Rating Rationale
January 10, 2025 | Mumbai
K.Amishkumar Trading Private Limited
Rating outlook revised to 'Negative'; Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.425 Crore
Long Term RatingCrisil BBB/Negative (Outlook revised from 'Stable'; Rating Reaffirmed)
Short Term RatingCrisil A3+ (Reaffirmed)
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 revised its outlook on the long-term bank facilities of K.Amishkumar Trading Private Limited (KATPL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘CRISIL BBB’ and has reaffirmed its ‘CRISIL A3+’ rating on the short-term bank facilities.

 

The revision in outlook factors weakening in operating performance due to decline in scale of operations and profitability, which is expected to remain lower than earlier estimates. The operating income declined to Rs 1,161 crores in fiscal 2024 compared to Rs 1,366 crores in fiscal 2023 primarily due to ~11% reduction in realisation. Additionally, volumes also declined by ~4% on year with demand uncertainties due to elections and cautious approach to do business with trusted parties. The operating margin has declined to 1.4% in fiscal 2024 from 1.6% in FY23 due to a reduction in scale of operation and on account of higher salary withdrawal by the promoters. In H1’FY25, the company achieved a revenue of Rs 627 crores, and the profitability has reduced further due to a decline in commodity prices. Though the recovery is estimated in Q4-25, improvement in operating income and profitability shall remain key monitorable.

 

The rating also factors in comfortable, financial risk profile, though slightly moderated due to reduction in operating profitability, with nil long-term debt and prudent working capital management with total outside liabilities to tangible networth (TOL/TNW) ratio of ~1.2 time as on March 31, 2024, and the ratio is expected to remain stable over the medium term. 

 

The ratings continue to factor in the extensive experience of the promoters in the steel trading business, established market position and comfortable financial risk profile. These strengths are partially offset by susceptibility of operating profitability to fluctuations in commodity prices and exposure to intense competition.

Analytical Approach

Crisil Ratings have analysed the business and financial risk profile of the KATPL on a standalone basis.

 

Unsecured loans of Rs 30 crore as on March 31, 2024 (Rs 30 crore as on March 31, 2023), from the promoters and their affiliates have been treated as debt as these bear interest and have been repaid in the past.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: Presence of over four decades in the iron and steel trading segment has helped the promoters to build strong relationships with customers. Also, the association of over three decades with JSW Steel Ltd (JSW) has enabled KATPL to become its primary dealer in Maharashtra. Recently, the company started procuring materials from Arcelor Mittal Nippon Steel India Ltd (AMNS India). The promoters have also extended need-based funding support.

 

  • Comfortable financial risk profile: Networth improved to Rs 176 crore as on March 31, 2024, from Rs 171 crore as on March 31, 2023. The TOLTNW ratio and gearing are likely to remain strong at below 1.5 times and under 0.4 times, respectively, over the medium term. The ability to sustain operating performance, resulting in healthy cash accrual and debt protection metrics, will remain a key rating sensitivity factor.

 

Weaknesses:

  • Susceptibility to fluctuations in commodity prices: Operating profitability remains susceptible to volatility in commodity prices and foreign exchange (forex) rates. Though all the imports are majorly hedged by the company, any change in procurement policy would remain key monitorable.

 

  • Exposure to intense competition: The steel trading segment is highly fragmented, which limits bargaining power and, therefore, profitability. It is crucial to maintain effective relationships with suppliers and customers to tackle uncertainties during the business cycles. Margin could also be susceptible to overreliance on specific stakeholders. Any policy change with stakeholders would be a key monitorable.

Liquidity: Adequate

The liquidity of the company has remained comfortable with unencumbered cash and equivalent of which ~Rs 3 crore. The liquidity is further supported by a fund-based limit of Rs 75 crore (utilised at ~21% on average over the 12 months ended Sept 2024), and non-fund-based limit of Rs 350 Crores (utilized at 44% in last 12 months). Liquidity is supported by short-term, unencumbered fixed deposits of ~ Rs 50 Crores maintained to repay letter of credit obligations. Unsecured loans of Rs 30 crore (as on March 31, 2024) from the promoters also support liquidity.

Outlook: Negative

Crisil Ratings believes the business risk profile of the company will remain moderate over the medium term driven by lower-than-expected operating income and profitability.

Rating sensitivity factors

Upward factors:

  • Better operating performance leading to sustained improvement in operating margin of above 4%
  • Significant improvement in liquidity on account of continued efficient working capital management

 

Downward factors:

  • Weak operating performance resulting in operating margin remaining below 1.2-1.5%
  • Stretched working capital cycle adversely affecting liquidity

About the Company

Incorporated in February 2006 and promoted by Mr P N Kamdar and his son, Mr Ketan P Kamdar, KATPL is a dealer of JSW's hot-rolled steel coils and plates in Maharashtra. It imports flat steel products such as hot- and cold-rolled coils, sheets and plates for sale in India but and sources it from local suppliers, including JSW and AMNS India.

Key Financial Indicators

Particulars

Unit

2024

2023

Revenue

Rs crore

1,161

1,366

Profit after tax (PAT)

Rs crore

5

8

PAT margin

%

0.4

0.6

Adjusted debt/ adjusted networth

Times

0.30

0.32

Interest coverage

Times

1.5

1.80

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 75.00 NA Crisil BBB/Negative
NA Letter of Credit NA NA NA 350.00 NA Crisil A3+
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 75.0 Crisil BBB/Negative   --   -- 31-10-23 Crisil BBB/Stable 09-09-22 Crisil BBB/Stable Crisil BBB/Stable
      --   --   -- 17-10-23 Crisil BBB/Stable   -- --
Non-Fund Based Facilities ST 350.0 Crisil A3+   --   -- 31-10-23 Crisil A3+ 09-09-22 Crisil A3+ Crisil A3+
      --   --   -- 17-10-23 Crisil A3+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 25 Bank of Baroda Crisil BBB/Negative
Cash Credit 25 The Federal Bank Limited Crisil BBB/Negative
Cash Credit 25 HDFC Bank Limited Crisil BBB/Negative
Letter of Credit 70 The Federal Bank Limited Crisil A3+
Letter of Credit 80 HDFC Bank Limited Crisil A3+
Letter of Credit 200 Bank of Baroda Crisil A3+
Criteria Details
Links to related criteria
Criteria for rating trading companies
CRISILs Approach to Financial Ratios

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