Rating Rationale

Rating Rationale

January 31, 2025 | Mumbai

Maiden Forgings Limited

'Crisil BBB/Stable' assigned to Bank Debt

Rating Action

Total Bank Loan Facilities Rated	Rs.42.5 Crore
Long Term Rating	Crisil BBB/Stable (Assigned)

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 BBB/Stable’ rating to the long tern bank facilities of Maiden Forgings Limited (MFL).

The rating reflects MFL's established market position and extensive industry experience of the promoters, Healthy operational efficiency and diversified customer base and healthy financial risk profile. These strengths are partially offset by it’s susceptibility of operating margin to volatility in raw material prices and moderate working capital cycle

Analytical Approach

For arriving at the ratings, Crisil Ratings has evaluated standalone business and financial risk profile of MFL.

Unsecured loan of Rs 8.7 crores as on March 31, 2024, extended by promoters has been treated a debt

Key Rating Drivers & Detailed Description

Strengths:

Established market position and extensive industry experience of the promoters: MFL is engaged in manufacturing of wide range of products which includes different shapes, sizes and variations of bright steel bars and wires from past 35 years. Further, the key promoters, i.e., Mr. Nishant Garg (Managing Director) and Ms. Nivedita Garg have experience of more than a decade in the steel products industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. The promoters are further supported by a well-qualified and experienced management team. As a result, revenues have improved to Rs 236 crores in fiscal 2024 and is expected to sustain its scale of operations as reflected by H1 FY 2025 revenues of Rs 109 crores. Crisil Rating believes that promoters’ experience backed by the professional management will continue to benefit business risk profile of the company.

Healthy operational efficiency and diversified customer base: MFL has long-standing relationships with its customers and suppliers. It has diversified customers (more than 500 customers), including top 5 customers accounting for 12% of total revenues in fiscal 2024 (similar range for fiscal 2023 and 2022). The products are also sold to various industries such as engineering and heavy goods, automobiles, auto sector, hardware, furniture and others. Diversified customer and industry base helps limit the concentration risk in revenues profile. Furthermore, with the addition of the value-added products and better cost efficiencies the operating margins has improved to 10% in fiscal 2024 and fiscal 2023 from 5% in fiscal 2022. Operating margins are expected to sustain 9%-10% over the medium term. The same has also led to ROCE being at healthy levels of above 15% for the last three fiscal years ending 2024. Sustained growth in the scale of operations while maintaining their operating profitability will be a key monitorable.

Healthy financial risk profile: MFL’s capital structure have been at healthy level due to limited reliance on external funds yielding gearing and total outside liabilities to adj adjusted net worth (TOL/ANW) of 0.88 times and 1.09 times respectively as on March 31, 2024. Capital structure is expected to remain at similar levels over the medium term. MFL’s debt protection measures have also been at a healthy level due to healthy operating profitability and moderate interest expenditure. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 3.99 times and 0.22 times for fiscal 2024. MFL debt protection measures are expected to remain healthy over the medium term.

Weaknesses:

Susceptibility of operating margin to volatility in raw material prices: The cost of production and profit margin are heavily dependent on raw material prices. Raw material cost accounts for 80% to 85% of its total expenses of company. Furthermore, profitability is linked to the fortunes of the inherently cyclical steel industry, which has a strong correlation with overall growth in gross domestic product. Sharp volatility in raw material prices, and offtake by key user sectors may impact the profitability and will remain a key rating sensitivity factor.

Moderate working capital cycle: MFL’s moderate working capital management is reflected in its gross current assets (GCA) of 174 days as on March 31, 2024. This is primarily driven by the higher inventory levels, which partially remain order backed, with remaining maintained to deliver products at a shorter time. Furthermore, it extends a moderate credit period of around 60 days to its customers, which is received in a timely manner. Overall working capital operations are expected to remain moderate over the medium term largely driven by the higher inventory levels.

Liquidity: Adequate

Bank limit utilization is high around 85 percent for the past twelve months ended November 2024. Cash accruals are expected to be over Rs 15 crore which are sufficient against term debt obligation of Rs 3 crore over the medium term. In addition, it will act as cushion to the liquidity of the company. Current ratio are healthy at 1.82 times on March 31, 2024. Moderate cash and bank balance of around Rs.3 crore as on March 31, 2024 which remains free. Additionally, need based support from the promoters in the form of USL will support the liquidity profile in case of exigencies. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

Crisil Ratings believe MFL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors:

Sustained improvement in scale of operation and sustenance of operating margin, leading to higher cash accruals above Rs 25 crores.
Sustenance of healthy financial risk profile and liquidity profile

Downward factors:

Decline in scale of operations leading to fall in revenue and profitability margin below 7%, hence leading to lower cash accruals.
Large debt-funded capital expenditure weakening capital structure
Witnesses a substantial increase in its working capital requirements thus weakening its liquidity and financial risk profile.

About the Company

MFL initially set up as sole proprietorship firm in 1988 and was incorporated as private limited company in 2005. Recently, in 2022, MFL was reconstituted as public limited company. MFL is engaged in manufacturing and sales of ferrous metal products including steel bright bars, wires, profiles, ground bars and nails (collated & loose). It has three manufacturing facilities, all are located in Ghaziabad (Uttar Pradesh) with a total installed capacity of 53,000 MT p.a.

MFL is listed at Bombay Stock Exchange (SME) platform. It is promoted & managed by Mr. Nishant Garg (Managing Director)

Key Financial Indicators

As on / for the period ended March 31	Unit	H1 FY 2025	2024	2023
Operating income	Rs crore	109.09	236.22	220.93
Reported profit after tax	Rs crore	4.05	9.87	9.63
PAT margins	%	3.71	4.11	4.35
Adjusted Debt/Adjusted Net worth	Times	1.01	0.88	1.69
Interest coverage	Times	3.46	3.84	4.04

Status of non cooperation with previous CRA
MFL has not cooperated with INFOMERICS Valuation and Rating Private Limited which has marked it non-cooperative via RR dated 10^th November 2023. The reason provided by INFOMERICS Valuation and Rating Private Limited is non-furnishing of information by MFL

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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 Outstanding with Outlook
NA	Cash Credit	NA	NA	NA	42.50	NA	Crisil BBB/Stable

Annexure - Rating History for last 3 Years

Current

2025 (History)

2024

2023

2022

Start of 2022

Instrument

Type

Outstanding Amount

Rating

Date

Rating

Date

Rating

Date

Rating

Date

Rating

Fund Based Facilities

42.5

Crisil BBB/Stable

All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility	Amount (Rs.Crore)	Name of Lender	Rating
Cash Credit	16.5	Axis Bank Limited	Crisil BBB/Stable
Cash Credit	26	Bank of Baroda	Crisil BBB/Stable

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

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