Goodluck India Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB / Stable / CRISIL A3+ ' | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed the ratings of Goodluck India Limited (GIL) at 'CRISIL BBB/Stable/ CRISIL A3+'.
The ratings continue to reflect GIL's established presence in the steel processing industry, its diversified product profile, and increasing geographic presence. These strengths are partially offset by large working capital requirement, susceptibility to volatility in raw material prices due to intense competition in the fragmented industry, and subdued financial risk profile. |
Analytical Approach For arriving at the ratings, CRISIL Ratings had earlier combined the business and financial risk profiles of GIL and its wholly owned subsidiary Swachh Industries Limited (SIL). However, SIL was amalgamated into GIL via an NCLT order effective March 11, 2020. Accordingly, CRISIL Ratings is arriving at the ratings of GIL on a standalone basis, post amalgamation of SIL into GIL. |
Key Rating Drivers & Detailed Description Strengths: * Established presence in the steel processing industry: GIL has leveraged its promoters' experience of more than three decades in the steel processing industry for expanding its capacity and product portfolio.
* Diversified product profile: GIL has a diversified product profile. It engineers basic steel to black and galvanized pipes and tubes, cold rolled coils, strips, and galvanised sheet/roofing sheets, transmission towers, bright bars, industrial/automotive forgings and flanges, and automotive tubes. A wide product mix safeguards against cyclicality and event-based risks.
* Healthy scale of operations: GIL’s operating income at Rs 1629.6 crore for fiscal 2020 is healthy. Operating income witnessed a CAGR growth of 14% for last 3 periods ending fiscal 2020. Despite significant impact of Covid-19 on business performance for first half of fiscal 2021, GIL is expected to report only a 5-10% drop in operating income for entire twelve months of fiscal 2021 due to ramp up in capacity utilization esp. forging and increase in realizations owing to increase in steel prices.
Weaknesses * Large working capital requirement: Gross current assets were at 143 days as on March 31, 2020, driven by receivables of 55 days and inventory of 77 days. Large working capital requirements have resulted in high bank limit utilisation.
* Susceptibility to volatility in raw material prices due to intense competition in the fragmented industry: GIL is susceptible to volatility in the price of key raw material, hot-rolled coils, which accounts for 70% of the total raw material cost, as the company is unable to pass on the impact of increase in raw material prices to customers in short-term contacts. In the long-term contracts, change in price is passed on only after 1-2 months.
* Average financial risk profile: Gearing is expected to remain moderate at 1.16 times as on March 31, 2021. Interest coverage and net cash accrual to adjusted debt are also estimated at 2.1 times and 0.1 time for fiscal 2021 on account of modest operating profitability and high dependence on debt to fund working capital requirement. |
Liquidity: Adequate Liquidity is adequate: cash accrual, expected at over Rs 55 crore in fiscal 2021, should sufficiently cover yearly maturing debt of Rs 38 crore. Utilisation of fund-based limit of Rs 355 crore was high, averaging 96% over the last 21 months through January 2021. The company has no major capex plans. Current ratio was moderate at 1.19 times as on March 31, 2020 and is expected to remain moderate going ahead as well. |
Outlook: Stable CRISIL Ratings believes GIL will continue to benefit from its established market position. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company Incorporated in 1986, GIL (formerly, Goodluck Steel Tubes Ltd) manufactures sheets, pipes, engineering structures, fabricated structures, forgings, and automobile tubes. GIL has five manufacturing facilities in Sikanderabad (Uttar Pradesh) and one recently operational in Kutch (Gujarat), with total installed capacity of more than 300,000 tonne per annum. The company is listed on Bombay Stock Exchange Ltd and National Stock Exchange Ltd. |
Key Financial Indicators
|
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)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|