| Sunflag Iron and Steel Company Limited | ||||||
| 'Crisil AA- / Stable / Crisil A1+ ' assigned to Bank Debt and Corporate Credit Rating | ||||||
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| 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 assigned its ‘Crisil AA-/Stable/Crisil A1+’ ratings to the bank facilities and corporate credit rating of Sunflag Iron and Steel Company Limited (SISCL).
The rating reflects SISCL’s strong market position in the steel industry, extensive industry experience of the promoters, integrated operations, diversified customer profile and strong financial risk profile. These strengths are partially offset by its working capital-intensive operations and susceptibility to changes in steel prices, and exposure to cyclicality in end user industry. |
Analytical Approach For arriving at its ratings, Crisil Ratings has consolidated the business and financial risk profiles of SISCL, its subsidiaries that are strategically important to and have a significant degree of operational integration with SISCL.
Unsecured loans from promoters of Rs 18 crores as on 31st March, 2025 has been treated as neither debt nor equity since it is expected to remain in the business over the medium term.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers - Strengths Strong market position in steel industry and extensive experience of the promoters: SISCL has long track record of operations spanning over four decades in the steel industry. The company’s promoters, supported by a well-qualified & experienced management team, have enabled SISCL to navigate various business cycles and establish itself in the special alloy steel industry. SISCL manufactures a wide range of steel grades conforming to various national and international specifications and customer-specific requirements. These products are available in various profiles, shapes, and sizes, such as round bars, coils, rolled bars, and wires, and have applications in the manufacturing of automotive transmission gears, drive shafts, steering systems, bearings, exhaust systems, and engine components.
Diversified customer profile: SISCL primarily supplies high grade steel components to tier-I auto ancillaries and original equipment manufacturers (OEMs). The company derieves around 60-65% of the revenues from the automotive industry while remaining is contributed by non-auto-sectors like defense, railways and heavy engineering goods. The top 10 customers accounted for around 35% of revenues in fiscal 2025. This has aided revenue growth over the years, with operating income rising to Rs.3536 crore in fiscal 2025 from Rs.1895 crore in fiscal 2021. Revenue growth should sustain over the medium term, driven by improved demand.
Integrated operations: SISCL has integrated operations with backward integration into manufacturing of pig iron, sponge iron and billets, along with captive power and mines for raw materials. The company’s facility is in Bhandara; Maharashtra which is strategically located with access to both raw material and customers. The integrated nature of SISCL’s operations and tie-up for raw material, supports its operating margin, which has ranged between 10-14%, and is expected to remain around 11-12% over medium term.
Strong financial risk profile: The financial risk profile is supported by strong adjusted networth of Rs 2871 crores (post adjustment of mark to market gains associated with investments in Lloyds Metals and Energy Ltd), gearing ratio of 0.19 time and total outside liabilities to adjusted networth (TOLANW) ratio of 0.51 time, as on March 31, 2025. Debt protection metrics were adequate with interest coverage and net cash accrual to adjusted debt (NCAAD) ratios of 4.5 times and 0.48 times, respectively, in fiscal 2025. While the company has capital expenditure plans for its mining and manufacturing capacities, the same will be judiciously funded through debt, keeping the financial profile strong. |
Key Rating Drivers - Weaknesses Working capital intensive operations: SISCL's operations are working capital intensive with gross current assets ranging from 134-156 days over the three fiscals ended 2025. This is primarily driven by sizeable inventory of 100-108 days, while debtors are moderate at 35-37 days. Inventory, though order backed, remains large due to various products and raw material stock. With increasing revenues, management of working capital cycle will remain monitorable.
Susceptibility to steel prices and to cyclicality in end user industry: The operating margin has ranged between 11-12.8% during the three fiscals ended 2025 due to fluctuations in raw material and steel prices, as the industry is highly fragmented, leading to limited bargaining power of individual companies to drive prices. The margin is also vulnerable to regulatory changes, such as in duties and tariffs, which affect the final cost. The steel industry is vulnerable to downturns in demand, leading to decline in realisations and profitability. Moreover, majority of the revenue (about 60-65%) comes from the domestic auto industry which is cyclical in nature. |
Liquidity Strong Cash accrual is expected to be more than Rs 300 crore per annum against yearly debt obligation of Rs 120 crore annually, over the medium term. Bank limit utilisation was around 33% for the 12 months through July 2025. The unencumbered cash and cash equivalent stood at Rs 124 crore and current ratio at 1.49 times, as on March 31, 2025. The company owns 11% stake in Lloyds Metals and Energy Ltd, with market value of more than Rs. 7000 crores, that provides financial flexibility. Strong networth and low gearing offer financial flexibility to withstand adverse conditions or downturn in the business. |
Outlook Stable Crisil Ratings believes SISCL will continue to benefit from its established market position, integrated operations and strong financial risk profile. |
Rating sensitivity factors Upward factors
Downward factors
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About the Group Incorporated in 1984, SISCL is the flagship company of the Nagpur (Maharashtra) based Sunflag Group, promoted by. Late Mr. P B. Bharadwaj and Mr. Ravi Bhushan Bhardwaj. Operations are managed by Mr Pranav Bharadwaj, Managing Director.The company manufactures alloy steel and special steel products. SISCL has its manufacturing facility located at Bhandara (Maharashtra) with installed capacity of 5 Lakh MTPA for rolled products with backward integration into pig iron, sponge iron, billets and capitave power. It also operates coal mines for captive consumption. The company is listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). |
Key Financial Indicators Consolidated financials (Crisil Ratings-adjusted)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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