Rating Rationale
April 23, 2024 | Mumbai
RR Metalmakers India Limited
Ratings Reaffirmed and Withdrawn
 
Rating Action
Total Bank Loan Facilities RatedRs.25 Crore
Long Term RatingCRISIL B/Stable (Rating Reaffirmed and Withdrawn)
Short Term RatingCRISIL A4 (Rating Reaffirmed and Withdrawn)
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CRISIL Ratings has reaffirmed its ratings on the bank facilities of RR Metalmakers India Ltd (RRMIL) and simultaneously withdrawn on receipt of withdrawal request from the company and No Objection certificate from the banker. The withdrawal is in line with crisil’s withdrawal policy.

 

The ratings continues to reflect the company’s modest scale in the intensely competitive steel trading industry and volatile operating margins and below-average financial risk profile. These weaknesses are partially offset by the extensive experience of the promoters in the steel trading business.

Key Rating Drivers & Detailed Description

Weaknesses:

  • Intensely competitive steel trading industry and volatile operating margins: Intense competition from a large number of players in the steel trading business limits the bargaining power of RRML, leading to modest scale of operations and leading to volatile operating margins  as highlighted with expected revenues of Rs.110 to Rs 130 crores in fiscal 2024 and Fiscal 2025 and between 3% to 6% over the last 3 fiscal years. The company has achieved revenues of Rs 76 crores in 9 months till December 2023 of FY 2024.

 

  • Below-average financial risk profile: Net worth is modest at Rs 5.5 crore as on March 31, 2023. which has kept capital structure aggressive, as reflected in total outside liabilities to adjusted net worth (TOLANW) ratio of 6.71 times as on March 31, 2023, because of high reliance on short-term borrowings. Debt protection metrics remained below average on account of modest operating margin, indicated by interest coverage ratio of 0.84 times in fiscal 2023.

 

Strength:

  • Extensive experience of the promoters: The promoters experience of over a two decade, his strong understanding of local market dynamics, and healthy relationships with suppliers and customers should continue to support the business.

Liquidity: Poor

Cash accrual, expected at Rs 1.3 to 1.5 crore per fiscal, is expected to be sufficient against nil repayments obligation, respectively. Bank limit utilisation averaged 95% over the 12 months through March 2024. Cash and Cash equivalents were moderate at Rs. 8.2 crores as on March 31, 2023. 

Outlook: Stable

CRISIL Ratings believes will continue to benefit from its the experience of the management in mitigating risks inherent in the trading business.

Rating Sensitivity Factors

Upward factors

  • Increase in revenue and stability of the operating margin leading to higher cash accrual.
  • Increase in net worth reducing TOLANW to less than 4.5 times.

 

Downward factors

  • Stretch in the working capital cycle weakening the financial risk profile.
  • Decline in revenue or operating margin leading to fall in net cash accrual to below Rs 1 crore over the medium term.

About the Company

RRMIL (earlier Shree Surgovind Tradelink Ltd) was incorporated in 1985 in Ahmedabad and was acquired by Mr Virat Shah and family in 2015. The company trades in steel and iron ore and manufactures steel pipes. The company will be incurring a capital expenditure for enhancement in steel manufacturing unit over the medium term.  RR Lifecare Private Limited India Limited is involved in manufacturing of injections through job work.

Key Financial Indicators

As on/for the period ended March 31

Unit 

2023

2022

Operating income

Rs.Crore

84.25

124.20

Reported profit after tax (PAT)

Rs.Crore

-1.03

-1.90

PAT margin

%

-1.22

-1.53

Adjusted debt/adjusted networth

Times

3.88

3.61

Interest coverage

Times

0.84

0.35

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 assigned with outlook
NA Inland/import letter of credit NA NA NA 18.5 NA CRISIL A4 (Rating Reaffirmed and Withdrawn)
NA Cash credit NA NA NA 6.5 NA CRISIL B/Stable (Rating Reaffirmed and Withdrawn)
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 6.5 CRISIL B/Stable (Rating Reaffirmed and Withdrawn)   -- 01-02-23 CRISIL B/Stable 10-03-22 CRISIL B/Stable   -- CRISIL B/Stable / CRISIL A4
      --   --   --   --   -- Withdrawn (Issuer Not Cooperating)*
Non-Fund Based Facilities ST 18.5 CRISIL A4 (Rating Reaffirmed and Withdrawn)   -- 01-02-23 CRISIL A4 10-03-22 CRISIL A4   -- CRISIL A4
      --   --   --   --   -- Withdrawn (Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 6.5 Union Bank of India CRISIL B/Stable (Rating Reaffirmed and Withdrawn)
Inland/Import Letter of Credit 18.5 Union Bank of India CRISIL A4 (Rating Reaffirmed and Withdrawn)
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
CRISILs Approach to Recognising Default

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