Rating Rationale
February 07, 2022 | Mumbai
Nitin Castings Limited
Ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.32.34 Crore
Long Term RatingCRISIL BBB-/Stable (Reaffirmed)
Short Term RatingCRISIL A3 (Reaffirmed)
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 on bank facilities of Nitin Castings Limited (NCL).

 

CRISIL Ratings continue to reflect NCL’s healthy financial risk profile, and extensive experience of promoters in the steel product manufacturing industry. These strengths are partially offset by the moderate business risk profile and volatility in raw material prices.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters in the steel manufacturing industry: The five-decade-long experience of promoters in the steel casting manufacturing industry, and their established relationships with customers from the cement, petrochemical, and steel industries, will continue to support the business risk profile. Also, significant part of revenue comes from the replacement market, with 75% of sales from repeat orders.

 

  • Healthy financial risk profile: Financial risk profile is marked by a moderate networth and low total outside liabilities to adjusted networth (TOLANW) ratio of Rs 50.29 crore and 0.33 time, respectively, as on March 31, 2021. Debt protection metrics are adequate, as indicated by interest coverage and net cash accrual to total debt ratios of 7.16 times and 1.50 time, respectively, for fiscal 2021.

 

Weaknesses:

  • Moderate business risk profile: The scale of operations continues to be moderate despite being in business since for a long time. Revenue for fiscal 2021 was at Rs 62.07 crore, (declined from Rs 64.31 crore in fiscal 2020) with demand impacted due to lockdown to curb the spread of COVID-19. Revenue is expected to remain moderate over the medium term. Also due to moderate scale of operations, accruals and return on capital employed (ROCE) were moderate at Rs. 5.47 crore and also at 10.79%, respectively, for fiscal 2021.

 

  • Susceptibility to changes in raw material prices: Operating margins are susceptible to the volatility in metal prices which forms the raw material for the company. The company can pass on rise in input cost to customers, only with a time lag. Operating margin was in the range of 9.9% - 10.9% for the three fiscals ending March 31, 2021.

Liquidity: Adequate

Bank limit utilisation is low at around 6.03% for the past twelve months ended November’ 2021. Cash accrual are expected to be over Rs 6 to 8 crores which are sufficient against term debt obligation of Rs.2.7 crores and Rs. 0.40 crores over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio are healthy at 2.59 times on March31, 2021. Unencumbered cash and bank balance of Rs. 44.12 lakhs and liquid investments of around Rs 15.49 crores in shares, debentures, and mutual funds as on March 31, 2021. Low gearing and moderate net worth support its financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business..

Outlook: Stable

CRISIL Ratings believes NCL will maintain its financial risk profile over the near-to-medium term, supported by strong capital structure, steady accretion to reserve and absence of any major capital expenditure (capex) plans.

Rating Sensitivity factors

Upwards Factors:

  • Sustained increase in revenue and sustenance of operating profit margin at above 9% results in higher net cash accruals
  • Stable capital structure and working capital cycle sustains financial risk profile

 

Downward Factors:

  • Significant decline in revenue with operating profit margins below 5%, leading to much lower net cash accrual
  • Any large advances made to group companies or stretch in working capital cycle or any large debt-funded capital expenditure or acquisition, weakening the capital structure, particularly liquidity.

About the Company

The Nitin group, promoted by the Kedia family, and currently headed by Mr. Nitin Kedia and Mr. Nirmal Kedia, manufactures alloy-steel products. It entered the castings business in 1962, through its flagship company, NCPL. NAGL was established in 1998, to expand capacity. The company merged the castings division of NCPL into NAGL and renamed NAGL as NCL in 2016.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

62.07

64.31

Reported profit after tax

Rs crore

3.25

0.97

PAT margins

%

5.25

2.06

Adjusted Debt/Adjusted Net worth

Times

0.07

0.16

Interest coverage

Times

6.62

4.52

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)

ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs crore) Complexity level Rating assigned with outlook
NA Cash Credit NA NA NA 4 NA CRISIL BBB-/Stable
NA Cash Credit & Working Capital Demand Loan NA NA NA 9.4 NA CRISIL BBB-/Stable
NA Letter of credit & Bank Guarantee NA NA NA 10.6 NA CRISIL A3
NA Term Loan NA NA Mar-2022 8.34 NA CRISIL BBB-/Stable
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 21.74 CRISIL BBB-/Stable   -- 29-01-21 CRISIL BBB-/Stable   -- 30-10-19 CRISIL BBB-/Stable CRISIL BBB-/Stable
Non-Fund Based Facilities ST 10.6 CRISIL A3   -- 29-01-21 CRISIL A3   -- 30-10-19 CRISIL A3 CRISIL A3
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 4 CRISIL BBB-/Stable
Cash Credit & Working Capital Demand Loan 9.4 CRISIL BBB-/Stable
Letter of credit & Bank Guarantee 5.6 CRISIL A3
Letter of credit & Bank Guarantee 5 CRISIL A3
Term Loan 3.47 CRISIL BBB-/Stable
Term Loan 4.87 CRISIL BBB-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Steel Industry
CRISILs Criteria for rating short term debt

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