| Krishna Coil Cutters Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB/Stable/CRISIL A3+ '; Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its ratings on the bank loan facilities of Krishna Coil Cutters Private Limited (KCCPL; part of Krishna Group) to ‘CRISIL BBB/Stable/CRISIL A3+’ from ‘CRISIL BBB-/Stable/CRISIL A3’.
The ratings upgrade reflects the sustained improvement in KCCPL’s business risk profile. KCCPL’s operating income has improved at a healthy compound-annual-growth-rate (CAGR) of 36% over the last four fiscals ended 2021 to record ~Rs 950 crore (estimated) in fiscal 2021. The healthy growth in operating income is supported by the quick ramp up post operationalization of the new unit in Indore. Despite the healthy growth in revenue, company has been able to prudently manage its working capital requirements – gross current assets (GCAs) are estimated to be ~60 days as on March 31, 2021, driven by low inventory holding and fast debtor realization.
The sustained and healthy revenue growth at a standalone level has subsequently resulted in healthy growth of operating income at a group level – Krishna group’s operating income has grown at a CAGR of 16.5% over the last four fiscals ended 2021 to record operating income of Rs 2000 crore (estimated) in fiscal 2021.
The ratings reflect the extensive experience of promoters, healthy financial risk profile, and prudent working capital cycle. These rating strengths are partially offset by susceptibility to fluctuation in steel prices, and exposure to risks related to intense competition and cyclicality in the metals industry. |
Analytical Approach To arrive at KCCPL’s rating, CRISIL Ratings has changed its analytical approach and now factors in a combined business and financial risk profiles of KCCPL and Krishna Sheet Processors Private Limited (KSPPL; rated CRISIL BBB/Stable/CRISIL A3+). That is because both the companies, together referred to as Krishna group, are in the same line of business, have cross share-holding, and are under a common management.
Unsecured loans of Rs 16.19 cr have been treated as neither debt nor equity as the same are at an interest rate lower than market rate and will be maintained in the business going forward.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Adequate Group has adequate liquidity, supported by adequate cushion in bank lines, healthy cash accruals against no repayments and funding support from promoters. Group did not avail any moratorium or any Covid-assistance loan. Supported by the group’s prudent working capital cycle, the bank lines have been utilized at low level, reflected in average utilization of 32% over the 12 months ended Dec-2020, thereby leaving adequate cushion to support incremental working capital requirements. Group is expected to generate healthy net cash accruals expected at Rs 22-32 crore per fiscal against which there are no repayment obligations. Liquidity is also supported by promoter’s unsecured loans of Rs 16.19 cr as on March 31, 2020, which are continuing over the medium term. Cash and bank balance is estimated to be around Rs 64 cr as in the form of FDs and free cash, and current ratio is estimated to be around 1.8-1.9 times on March 31, 2021. |
Outlook Stable CRISIL Ratings believes Krishna group will continue to benefit from an established market position and the extensive experience of the promoters. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Group KSPPL, established in April 1995, is engaged in processing of hot-rolled and cold-rolled steel coils, and galvanized steel. The company undertakes cutting, slitting and shaping of HR/CR coil and galvanized sheets to suit customers' requirement. The company has its processing plant in Taloja, Maharashtra. It has five branches across the country in Delhi, Jaipur, Ludhiana, Faridabad and Indore.
KCCPL, incorporated in 2007, is also engaged in the business of cutting, slitting and shaping of HR/CR coil and galvanized sheets as per customer requirement. Its manufacturing unit is located at Gujarat (Barejagaon), and the company caters to the Gujarat, Maharashtra and Madhya Pradesh market. It has branches in Ahmedabad, Mumbai, Indore and Ghaziabad.
The group is promoted by Mr. Biharisharan Khandelwal & family, and Mr. Kapil Kumar Agarwal & family. |
Key Financial Indicators
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Status of non cooperation with previous CRA: KCCPL has not cooperated with Acuite Ratings and Research Ltd, which has classified it as issuer not cooperative vide release dated 24 June 2020. The reason provided by the CRA is non-furnishing of information for monitoring of ratings. |
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)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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