| M.K.K. Metal Sections Private Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 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 M.K.K. Metal Sections Private Limited (MKK; part of the MNS group) to ‘Positive’ from ‘Stable’ and has reaffirmed the rating at ‘CRISIL BB+’. The short-term rating has been reaffirmed at ‘CRISIL A4+’
The rating action reflects CRISIL’s relief that the MNS group will sustain its improved liquidity profile over the medium term. Improved operating performance in fiscal 2022 has resulted in larger accruals against repayment obligations. The group’s revenues grew by 17% to Rs 582 crore in fiscal 2022 while sustaining profitability in moderate levels. Although the realizations would witness a correction in coming quarters, the revenues would continue to grow supported by volumes. The group has recently enhanced its working capital lines resulting in improved cushion. Sustenance of liquidity profile would remain key monitorable.
The ratings continue to reflect the group's established market position in the metal pipes and structures industry, moderate working capital requirements and average financial risk profile. These strengths are partially offset by exposure to intense competition. |
Analytical Approach: For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of MKK and MNS Metal and Profiles Pvt Ltd (MNS). This is because the two companies, together referred to as the MNS group, operate in the same line of business, and have a common management, in addition to intra-corporate guarantees.
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:
The MNS group is one of the leading players in the metal pipes and structures industry, with operations across Tamil Nadu and parts of Karnataka. The market position is supported by a diversified base of over 300 customers in Tamil Nadu, Karnataka, Bihar, Kerala, and Maharashtra. A network of 35-40 dealers in Tamil Nadu and Karnataka helps channelize sales to other states. The group’s operation was impacted for a brief period due to COVID-19 lock down and have resumed to normalcy now.
Operations are moderately working capital intensive as reflected in gross current assets (GCA) of 131 days as on March 31, 2022, on account of moderate levels of inventory maintained, for about 87 days and moderate receivable days of about 50 days. Going forward, working capital is expected to be at similar levels.
The group’s scale of operations are moderate as reflected by the revenues. The group has reported about Rs 391.53 crore revenues in fiscal 2021 and about Rs 581.68 crore in fiscal 2022. This improvement is driven by better realizations and supported by growth in the volumes. Going forward, though we expect the realizations to witness a correction, the volume growth will continue to support the group’s improved operations.
Weaknesses:
The metal pipes and structures industry is highly fragmented because of low capital and technology requirements. While the MNS group is one of the leading players in the organized segment, it remains exposed to intense competition from small players in the unorganized segment. This limits its bargaining power with customers, as reflected in the moderate operating margins of 4-6% over the three fiscals through March 2022.
The net worth was healthy at Rs 50.39 crores as on March 31, 2022. However, the group relies on bank borrowing to support its working capital requirement and subsequently its capital structure is average marked by gearing of 2.89 times, as on March 31, 2022. Debt protection metrics are average, marked by an interest coverage of around 2.67 times and net cash accruals to total debt ratio of around 0.10 times for fiscal 2022. |
Liquidity: Adequate Bank limit utilisation is high at around 91.73 percent for the past twelve months ended April 2022. Cash accruals are expected to be over Rs 11-16 crore which are sufficient against term debt obligation of Rs 3-4 crore over the medium term. In addition, it will act as cushion to the liquidity of the company. Current ratio is moderate at 1.23 times on March 31, 2022. |
Outlook Positive CRISIL Ratings believes the MNS group will continue to benefit from its large customer base and the extensive industry experience of its promoters. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Group MKK was founded by Mr Mahesh Kumar Khandelwal, as a proprietorship firm in 2000 and reconstituted as a private limited company in 2009. MKK, based in Chennai, manufactures specialised metal pipes and tubes, structures, and spring wires. The promoter set up MNS as a proprietorship firm in the 1980s. The firm was reconstituted as a private limited company in 2000. The Chennai-based company trades in metal pipes and tubes. |
Key Financial Indicators
*Provisional data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
* - Issuer did not cooperate; based on best-available information
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
|
This Annexure has been updated on 04-Jul-2022 in line with the lender-wise facility details as on 04-Jul-2022 received from the rated entity.
Criteria Details
|