Rating Rationale
July 28, 2017 | Mumbai
Real Ispat and Power Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.91.7 Crore (Enhanced from Rs.76.7 Crore)
Long Term Rating CRISIL A-/Positive (Reaffirmed)
Short Term Rating CRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL's rating on the bank facilities of Real Ispat and Power Limited (RIPL; part of the Real group) continues to reflect a strong financial risk profile because of a robust networth, a comfortable capital structure, and healthy debt protection metrics. The ratings also factor in an established market position in the secondary steel industry backed by integrated operations and a strong clientele. These strengths are partially offset by susceptibility of the operating margin to fluctuations in raw material prices, changes in government regulations, and cyclicality in the steel industry

In July 2017, CRISIL had revised its rating outlook on the long-term bank facilities of RIPL to 'Positive' from 'Stable', and reaffirmed the rating at 'CRISIL A-'; the short-term facilities have been reaffirmed at 'CRISIL A2+'.

The outlook revision reflects CRISIL's expectation of an improvement in the group's credit risk profile over the medium term. Improvement in the business risk profile will be driven by healthy revenue growth and better operating profitability following stabilisation of operations at the enhanced capacities, while benefits from high level of integration and an established market position will continue. That's expected to lead to an increase in net cash accrual to above Rs 80 crore per fiscal. This, along with controlled working capital debt and absence of major capital expenditure (capex) plans should strengthen the financial risk profile and liquidity.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of RIPL and its wholly-owned subsidiaries, Shivalay Ispat and Power Pvt Ltd (SIPPL), Real Power Pvt Ltd (RPPL), and API Ispat and Powertech Pvt Ltd (API). That's because all these companies, together referred to as the Real group, share a common management and have significant financial linkages. Moreover, they have significant operational synergies as they are in the same business.

Key Rating Drivers & Detailed Description
* Established market position in the secondary steel industry:
The Real group has established market position reflected in its revenue of Rs 856 crore for fiscal 2017. The market position in backed by promoters' extensive experience in secondary steel industry, integrated facilities and healthy relations with customers and suppliers, and a robust distribution network.

* Strong financial risk profile: The networth was robust at Rs 274.8 crore and the gearing low at 0.63 time, as on March 31, 2017. The debt protection metrics are healthy too, with interest coverage ratio of 6.2 times and net cash accrual to total debt ratio of 46% for fiscal 2017.


* Susceptibility of the operating margin to fluctuations in raw material prices, changes in government regulations, and cyclicality in the steel industry: Profitability remains susceptible to fluctuations in raw material prices and changes in government regulations. Exposure to cyclicality and intense competition in the steel industry will also continue.
Outlook: Positive

CRISIL believes the Real group will continue to benefit from its established market position and strong financial risk profile. The ratings may be upgraded if considerable increase in revenue, sustenance of healthy profitability, and efficient working capital management strengthen the business risk profile. The outlook may be revised to 'Stable' if lower-than-expected revenue or profitability, a stretch in the working capital cycle, or large, debt funded capex weakens the financial risk profile.

About the Group

The Real group is a Raipur-based integrated steel producer, promoted by Mr Rajesh Agrawal, Mr Umesh Agrawal, and Mr Ramesh Agrawal. It has sponge iron plants, induction furnaces, automatic hot rolling mills, a wire-drawing unit, and power plants.

RIPL, the group's flagship company, was incorporated in 1999 as Real Ispat Pvt Ltd. It was reconstituted as a limited company with the current name in 2005. Its final products, thermo-mechanically treated (TMT) bars, wire rods, and steel wires, are sold under the GK TMT brand.

SIPPL was incorporated in 2004, promoted by the Kedia family of Raipur. Subsequently, in August 2011, the company was acquired by the Real group, and it became wholly-owned subsidiary of RIPL. The company manufactures sponge iron and generates power.

The group's profit after tax (PAT) was Rs 59.67 crore on an operating income of Rs 856.38 crore, on a provisional basis, for fiscal 2017, against Rs 34.87 crore and Rs 739.12 crore, respectively, in fiscal 2016.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 Cr) Rating outstanding with Outlook
NA Bank Guarantee NA NA NA 1 CRISIL A2+
NA Cash Credit NA NA NA 50 CRISIL A-/Positive
NA Foreign Exchange Facility NA NA NA 0.7 CRISIL A2+
NA Letter of Credit NA NA NA 25 CRISIL A2+
NA Term Loan NA NA 01-Oct-2021 15 CRISIL A-/Positive
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  65.7  CRISIL A-/Positive/ CRISIL A2+  07-07-17  CRISIL A-/Positive/ CRISIL A2+    No Rating Change  08-09-15  CRISIL A-/Stable/ CRISIL A2+    --  -- 
Non Fund-based Bank Facilities  LT/ST  26  CRISIL A2+    No Rating Change    No Rating Change  08-09-15  CRISIL A2+    --  -- 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 1 CRISIL A2+ Bank Guarantee 1 CRISIL A2+
Cash Credit 50 CRISIL A-/Positive Cash Credit 50 CRISIL A-/Positive
Foreign Exchange Facility .7 CRISIL A2+ Foreign Exchange Facility .7 CRISIL A2+
Letter of Credit 25 CRISIL A2+ Letter of Credit 25 CRISIL A2+
Term Loan 15 CRISIL A-/Positive -- 0 --
Total 91.7 -- Total 76.7 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Steel Industry
CRISILs Criteria for Consolidation
Criteria for rating Short-Term Debt (including Commercial Paper)

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Tanuja Abhinandan
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000

Salim Yahoo
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3031

Jaya Mirpuri
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 20 4018 1926

Jagrut Khairnar
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 20 4018 1928
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a global, agile and innovative analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers.

We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view the Company’s Customer Privacy at https://www.spglobal.com/privacy

Last updated: April 2016


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL