Rating Rationale
July 29, 2024 | Mumbai
Ram Ratna International
Rating reaffirmed at 'CRISIL A2'
 
Rating Action
Total Bank Loan Facilities RatedRs.30 Crore
Short Term RatingCRISIL A2 (Reaffirmed)
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 reaffirmed its ‘CRISIL A2’ rating on the short-term bank facilities of Ram Ratna International (RRI).

 

The rating continues to reflect the extensive experience of the partners in the copper wires and cables industry, the strong position of the firm as the marketing arm of the Ram Ratna group for exports and its prudent risk management practices. These strengths are partially offset by exposure to supplier concentration risk, and vulnerability to large capital withdrawal, given the partnership nature of the firm.

 

Revenue grew by 15% to Rs 479 crore in fiscal 2024 from Rs 418 crore in fiscal 2023 owing to growth across key product segments, such as cables, copper strips/bus bars, and chemicals. This growth was led by volume growth of around 9% and increase in realisation. In the first quarter of fiscal 2025, revenue declined by around 18% to Rs 100 crore (Rs 122 crore in the corresponding period of the previous fiscal) owing to supply constraints for copper, which is a key underlying commodity. The supply issues are expected to ease out during the year and demand for key products will likely remain robust over the near-to-medium term.

 

Operating margin improved marginally to 11.1% in fiscal 2024 from 10.8% in fiscal 2023 owing to relatively stable raw material prices and higher operating leverage. With the firm expected to increase the revenue share of high-margin products, the operating margin is expected to sustain at similar level over the near-to-medium term.

 

The rating also factors in the healthy financial risk profile maintained over the past few fiscals, driven by healthy profitability coupled with limited dependence on debt, and limited capital withdrawal. Liquidity was adequate with unencumbered cash and equivalent and investment of around Rs 21 crore as on March 31, 2024 (Rs 39 crore a year earlier), aided by absence of debt and negligible bank limit utilisation.

Analytical Approach

For arriving at its rating, CRISIL Ratings has considered the standalone credit risk profile of RRI.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the partners: The partners, members of the Kabra family, have experience in trading of more than four decades in the low-voltage electric cables and house wires business through RR Kabel Ltd. They have been engaged in trading of copper busbars and rods through MEW Electricals Ltd (‘CRISIL BBB-/Stable/CRISIL A3’) and enameled copper winding wires through Ram Ratna Wires Ltd.

 

  • Prudent risk management practices: The firm continues to follow prudent risk management practices. Order-backed trading ensures a low inventory holding period (15 days as on March 31, 2024, and 12 days as on March 31, 2023, including goods-in-transit). The firm uses its pre-shipment and post-shipment credit lines in foreign currency and thus enjoys a natural hedge. It also enters into plain forward contracts to ensure that bulk of the foreign exchange exposure is hedged.

 

  • Healthy financial risk profile: The financial risk profile was healthy supported by nil debt and moderate networth of Rs 119 crore as on March 31, 2024. Given the firm was debt-free as on March 31, 2024, gearing and debt protection metrics were strong. While the firm has given an undertaking to maintain capital of Rs 12 crore, it maintains a higher amount. Any major capital withdrawal, which could weaken the capital structure, will remain a key monitorable.

 

Weaknesses:

  • Exposure to supplier concentration risk: RRI acts as an export unit for marketing and selling products of the Ram Ratna group in overseas markets. As bulk of the products are sourced from group entities, supplier concentration risk remains high. Also, value addition is limited, with operations restricted to trading of copper-based products, electrical accessories and chemicals.

 

  • Modest networth, susceptible to capital withdrawal by partners: Networth was modest levels of Rs 119 crore as on March 31, 2024. Limited capital withdrawal over the past three fiscals has helped in shoring up networth. However, the firm remains exposed to the risk of substantial withdrawal of capital by the partners.

Liquidity: Adequate

Adequate liquidity supported by a cash surplus of ~Rs 21 crore as on March 31, 2024, and unutilized bank limits of 30 crores. Further, firm was debt free as on March 31, 2024, and dependence on external debt is expected to remain minimal over near to medium term as well. Available bank limit should also help in meeting the incremental working capital expenses if needed.

Rating Sensitivity factors

Upward factors:

  • Significant increase in scale of operations while maintaining operating margins above 11%-12% on a sustained basis leading to improved cash accruals
  • Sustenance of stable financial risk profile

 

Downward factors:

  • Weaker-than-expected operating performance, driven by low demand, leading to moderation in the business risk profile
  • Fall in operating margin below 8% on a sustained basis
  • Any large capital withdrawal by partners, or any unanticipated increase in debt, amidst stretch in the working capital cycle, straining the capital structure and liquidity

About the firm

RRI was set up in 1991 as a partnership by members of the Kabra family. The Mumbai-based firm exports copper-based products (key revenue contributor) of the Ram Ratna group. It also trades in chemicals and electrical accessories procured from outside the group.

Key Financial Indicators

As on/for the period ended March 31

Unit

2024 (Prov)

2023 (Audited)

Revenue

Rs.Crore

479

418

Profit After Tax (PAT)

Rs.Crore

33

28

PAT Margin

%

7.0

6.8

Adjusted debt/adjusted networth

Times

0.00

0.06

Adjusted interest coverage

Times

665.63

54.56

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Bill purchase-discounting facility NA NA NA 20 NA CRISIL A2
NA Packing credit NA NA NA 10 NA CRISIL A2
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST 30.0 CRISIL A2   -- 31-05-23 CRISIL A2 28-03-22 CRISIL A3+   -- CRISIL A3+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bill Purchase-Discounting Facility 10 ICICI Bank Limited CRISIL A2
Bill Purchase-Discounting Facility 10 HDFC Bank Limited CRISIL A2
Packing Credit 5 ICICI Bank Limited CRISIL A2
Packing Credit 5 HDFC Bank Limited CRISIL A2
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
CRISILs Criteria for rating short term debt

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