December 01, 2015
Mumbai
Ratnamani Metals and Tubes Limited
 
Rated amount enhanced
 
Total Bank Loan Facilities Rated Rs.8560 Million (Enhanced from Rs.8186.7 Million)
Long Term Rating CRISIL AA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
(Refer to Annexure 1 for Facility-wise details)

 CRISIL's ratings on the bank facilities of Ratnamani Metals and Tubes Limited (Ratnamani) continue to reflect Ratnamani's strong business risk profile, supported by market leadership in the stainless steel tubes and pipe (SSTP) segment and its diversified revenue base. The ratings also factor in the company's healthy financial risk profile marked by low gearing and robust debt protection metrics. These rating strengths are partially offset by Ratnamani's working capital-intensive operations and susceptibility of operating performance to slowdown in end-user industries.
 
For arriving at its ratings, CRISIL has consolidated the business and financial risk profiles of Ratnamani and its wholly owned subsidiary Ratnamani Inc. (based out of USA) because of strong operational and financial linkages between these entities.
 
Ratnamani's market position benefits from its diversified product profile of SSTP (welded and seamless pipes) and carbon steel pipes [longitudinal submerged arc welded (LSAW), helical submerged arc welded (HSAW), circumferential seam submerged arc welded (CSAW) and electric resistance welded (ERW)]. The company's products are used both within and outside India, in various end user industries, including power, oil and gas, chemicals, water, and refineries. Moreover, strong market share in the niche SSTP segment, customised nature of product and focus on high-margin business has enabled the company to maintain strong operating margins of around 18 to 20 per cent over the three years through 2014-15 (refers to financial year, April 1 to March 31). The company reported an order book position of Rs.14 billion as on September 30, 2015, providing adequate revenue visibility over the near to medium term.

Ratnamani's strong business risk profile is complemented by its healthy financial risk profile, marked by low gearing and robust debt protection metrics. The company's gearing was low at under 0.2 times, driven by strong networth of about Rs.9 billion as on March 31, 2015 and low debt. Moreover, the debt protection metrics were robust for 2014-15, with interest coverage and net cash accruals to total debt ratios at 28 times and 1.3 times, respectively. CRISIL believes the company's financial risk profile will remain healthy over the medium term driven by strong cash generation and low debt.

Demand for steel pipes & tubes is a function of fresh capital investment in key end-user sectors like oil & gas, water, power and refineries. Consequently, Ratnamani's operating performance is susceptible to slowdown in end-user industries. Moreover, the company's operations are working capital intensive in line with the industry. The company has initiated an expansion of its facility at Indrad (Gujarat) to enhance the SSTP capacity to 48,000 tonnes per annum (tpa) by 2017-18 from existing 28,000 tpa. The estimated cost of the project is around Rs.4 billion, which is expected to be entirely funded through internal accruals, thus alleviating the funding risk. However, the company will remain exposed to demand related risks in view of currently subdued offtake scenario from end-user industries.

Outlook: Stable

CRISIL believes Ratnamani will maintain its leadership position in the SSTP segment and benefit from a diversified business risk profile. The outlook may be revised to 'Positive' if Ratnamani continues to scale-up its operations without adversely affecting its profitability or financial risk profile. Conversely, the outlook may be revised to 'Negative' if a prolonged downturn in the industry leads to subdued operating performance, or the financial risk profile deteriorates owing increase in working capital requirements or a large debt-funded capital expenditure.

About the Company

Ratnamani, incorporated in 1983, manufactures a wide range of welded and seamless SSTP (installed capacity of 28,000 tpa) and carbon steel pipes (installed capacity of 340,000 tpa of LSAW, HSAW, CSAW and ERW). The company is promoted by Mr. Prakash Sanghvi, who is also the Chairman & Managing Director.

For 2014-15 (refers to financial year, April 1 to March 31), Ratnamani reported profit after tax (PAT) of Rs.1.73 billion on net sales of Rs.16.75 billion against PAT of Rs.1.42 billion on net sales of Rs.13.52 billion for the previous year. For the six months ended September 30, 2015, the company reported a PAT of Rs.822.9 million on net sales of Rs. 8.35 billion, as against a PAT of Rs. 876.9 million on net sales of Rs. 7.93 billion for the corresponding period of the previous year.

Annexure 1 - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Million) Rating Facility Amount (Rs.Million) Rating
Cash Credit* 675 CRISIL AA/Stable Cash Credit* 675 CRISIL AA/Stable
Letter of credit & Bank Guarantee# 7750 CRISIL A1+ Letter of credit & Bank Guarantee# 7376.7 CRISIL A1+
Term Loan 135 CRISIL AA/Stable Term Loan 135 CRISIL AA/Stable
Total 8560 -- Total 8186.7 --
*Interchangeable with export packing credit/ packing credit in foreign currency
# Interchangeable with buyer's credit/ supplier's credit.
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December 01, 2015

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