| Shamli Steels Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB-/Stable/CRISIL A3' | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale CRISIL Ratings has reaffirmed its 'CRISIL BBB-/Stable/CRISIL A3’ ratings on the bank loan facilities of Shamli Steels Private Limited (SSPL).
The ratings continue to reflect the extensive experience of the promoters in the steel industry and healthy revenue growth of around 33% in fiscal 2022 to Rs 341 crore, as compared to Rs 256 crore in fiscal 2021. Growth in revenue is backed by the company’s collaboration with SRMB Steels Pvt Ltd for manufacturing under the SRMB brand and introduction of its in-house brand, Stellar Gold, in fiscal 2022. These strengths are partially offset by exposure to risks related to cyclicality in the steel sector and low operating margin in the competitive steel long products segment. The company has efficiently maintained its working capital cycle, as reflected in improved gross current assets (GCAs) to 100 days in fiscal 2022, as compared to 117 days in fiscal 2021. However, profitability margins remain subdued at 2.24% in fiscal 2022 due to high volatility in input material cost and undifferentiated and commoditised nature of the product which limits the company’s ability to pass on increase in raw material prices to the end customer. Revenue is expected to improve 15% in fiscal 2023 with profitability margin expected at 2.85% over the medium term. |
Analytical approach Unsecured loans of Rs 4.30 crore (as on March 31, 2022) extended by the promoters have been treated as 75% equity and the rest as debt, as these are interest-free and are likely to be retained in the business over the medium term. |
Key rating drivers and detailed description Strengths:
Weaknesses:
|
Liquidity: Adequate Bank limit utilisation has been comfortable at 83% on average in the 16 months till June 2022. The company is estimated to generate healthy cash accrual of Rs 7.17 crore in fiscal 2023 with increasing scale of business and stable profitability. The debt obligation is estimated to remain at Rs 5.5 crore, thus providing a comfortable liquidity cushion of Rs 1.7 crore over the medium term.
The promoters have provided support in the form of capital and unsecured loans of Rs 4.3 crore as on March 31, 2022. These loans are non-interest bearing and are expected to be retained in the business. The company had unencumbered cash and cash equivalent of Rs 5.2 crore as on March 31, 2022. Current ratio continues to remain comfortable at 1.36 times as on March 31, 2022. |
Outlook: Stable SSPL should continue to benefit from the extensive experience of its promoters. |
Rating sensitivity factors Upward factors
Downward factors
|
About the Company Incorporated in 1999 and promoted by members of the Jain and Bansal families, SSPL manufactures rolled products, primarily TMT bars, but also angels, channels, ingots, flats, rounds and squares. SSPL's products are certified under the International Organisation for Standardisation (ISO) 14001/9001. |
Key financial indicators
|
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Status of non cooperation with previous CRA: SSPL has not cooperated with ICRA Ltd, which has classified it as issuer not cooperative through its release dated November 09, 2017. The reason provided by ICRA Ltd is non-furnishing of information for monitoring of ratings.
Any other information: Not Applicable
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
* - Issuer did not cooperate; based on best-available information
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
|
Criteria Details
|