| Aditya Ultra Steel Limited | ||||
| Rating migrated to 'CRISIL BBB- / Stable' | ||||
| Rating Action | ||||
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| & *Issuer did not cooperate; based on best-available information | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Due to inadequate information, CRISIL Ratings, in line with SEBI guidelines, had migrated the rating of Aditya Ultra Steel Ltd (AUSL) to 'CRISIL BB+/Stable Issuer Not Cooperating'. However, the management has subsequently started sharing requisite information, necessary for carrying out comprehensive review of the rating. Consequently, CRISIL is migrating the rating on bank facilities of AUSL from ‘CRISIL BB+/Stable Issuer Not Cooperating’ to ‘CRISIL BBB-/Stable’.
The ratings reflect the extensive experience of the promoters along with benefits derived by AUSL from association with established brand, Kamdhenu, moderate financial profile and an efficient working capital cycle. These strengths are partially offset by the exposure to volatility in raw material prices, and dependence on principal. |
Key Rating Drivers & Detailed Description Strengths:
The promoters have more than three decades of experience, through group entities engaged in ship breaking activity. Since takeover of AUSL’s operations in fiscal 2017, its scale has significantly increased, backed by industry acumen of the promoters and continuous focus on improving efficiency of the manufacturing facility.
The company sells its products under the brand, Kamdhenu, which is an estabilished domestic brand in TMT. Benefits from well-established dealer network and marketing support provided by Kamdhenu helped in establishing its presence in Tier-3 cities of Gujarat. The company is the sole supplier of Kamdhenu thermo-mechanically treated (TMT) bars in Ahmedabad.
AUSL had a moderate net worth of Rs 20 crore and gearing of 1.84 times as on March 31, 2021. Debt protection metrics were adequate with an interest coverage ratio of 3.5 times and adjusted debt to networth ratio of 0.15 times in fiscal 2021.
Weaknesses
Since cost of procuring the major raw material (ingots) accounts for 75-80% of total production cost, even a slight variation in rates may drastically impact profitability. The risk is pronounced as the company has modest operating margin of 2-3% only.
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Liquidity: Adequate AUSL has adequate liquidity marked by moderate cash accruals against repayment obligations, efficient working capital management though high limit utilization. The company is expected to generate annual cash accruals of Rs. 5-6 cr against its repayment of around Rs. 3.5 cr in fiscal 2022 and Rs. 2 cr in subsequent years. AUSL continues to well manage its working capital cycle however owing to significant rise in metal prices, its working capital requirements have increased with average bank limit utilization being 92 % (off the sanctioned Rs. 27 cr limit) through 12 months to August 2021. The company has just got its working limits enhanced by Rs. 10 cr which shall ensure adequate liquidity for company. AUSL’s current ratio and financial flexibility remains moderate. |
Outlook Stable CRISIL Ratings believes AUSL will continue to benefit from the extensive experience of the promoters and an established presence through Kamdhenu. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company AUSL, incorporated in 2011, has a TMT re-rolling mill in Rajkot (Gujarat). Mr Manoj Jain and his son, Mr Varun Jain, are the current promoters; they took over operations in fiscal 2017. |
Key Financial Indicators
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| 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. | |||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||
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Criteria Details
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