| Mohit Ispat Private Limited | ||||||
| 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 reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings to the bank facilities of Mohit Ispat Private Limited (MIPL).
CRISIL Ratings had assigned its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings to the bank facilities of MIPL through its rationale dated August 30, 2022.
The ratings reflect the extensive experience of the promoters in the steel industry, company’s moderate scale of operations and comfortable financial risk profile. These strengths are partially offset by susceptibility to volatility in steel prices and exposure to intense competition and cyclicality in the steel industry. |
Analytical Approach Unsecured loans of Rs. 20.30 crore as on March 31, 2022 have been treated as 75% equity and 25% debt as the same are subordinated to bank debt and are to remain in business over medium term. |
Key Rating Drivers & Detailed Description Strengths: Extensive industry experience of the promoters: The promoters have experience of over two decades in the steel products industry. This has given them a strong understanding of the market dynamics and enabled them to establish healthy relationships with suppliers and customers. The group has semi-integrated operations with capacity for manufacturing billets and thermo mechanically treated (TMT) bars, supporting the business profile.
Comfortable financial risk profile: Gearing and total outside liabilities to adjusted networth ratio has remained comfortable at 0.59 time and 1.54 times, respectively, as on March 31, 2022, on account of efficient working capital management, funding support from the promoters and healthy networth of Rs. 59.88 crore as on March 31, 2022. Despite moderate debt-funded capital expenditure (capex) over the medium term, the capital structure will remain comfortable with gearing below 1 time. Interest coverage ratio was around 4.88 times for fiscal 2022 and is expected to remain at similar level over the medium term.
Moderate scale of operations: The group had revenue of Rs 376-536 crore over the three fiscals through 2022. The revenue has been increasing, aided by higher capacity utilisation and higher realisations. The revenue is expected to remain healthy over the medium term as well, aided by stable demand for the products.
Weaknesses: Exposure to volatility in steel prices: Profitability remains susceptible to fluctuations in raw material prices and changes in government regulations. The key input materials are sponge iron and iron ore, prices of which have been volatile over the past few years. Any adverse movement in input prices can impact the profitability of the group.
Exposure to intense competition and cyclicality in the steel industry: The steel industry, especially long steel products, is highly fragmented, leading to high competition. Furthermore, since demand for steel is closely linked to economic activity, players are susceptible to cyclicality in demand and fluctuations in realisations, as reflected in revenue that has fluctuated over the past three years. |
Liquidity: Adequate The bank limits are moderately utilised at 57% on average for the 12 months through July 2022. The net cash accrual is expected to be Rs 17-19 crore, which should be sufficient against term debt obligation of Rs 2.5-3 crore over the medium term. The promoters’ support is available in the form of unsecured loans which cushions liquidity. Current ratio was adequate at 1.32 times as on March 31, 2022. Any large capex or acquisition may impinge liquidity. |
Outlook: Stable CRISIL Ratings believes the MIPL will continue to benefit from its promoters’ extensive industry experience and steady industry demand. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Incorporated in 1998 the company is engaged in manufacturing of manufacturing of Thermo-Mechanically-Treated (TMT) bars and was established by Mr. Harshvardhan Mittal. The company had purchased once closed unit during year 2005 which had the license for establishing a rolling mill. Later on in year 2009, large capacity rolling mill was established for manufacturing of TMT Bars along with manufacturing capacity of MS Billets and MS Ingots, established in 2017, which are currently captively used.
Currently it has a capacity of 150,000 TPA wherein they are licensed to use 120,000 TPA. The company operates under a franchisee model wherein they sell under the brand name of Kamdhenu. This helps the company in selling at a decent brand presence. |
Key Financial Indicators
*Provisional |
Status of noncooperation with previous CRA MIPL has not cooperated with CARE Ratings which classified it as not-cooperative vide a release dated March 24, 2020. MIPL has also not cooperated with ICRA Limited which classified it as not-cooperative vide a release dated September 28, 2018. The reason provided by both is non-furnishing of information for monitoring the rating. |
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. 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)
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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 Bank Lenders & Facilities | ||||||||||||||||||||||||
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This Annexure has been updated on 09-Sep-2022 in line with the lender-wise facility details as on 30-Aug-2022 received from the rated entity.
Criteria Details
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