| VSP Udyog Private Limited | ||||||
| Rating reaffirmed at 'CRISIL BBB-/Stable'; 'CRISIL A3 ' assigned to Bank Debt; rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB-/Stable’ rating to the bank facilities of VSP Udyog Private Limited (VSPL). CRISIL Ratings has assigned its ‘CRISIL A3’ rating to the short-term bank facilities.
on November 30, 2021, CRISIL Ratings had assigned its ‘CRISIL BBB-/Stable’ rating to the bank facilities of VSPL.
The ratings reflect the extensive experience of the promoters in the steel industry and the above-average financial risk profile of VSPL. These strengths are partially offset by the limited track record of operations and exposure to risks arising from intense competition, cyclicality in the steel industry and any slowdown in offtake from the end-user industries. |
Key Rating Drivers & Detailed Description Strengths:
The key promoter, Mr Amit Singh has spent over two decades in the iron and steel industry, and the track record of successfully running sick companies post takeover. These factors have helped VSPL maintain healthy relationships with customers and suppliers and ramp up operations profitably within a short span of time. Longstanding presence of the promoter will also help the company sustain industry down cycles.
Financial risk profile is marked by an expected networth of about Rs 89 crore by the end of fiscal 2022, backed by sizeable accretion to reserves and an equity infusion of Rs 5 crore. Debt protection metrics should also be moderately healthy with interest coverage and net cash accrual to total debt (NCATD) ratios of around 3 times and 0.20 time, respectively, for the current fiscal. Gearing will remain below one time over the medium term, and will supported by the absence of any large debt-funded capital expenditure (capex).
Weaknesses:
Post-acquisition of the company, the current management has operated the unit for only seven months. Hence, sustainability and efficiency traits are yet to be demonstrated over a longer tenure. However, with a buoyant industry scenario and longstanding presence of the promoters, VSPL has been able to scale up its operations profitably within a short span of time. With a further scale up of operations and sustenance of margin, working capital management and financial risk profile will be key monitorables.
Low entry barriers have attracted several small players in the domestic steel industry. Furthermore, with large, integrated players adding capacities, pricing power of secondary steel producers such as VSPL, in the billet and long product segment, may be restricted. |
Liquidity: Adequate Liquidity remains adequate, marked by sufficient cash accrual and low bank limit utilisation. Expected cash accrual of over Rs 17-20 crore should suffice to meet the term debt of Rs 4.4 crore over the medium term. Bank limit utilisation averaged around 23% over the few months ended October 31, 2021. |
Outlook: Stable CRISIL Ratings believes VSPL will continue to benefit from its established market position and extensive experience of the promoters in the steel industry. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company VSPL was promoted by Mr OM Prakash Agarwal in fiscal 2002. The company has annual capacity to manufacture 2,40,000 thermo mechanically treated bars and 92,400 billets. The erstwhile promoters could not run the facility successfully due to various reasons and the company became non-operational. Later, in October 2020, the current promoters, Mr Amit Kumar Singh and his brother, Mr Arvind Kumar Singh bought this entity as a distressed asset from a bank. The purchase consideration was Rs 52.86 crore and it was funded through a bank loan of Rs 30.74 crore and the rest was via contribution from promoters. After the whole takeover process was completed, the plant became operational from April 2021. VSP sells its products under the VSP brand. |
Key Financial Indicators
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Status of non cooperation with previous CRA: Credit Analysis and Research Ltd (CARE) has Withdrawn the rating of VSPL on 12th July 2021 after being marked Issuer Non-cooperative on 26th February 2021. The reason provided by CARE is non-furnishing of information for monitoring of ratings. |
Any other information: Not applicable |
| 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. |
Annexure - Details of Instrument(s)
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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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This Annexure has been updated on 01-Dec-2021 in line with the lender-wise facility details as on 30-Nov-2021 received from the rated entity.
Criteria Details
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