January 16, 2014
Mumbai
Rashmi Metaliks Limited
 
Ratings upgraded to 'CRISIL BBB/Stable/CRISIL A3+'
 
Total Bank Loan Facilities Rated Rs.5309 Million (Reduced from Rs.6300 Million)
Long Term Rating CRISIL BBB/Stable (Upgraded from 'CRISIL BBB-/Stable')
Short Term Rating CRISIL A3+ (Upgraded from 'CRISIL A3')
(Refer to Annexure 1 for Facility-wise details)

CRISIL has upgraded its rating on the bank facilities of Rashmi Metaliks Ltd (RML; part of the Rashmi group) to 'CRISIL BBB/Stable/CRISIL A3+' from 'CRISIL BBB-/Stable/CRISIL A3'.

The rating upgrade reflects an improvement in the Rashmi group's business risk profile, following the stabilization of its operations at its recently enhanced capacities resulting in higher-than-expected operating performance. As a result the group's operating margin improved to around 13 per cent in 2012-13 (refers to financial year, April 1 to March 31), from around 11 per cent in 2011-12. Over the past few years, the Rashmi group has continuously undertaken capital expenditure (capex) programme to add on additional manufacturing capacities which support its strong business risk profile.

The rating upgrade also reflects an improvement in the Rashmi group's financial risk profile, with the promoters' continual equity infusions to support the capex programme, and incremental working capital requirements. Over the past three years, the promoters have infused substantial equity in both the companies; hence, the group sustained its healthy gearing of around 0.33 times as on March 31, 2013.

The ratings reflect the Rashmi group's well-integrated operations, and strong operating efficiencies, on the back of its diversified manufacturing set up. Moreover, the group has a comfortable financial risk profile. These rating strengths are partially offset by the Rashmi group's exposure to cyclical demand in the iron and steel industries; and to risks related to volatility in raw material and finished goods prices, and foreign exchange rates. Furthermore, the rating continues to factor in risks related to the final outcome in the ongoing dispute between RML and the South-Eastern Railways. CRISIL believes that any outcome with respect to the dispute will remain a key rating sensitivity factor over the medium term.

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of RML and Rashmi Cement Limited (RCL). This is because both companies together referred to as the Rashmi group operate in the same line of business, have significant operating and financial linkages, and a common management team.

Outlook: Stable
CRISIL believes that the Rashmi group will continue to benefit over the medium term from its diversified and integrated operational set up, and robust financial risk profile. The outlook may be revised to 'Positive' if the group generates strong cash accruals thereby sustaining the improvement in its financial risk profile and working capital management. Conversely, the outlook may be revised to 'Negative' if the Rashmi group's financial risk profile weakens due to sizeable capex programme; or its profitability deteriorates leading to a decline in liquidity. Any adverse development in the group's ongoing dispute with the South Eastern Railways will also result in a 'Negative' outlook revision.
About the Group

RCL was incorporated in 1991. The company manufactures cement, sponge iron, power, and ferroalloys. RCL has manufacturing units in Jhargram (West Bengal).
 
In 2004, the Rashmi group expanded its operations and established RML, which manufactures pig iron, sponge iron, sinter, billets and power. The company has added capacities for ductile iron pipes and thermo-mechanically treated bars over the past few years. In 2012, RML established a pelletisation unit, the first of its kind, in West Bengal.

The Rashmi group has a diversified business risk profile, comprising production and sale of iron, steel, power, and cement

Annexure 1 - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Million) Rating Facility Amount (Rs.Million) Rating
Bank Guarantee 400 CRISIL A3+ Bank Guarantee 600 CRISIL A3
Buyer Credit Limit 429 CRISIL BBB/Stable Cash Credit 2432.5 CRISIL BBB-/Stable
Cash Credit* 1460 CRISIL BBB/Stable External Commercial Borrowings 1035.7 CRISIL BBB-/Stable
Letter of Credit^ 820 CRISIL A3+ Letter of Credit 1370 CRISIL A3
Proposed Bank Guarantee 200 CRISIL BBB/Stable Proposed Cash Credit Limit 67.5 CRISIL BBB-/Stable
Proposed Letter of Credit 400 CRISIL A3+ Proposed Letter of Credit 281.8 CRISIL A3
Proposed Long Term Bank Loan Facility 500 CRISIL BBB/Stable Proposed Long Term Bank Loan Facility 62.6 CRISIL BBB-/Stable
Term Loan 1100 CRISIL BBB/Stable Term Loan 449.9 CRISIL BBB-/Stable
Total 5309 -- Total 6300 --
* Out of Rs. 650 Million - Sub-Limit of Rs. 150 Million of Bill Discounting and Inland/Import Letter of Credit; Sub-Limit of Rs. 210 Million of Export Packing Credit; 100% One way Interchangeability to Letter of Credit
Out of Rs. 100 Million - Sub-Limit of Rs. 100 Million of Foreign Bill Discounting and Packing Credit Limit
Out of Rs. 300 Million - Sub-Limit of Rs. 150 Million of Export Packing Credit; Letter of Credit and Bill Discounting; 100% One way Interchangeability to Letter of Credit
Out of Rs. 100 Million - Sub-Limit of Rs. 100 Million of Bill Discounting; Letter of Credit and Inland/Import Letter of Credit
Out of Rs. 110 Million - Sub-Limit of Rs. 110 Million of Bill Discounting; Letter of Credit and Inland/Import Letter of Credit
^ Out of Rs. 520 Million - Sub-Limit of Rs. 150 Million of Letter of Comfort/Letter of Undertaking
Out of Rs. 200 Million - Sub-Limit of Rs. 200 Million of Bank Guarantee
Out of Rs. 100 Million - Sub-Limit of Rs. 100 Million of Bank Guarantee
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January 16, 2014

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