| Jai Balaji Industries Limited | ||||||
| Ratings upgraded to 'Crisil BBB+/Stable/Crisil A2' | ||||||
| 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 upgraded its ratings on the bank facilities of Jai Balaji Industries Ltd (JBIL) to 'Crisil BBB+/Stable/Crisil A2' from 'Crisil BBB/Stable/Crisil A3+'.
The upgrade reflects improvement in financial flexibility driven by increase in access to external working capital borrowing limits which aids JBILs working capital cycle. Rating action also factors in the sustenance of healthy operating performance, as reflected in revenue of over Rs 6,362 crore in fiscal 2025 from Rs 6,418 crore a year earlier. In fiscal 2025, while revenue remained strong, there was a 3% degrowth on year due to moderation in realizations partially set off by rise in sales volume. Fall in raw material prices each quarter during fiscal 2025, also resulted in moderation in operating margins by 86 bps from 14.58% in fiscal 2024. In fiscal 2025, while revenue remained strong, there was a 3% degrowth on year due to moderation in realizations partially set off by rise in sales volume. Fall in raw material prices each quarter during fiscal 2025, also resulted in moderation in operating margins by 86 bps from 14.58% in fiscal 2024. The scale of operations is expected to sustain on back of rise in volume sales of high profitability products namely DI pipes and Ferro Alloys, cost reduction strategies and economies of scale.
Prudent working capital management and capital expenditure (capex), mainly funded by internal accrual drove up return on capital employed to 35% in fiscal 2025 from 21% in fiscal 2023 while sustaining operating income to gross block ratio over 2 times. With steady accretion to reserve in the two fiscals through March 31, 2025 and repayment of term debt, gearing and total outside liabilities to tangible networth ratio improved to 0.3 time and 0.8 times, respectively, as on March 31, 2025, from 1.6 times and 3.8 times, respectively, as on March 31, 2023. Sustenance of market position and operating profitability, reducing net debt and improving financial flexibility, continues to remain a key monitorable.
The ratings continue to reflect the extensive experience of the promoters in the iron and steel industry, the integrated operations of the company and its improving market position in value-added products. These strengths are partially offset by moderate financial risk profile and susceptibility to demand and price risks. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profile of JBIL as its joint ventures Rohne Coal Company Private Limited (RCCPL) and Andal East Coal Company Private Limited (AECCPL) are under liquidation. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters and integrated operations: The promoters have more than two decades’ experience in the iron and steel industry and are supported by a well-qualified and experienced management team. This has given them an understanding of market dynamics and enabled them to establish relationships with customers, suppliers and other stakeholders. Healthy relationships aid healthy scale of operations, supported by integrated operations spread across four units; three units in West Bengal and one unit in Chhattisgarh and a diverse portfolio of value-added products of DI pipes and special-grade ferroalloys, including basic steel products such as DRI (sponge iron), pig iron, mild steel billet, reinforcement steel TMT bars and wire rods. Thus, JBIL has a healthy market position allowing it to penetrate deep into the value chain. Furthermore, captive power plants and railway sidings have controlled cost of production, strengthening its market position, which should continue to aid the business over the medium term. Improving market position in value-added products: JBIL has a moderately healthy market share in DI pipes and special-grade ferroalloy segments, backed by its ability to manufacture higher grades and value-added products. It makes DI pipes and specialized chrome-based ferroalloys (with application in superior grade stainless steel used in aerospace, aviation defense sectors, among others). Capacity for DI pipes is 5.04 lakh tonne per annum (TPA), and the company plans to add 0.96 lakh TPA in fiscal 2026. For ferroalloys, JBIL has increased capacity to 1.66 lakh TPA and plans to add 0.24 lakh TPA by end of fiscal 2026 against earlier plan of adding the capacity in fiscal 2025. The revision in capex schedule is in line with demand across industry. Timely installation and stabilization of capacities, translating into better fixed cost absorption; sustenance of earnings before interest, tax, depreciation and amortization (Ebitda) margin around 13-14% and higher cash accrual will be closely monitored.
Weaknesses: Moderate financial risk profile: The financial risk profile was weak, constrained by sizeable debt, consequent to significant capex post incorporation while returns in fiscal 2014 were subdued owing to lower steel realization and de-allocation of coal mines. Consequently, debt to Ebitda ratio rose to 95 times in fiscal 2014. Over the years, JBIL has taken steps to improve its capital structure through refinancing, including capital infusion through preferential issue of share warrants. This, coupled with ramp-up of operations, reduced debt to Ebitda ratio to 0.5 time in fiscal 2024 from 2.6 times in fiscal 2023, which sustained at 0.6 time on March 31, 2025. However, the debt profile of the company is restricted by large repayments, which yielded current ratio of 1.2 time as on March 31, 2025. The company has also envisaged capex of Rs 1,000 crore, funded by internal accrual, to be spent in phases by fiscal 2026 and of this, around Rs 178 crore pending to be incurred in fiscal 2026.
Along with regular debt repayment, there is high dependence on internal accrual for meeting working capital requirement and capex while limited working capital lines continues to constrain the financial flexibility. Sustenance of healthy cash flow from operations and steady accretion to reserve further strengthening financial flexibility remain key rating sensitivity factors.
Susceptibility to demand and price risks: Demand for steel products depends on the level of construction and infrastructure activities in the country. While there has been a significant push by the government on steel-intensive sectors such as railways and infrastructure, downturns in economic cycles will adversely affect demand. The steel industry remains exposed to fluctuations in the prices of key inputs (such as iron ore and coal), which impacts realisation from finished goods. Any adverse movement in the industry can have a direct bearing on the company’s performance; this risk is partly mitigated by the company’s increasing focus on value-added products like DI pipe and ferro alloy, and integrated operations. |
Liquidity: Adequate Bank utilization is moderate at around 50 percent for the past twelve months ended March 2025. Cash accruals are expected to be over Rs 750 crore which are sufficient against term debt obligation of more than Rs 200 crore over the medium term. In addition, it will act as cushion to the liquidity of the company. Current ratio are moderate at 1.2 times on March 31, 2025 |
Outlook: Stable Crisil Ratings believes JBIL will continue to benefit from its established relationships with stakeholders. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company JBIL, the flagship company of the Jai Balaji group, was incorporated in July 1999. The company manufactures various value-added products of DI pipes and special-grade ferroalloys, including basic steel products such as sponge iron, pig iron, mild steel billets, reinforcement steel TMT bars and wire rods. It has a sinter and captive power plant and four integrated steel plants in Burdwan, West Bengal, and Durg, Chhattisgarh. The company is listed on the Bombay Stock Exchange and National Stock Exchange. It is headed by Mr Aditya Jajodia (Chairman and MD) and his family members |
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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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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