| RR Metalmakers India Limited | ||||||
| Ratings reaffirmed at 'CRISIL B / Stable / CRISIL A4 ' | ||||||
| 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 reaffirmed its ‘CRISIL B/Stable/CRISIL A4’ ratings on the bank facilities of RR Metalmakers India Ltd (RRMIL).
The ratings continue to reflect the company’s modest scale in the intensely competitive steel trading industry, 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. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has revised its analytical approach and considered RRMIL on standalone basis, earlier CRISIL Ratings has consolidated the business and financial risk profiles of RRMIL and its subsidiary RR Life Care Pvt Ltd (RRLCPL). The analytical approach is revised as there are no operations in RRLCPL.
Unsecured loans from the promoters of Rs. 2.5 crores are treated as debt as there is no track record of sustenance of these funds in the business. |
Key Rating Drivers & Detailed Description Weakness: 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 RRMIL, leading to modest scale of operations and volatile operating margins as highlighted with revenue of Rs. 120-130 crores and operating margin ranging between (1.35%)-5.67% over last 3 fiscals. The company has booked lower operating margins in fiscal 2022 as the operating margins have dipped from 5.67% in fiscal 2021 to 0.56% in fiscal 2022 on account of fluctuation in the raw material prices which the company was not able to pass on to its customers. The company has booked PAT losses.
Below-average financial risk profile Networth is modest at Rs 5.6 crore as on March 31, 2022 which is expected to remain at similar level in fiscal 2023 due to low profitability. Modest capital structure have kept capital structure aggressive, as reflected in the gearing ratio of 3.61 and total outside liabilities to adjusted networth (TOLANW) ratio of 8.41 times as on March 31, 2022, because of high reliance on short-term borrowings. TOLANW ratio is estimated at similar level in fiscal 2023. Debt protection metrics remained below average on account of modest operating margin, indicated by interest coverage ratio of 0.32 times in fiscal 2022. With no major debt funded capex plan over the medium term, debt protection metrics is expected to improve over the medium term with interest cover estimated at 1 to 1.2 times in fiscal 2023
Strengths: Extensive experience of the promoters Mr. Virat Shahhave an extensive 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: Stretched Net cash accruals are expected to be tightly matched with debt obligation of Rs 1.25 and Rs 1.41 crore in fiscals 2024 and 2025, respectively. Bank limit utilisation averaged 90% over the 12 months through December 2022. Cash and bank balances were moderate at Rs. 5.3 crores as on March 31, 2022. Unsecured loans from the promoters stood at Rs. 2.5 crores as of March 31, 2022 and they are willing to infuse funds as unsecured loans as and when required by the business. |
Outlook Stable CRISIL Ratings believes that the company will continue to benefit from its the experience of the management in mitigating risks inherent in the trading business. |
Rating Sensitivity factors Upward factors
Downward factors
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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 is listed on Bombay Stock Exchange. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| 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 |
| Inland/Import Letter of Credit | 18.5 | Union Bank of India | CRISIL A4 |
This Annexure has been updated on 08-Feb-23 in line with the lender-wise facility details as on 17-Jan-23 received from the rated entity.
Criteria Details
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