Rating Rationale
May 04, 2022 | Mumbai
Bansal Wire Industries Limited
Rating reaffirmed at 'CRISIL A / Stable'; rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.605 Crore (Enhanced from Rs.380 Crore)
Long Term RatingCRISIL A/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL A/Stable' rating on the long-term bank facilities of Bansal Wire Industries Ltd (BWIL; a part of the Bansal Wire group).

 

Business risk profile continues to be driven by the strong market position of the Bansal group as a prominent supplier of different steel wires to industries such as engineering and infrastructure, automobile components and household segment. Accordingly, an operating income growth of 20-25% is estimated in fiscal 2022 to over Rs 2800 crore supported by greater demand from engineering and infrastructure segment and higher sales realisation due to input price increase. Rising freight cost and steel prices should lower operating margin slightly. Though regular price alterations and revision of Freight on Board (FOB) arrangement will partly aid operating profitability in the last quarter of the fiscal, it will remain lower than the previous fiscal.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of BWIL, Balaji Wires Pvt Ltd (BWPL), Bansal High Carbons Pvt Ltd (BHCPL), Bansal Steel and Power Ltd (BSPL) and Bansal Aradhya Steel Power Ltd (BASPL). All the companies, collectively referred to as the Bansal Wire group, have the same promoter, Mr Arun Gupta, and a common management team; are in the same line of business; and have operational linkages and fungible cash flow. Mr Gupta controls the strategic functions, including procurement, marketing and capacity expansion, of all these group companies.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Established regional market position, supported by diversified product and customer portfolios:

The group is one of the largest players in North India and has a well-entrenched presence owing to large manufacturing capacities, established brand and longstanding relationship with customers. The clientele comprises over 500 customers, including traders and manufacturers across different industries such as engineering and infrastructure, automobile components and household segment. The product portfolio includes different varieties and sizes of galvanised iron (GI), mild steel (MS), high carbon (HC) and stainless steel (SS) wires. Further, with the addition of BASPL to the group, products such as tyre bead wire has also been added to the portfolio, which finds usage in the auto-component industry. Also, the three-decade experience of the promoter and his healthy relation with suppliers and customers should continue to boost the business.

 

Healthy financial risk profile:

Financial risk profile should remain healthy as indicated by healthy networth, estimated at over Rs 500 crore as on March 31, 2022 along with improving capital structure with gearing and total outside liabilities to tangible networth ratios of 1.3 and 1.4 times, respectively, as on March 31, 2022 (1.7 and 1.8 times, a year earlier). The same has been supported by healthy accretion to reserve and repayment of existing debt. Despite a debt-funded capex plan in the near term, capital structure is expected to improve due to healthy accretion to reserve. Debt protection metrics remain moderate due to the presence of sizeable debt leading to an estimated interest coverage ratio of 3.65 times in fiscal 2022.

 

Weaknesses

Susceptibility to steel prices and freight cost:

The operating margin and realisations are susceptible to volatility in steel prices and freight cost as reflected by an estimated slight dip in operating profitability in fiscal 2022 to 6.8-7.0% against 7.5% in fiscal 2021. However, the group has taken measures with respect to regular price alteration and revision of FOB arrangement with its customers to mitigate the risk of cost increase in the current fiscal. The impact is further mitigated by the group's presence in diverse product segments and steady addition in value-added products. Improvement and sustenance of profitability will remain a key rating sensitivity factor over the medium term.

Liquidity: Strong

Liquidity is strong supported by healthy cash accrual projected at over Rs 100 crore per annum over the medium term, sufficient to meet the yearly maturing debt of Rs 40-45 crore; the surplus cash will aid financial flexibility. Debt obligation is expected at Rs 45.6 crore for fiscal 2022 owing to increased repayment from the Covid-19 loans and the guaranteed emergency credit line availed by the group. Bank limit utilisation averaged a high 80% over the 12 months through February 2022. Further, liquidity remains supported by promoter-funding in the form of unsecured loans, which stood at Rs 78.36 crore as on December 31, 2021.

Outlook Stable

The Bansal Wire group will continue to benefit from the extensive experience of its promoter and his established relationship with clients.

Rating Sensitivity factors

Upward factors

  • Operating margin increasing by 200 basis points on-year, with improvement in the overall scale of operations, leading to cash accrual of more than Rs 150 crore
  • Improvement in the financial risk profile, particularly interest coverage ratio and capital structure

 

Downward factors

  • Deterioration of the debt protection metrics, particularly interest coverage dropping below 2 times
  • Steep decline in operating margin, resulting in lower-than-expected cash accrual
  • Sizeable increase in debt, thereby weakening the overall financial risk profile of the group

About the Group

BWIL, the flagship company of the Bansal group, was established in 1985 by Mr Arun Gupta; he also established the group's other three companies. The company manufactures SS and MS wires.

 

The promoter acquired M/s Garg Inox Ltd through the National Company Law Tribunal in March 2019 and subsequently renamed it as BSPL. It produces SS, HC, GI and cable armouring wires at its facility in Bahadurgarh, Haryana

 
BWPL, incorporated in 1988, manufactures galvanised MS wires.

 
BHCPL, established in 1997, makes HC and MS wires.

 

BASPL, established in 1971, manufacturers tyre bead wires

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

1477.40

1402.66

Reported profit after tax (PAT)

Rs crore

42.79

26.46

PAT margins

%

2.9

1.89

Adjusted debt/Adjusted networth

Times

2.04

2.00

Interest coverage

Times

4.02

3.00

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)

ISIN

Name of instrument

Date of allotment

Coupon
rate (%)

Maturity date

Issue size
(Rs crore)

Complexity levels

Rating assigned with outlook

NA

Cash credit

NA

NA

NA

239

NA

CRISIL A/Stable

NA

Loan against property

NA

NA

Jan-25

16.67

NA

CRISIL A/Stable

NA

Long-term loan

NA

NA

Jun-25

5.72

NA

CRISIL A/Stable

NA

Working capital demand loan

NA

NA

Dec-22

49.19

NA

CRISIL A/Stable

NA

Working capital term loan

NA

NA

Nov-23

3.42

NA

CRISIL A/Stable

NA

Proposed Long term bank loan facility

NA

NA

NA

6.0

NA

CRISIL A/Stable

NA

Term loan

NA

NA

Mar-25

60.0

NA

CRISIL A/Stable

NA

Proposed term loan

NA

NA

NA

200.0

NA

CRISIL A/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

25.0

NA

CRISIL A/Stable

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

BWIL

Full

Operational and financial linkages; common management

BWPL

Full

Operational and financial linkages; common management

BHCPL

Full

Operational and financial linkages; common management

BSPL

Full

Operational and financial linkages; common management

BASPL

Full

Operational and financial linkages; common management

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 605.0 CRISIL A/Stable 06-04-22 CRISIL A/Stable 20-08-21 CRISIL A/Stable 01-09-20 CRISIL A-/Stable 03-06-19 CRISIL A-/Stable CRISIL BBB+/Positive
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 70 Canara Bank CRISIL A/Stable
Cash Credit 110 State Bank of India CRISIL A/Stable
Cash Credit 59 HDFC Bank Limited CRISIL A/Stable
Loan Against Property 16.67 Standard Chartered Bank Limited CRISIL A/Stable
Long Term Loan 2.39 Tata Capital Financial Services Limited CRISIL A/Stable
Long Term Loan 1.82 Canara Bank CRISIL A/Stable
Long Term Loan 1.51 Tata Capital Financial Services Limited CRISIL A/Stable
Proposed Long Term Bank Loan Facility 6 Not Applicable CRISIL A/Stable
Proposed Term Loan 200 Not Applicable CRISIL A/Stable
Proposed Working Capital Facility 25 Not Applicable CRISIL A/Stable
Term Loan 60 HDFC Bank Limited CRISIL A/Stable
Working Capital Demand Loan 4.24 HDFC Bank Limited CRISIL A/Stable
Working Capital Demand Loan 9.62 State Bank of India CRISIL A/Stable
Working Capital Demand Loan 5.33 Canara Bank CRISIL A/Stable
Working Capital Demand Loan 30 IndusInd Bank Limited CRISIL A/Stable
Working Capital Term Loan 3.42 Standard Chartered Bank Limited CRISIL A/Stable

This Annexure has been updated on 04-May-22 in line with the lender-wise facility details as on 05-Apr-22 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Steel Industry
CRISILs Criteria for Consolidation

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