| Goodluck India Limited | ||||||
| Ratings upgraded to 'CRISIL A/Stable/CRISIL A1' | ||||||
| Rating Action | ||||||
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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 upgraded its ratings on the bank facilities of Goodluck India Ltd (GIL) to 'CRISIL A/Stable/CRISIL A1’ from 'CRISIL A-/Stable/CRISIL A2+’
The upgrade reflects significant improvement in the business and financial risk profiles of GIL. Healthy and consistent growth in scale of operations, a healthy order book and steady operating margin have supported the business risk profile. Operating income grew 18.6% to Rs 3,076 crore in fiscal 2023, from Rs 2,594 crore in fiscal 2022. Further, in the first half of fiscal 2024, the company achieved revenue of Rs 1,744 crore (as against revenue of around Rs 1,600 crore in the first half of fiscal 2023). GIL is likely to clock revenue of Rs 3,400-3,500 crore for full fiscal 2024, led by increase in volume and realisations. Healthy demand from multiple end-user industries such as automobiles, construction, power, oil & gas will drive growth in volume. A vast customer profile in the domestic and overseas markets offers geographical diversity. Order book worth Rs 1,200 crore (as of October 2023) provides healthy revenue visibility over the medium term. GIL has recently acquired its group company, Goodluck Defence and Aerospace Pvt Ltd (which is not operational at present) to focus on defence related products, which will also contribute to overall revenue going ahead. The established track record and clientele will also support the business risk profile. Operating margin has remained stable at 7-8% for the three years ended March 31, 2023, and rose to 8.28% for the first half of fiscal 2024 (as against 6.60% in the corresponding period of the previous fiscal), driven by the company’s focus on enhancing its earnings before interest, tax, depreciation and amortisation (EBITDA per ton (which has improved by 25-30% in last 2-3 years).
An efficient receivables collection period and inventory management system have ensured lower dependence on debt; gross current assets (GCAs) have ranged between 115 and 120 days over the two fiscals ended March 31, 2023 (vis-à-vis more than 140 days, previously) and are expected to range from 120 to 125 days going ahead.
Networth rose to around Rs 620 crore as on March 31, 2023, from Rs 465 crore, a year earlier, backed by equity infusion and accretion to reserves. Total outside liabilities to adjusted networth ratio stood at 1.3 times as on March 31, 2023, and should remain below one time going forward. The company plans to raise Rs 200 crore through a qualified institutional placement (QIP) and the proceeds will be utilised for capacity expansion, repayment of term debt and for other working capital requirements. With no major debt-funded capital expenditure plans and the fund-raising capabilities of the company, the financial risk profile is expected to improve further.
The ratings continue to reflect the established position of GIL in the steel processing industry, its diversified product profile and healthy scale of operations. These strengths are partially offset by the moderate working capital requirement and susceptibility to volatility in raw material prices and intense competition in the fragmented steel industry. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Strong Expected cash accrual of Rs 100-130 crore should suffice to cover debt obligation of Rs 45-60 crore over the medium term. Bank limit utilisation averaged 85% over the 12 months ended September 30, 2023. Current ratio was healthy at 1.31 times as on March 31, 2023, and is projected over 1.5 times as on March 31, 2024. Low gearing and healthy networth, along with fund raising capabilities, will support financial flexibility over the medium term. |
Outlook: Stable CRISIL Ratings believes the business profile of GIL will improve further, backed by a healthy order book and diversified product profile. |
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About the Company Incorporated in 1986, GIL (formerly, Goodluck Steel Tubes Ltd) manufactures sheets, pipes, engineering structures, fabricated structures, forgings, and automobile tubes. The company has five manufacturing facilities in Sikanderabad (Uttar Pradesh) and one recently operational in Kutch (Gujarat), with a total installed capacity of more than 300,000 tonne per annum. The company is listed on Bombay Stock Exchange Ltd and National Stock Exchange Ltd. |
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Any other information: Not applicable |
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Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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