| Rachna Metal Industries Private Limited | ||||
| Rating downgraded to 'Crisil BB+/Stable' | ||||
| Rating Action | ||||
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| 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 downgraded its rating on the long-term bank facilities of Rachna Metal Industries Private Limited (RMIPL) to ‘Crisil BB+/Stable’ from ‘Crisil BBB-/Stable’.
The downgrade reflects the continuous decline in the company’s operating profitability over the years leading to lower-than-expected net cash accrual. The operating margin declined from 3.9% in fiscal 2023 to 2.25% in fiscal 2024 and further to 1.7% in the first half of fiscal 2025 on account of intense competition in the market leading to aggressive pricing and company’s limited ability to pass on the price deviation to the customers entirely. The same resulted in lower-than-expected net cash accruals. Though the operating margins shall improve slightly, however are expected to remain in the range of 2.25-2.5% in the upcoming fiscals which is below Crisil’s expectations of 4-4.2%. Improvement in the operating margins amid sustained scale of operations will remain a key monitorable.
The rating continues to reflect the promoters’ extensive experience in the non-ferrous metals industry and company’s healthy financial risk profile. These strengths are partially offset by declining operating profitability. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of RMIPL. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: The promoters have experience of around three decades in trading and manufacturing copper and copper alloy products. Their strong understanding of the market dynamics and healthy relationships with suppliers and customers should continue to support the business. The clientele comprises reputed players such as Havells, Control and Switchgear and Blue Dart. The company recorded revenue of Rs 130 crore in the first half of fiscal 2025 and is expected to close the fiscal at Rs 270-280 crore, supported by volume growth, driven by demand in the end-user industries (such as home appliances, electrical components, switchgears). Sustained increase in the revenue backed by growth in volume will remain monitorable.
Healthy financial risk profile: The financial risk profile remains healthy supported by steady accretion to reserve, low reliance on external debt, and the absence of large, debt-funded capital expenditure (capex). Gearing is expected to be comfortable at 0.30-0.35 time and total outside liabilities to tangible networth ratio at 0.50-0.55 time in fiscals 2025 and 2026. Debt protection metrics are also expected to remain healthy, with interest coverage ratio of 4.5-5.5 times and net cash accrual to adjusted debt ratio of 0.25-0.35 time over the medium term. The financial risk profile is expected to remain comfortable with accretion to reserve and no plans for any major debt funded capex.
Weaknesses: Declining operating profitability: The company’s operating margin has declined over the three years through fiscal 2024. The operating margin declined to 2.25% in fiscal 2024 from 4.9% in fiscal 2023 and to around 1.7% in the first half of fiscal 2025. This was on account of increasing competition, which led to aggressive pricing. While the profitability is susceptible to volatility in raw material prices because of the commodity nature of business, the company’s margin is insulated to some extent as the inventory is against orders, but needs to be monitored. The margins are expected in the range of 2.25-2.5% for fiscal 2025 and 2026. Any further decline in the profitability leading to significantly low net cash over the medium-term accrual will remain monitorable. |
Liquidity: Stretched Bank limit utilisation averaged 37% for the 12 months through September 2024. In the absence of any term loan obligation, the entire cash accrual — projected at Rs 4-5 crore per annum — will aid financial flexibility. Current ratio is expected to be healthy at 2.8-3.0 times as on March 31, 2025. Low gearing and moderate networth give the required financial flexibility and support liquidity. |
Outlook: Stable RMIPL will continue to benefit from the extensive experience of the promoters in the non-ferrous metals industry. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company RMIPL was incorporated in 1992 by the late Mr Mahesh Agarwal and Ms Sadhna Agarwal. The company manufactures copper and copper alloy products such as sheets, tubes and pipes at its facility in Sahibabad, Uttar Pradesh. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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Criteria Details
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