| Premium Ferromet Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / Stable / CRISIL A3 ' | ||||||
| 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 ratings on the bank facilities of Premium Ferromet Pvt. Ltd. (PFPL) at 'CRISIL BBB-/Stable/CRISIL A3'.
The ratings reflect PFPL's extensive industry experience of the promoters and prudent risk management policies. These strengths are partially offset by its low operating margins due to trading nature of the business and extensive exposure to group companies. |
Key Rating Drivers & Detailed Description Strengths: Promoters’ extensive experience in the ferro-alloy trading business: The promoters are in the line of ferro-alloy trading business for more than 4 decades through its group entity Mortex (India). Over the years, the promoters have developed good insights about the cyclicality of the industry and has also established healthy relationship with its suppliers and key customers. Established relationship with the key suppliers and customers has resulted in timely supply of materials and repeat orders. CRISIL Ratings believes the company’s business risk profile would continue to benefit over the medium term backed by promoters’ longstanding industry experience.
Prudent risk management policy leading to lower debtor and inventory risk: Around 90-95% of the company’s transactions are order-backed, and the balance is managed through a stock-and-sell model. Once the product enquiry is received from customers, the company seeks the best quotes from suppliers. While procuring the supplies, it orders for a marginal quantity, depending on expected movement in commodity prices in the near term, and sells the surplus material in the open market. A significant portion of receivables, backed by letters of credit, also reduce risks related to bad debts. As a result, gross current has remained below 90 days in last three years ending March 31, 2020. The GCA days are expected to remain at similar level over medium term.
Weakness: Moderat operating profitability: The company’s operating profitability has remained moderate at around 2-3.5% over last three fiscals ending fiscal 2021. Modest profitability has been on account of trading nature of business. Also, the group is a small player with very less market share and thus has low bargaining power. CRISIL Ratings believes PFPL’s margin would continue to remain moderate at similar level over the medium term.
Ferroalloys are intermediates for the steel industry: Ferroalloys are intermediates for the steel industry. Hence, the prospects for the ferroalloy industry are linked to the overall fortunes of the steel industry, which is inherently cyclical, as indicated by a downswing during fiscals 2009 and 2016, resulting in a sharp fall in the demand and prices of ferroalloys. CRISIL Ratings believes that PFPL's performance shall continue to remain susceptible to the performance of the steel industry. |
Liquidity: Adequate Bank Limit Utilization: The company is availing packing credit limit of Rs 25 crores for its working capital requirement and the same has remained utilized at around 90% over last 12 months.
Promoters Support: The management of the company has supported the business growth by the way of infusion of unsecured loans which stood at around Rs 7.5 cr as on Dec 31, 2020. They carry interest of 10% and are subordinated to bank debt.
Absence of repayment obligations: The company’s repayment obligation is nil and is expected to remain so due to absence of any capex plans. Most of the godowns are rented and some of it is owned by promoters at their personal capacity major capex plans. Hence, liquidity is expected to remain moderate over the medium term. |
Outlook Stable CRISIL Ratings believes PFPL will continue to benefit over the medium term from its longstanding relationships with principals and experience of the management to mitigate the inherent risk in trading business. |
Rating Sensitivity factors Upward factor
Downward factors
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About the Company PFPL was incorporated in 2006, its engage in trading of ferro manganese, ferro silicon, ferrosilicon manganese and silicon manganese. PFPL is owned & managed by Kailash Keyal & family. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 various bank facilities | ||||||||||||||||||||||||||||||||||||
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