| Ram Ratna Wires Limited | ||||
| Rating outlook revised to 'Stable', Rating reaffirmed | ||||
| 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 revised its rating outlook on the long term bank facilities of Ram Ratna Wires Limited (RRWL) to ‘Stable’ from 'Negative' while reaffirming the long term rating at ‘CRISIL BBB+’
The outlook revision is based on improvement in the business risk profile supported by better than expected operating performance in fiscal 2022 driven by higher realizations and uptick in volumes. Volume growth is expected to sustain going forward owing to increasing thrust on infrastructure development resulting in increase in demand for enamelled copper wires. Improving profitability is also expected to benefit networth and cash generation levels, which if utilized for deleveraging, will result in further improvement of debt protection metrics over the medium term.
The rating continues to reflect the extensive experience of RRWL's promoters in the copper wires segment, and adequate financial risk profile. These strengths are partially offset by susceptibility to volatility in raw material prices, and large working capital requirement.
The company is expected to generate revenue of over Rs 2300 crore in fiscal 2022 up from Rs 1527 crore in fiscal 2021 on account of increase in realization (~35% y-o-y) and volumes (~13% y-o-y) across products. The volume uptick was on account of gradual demand recovery from transmission cables industry while realizations were driven by the commodity upcycle. RRWL’s revenue and operating margin improved to Rs. 1651 crore and 4.8%, respectively, during the first nine months through December 31, 2021 vis-à-vis Rs 978 crore and 3.8%, respectively, in the corresponding period last fiscal. Margins for the company have remained fairly stable owing to pass through of rise in price in Copper, which is the key raw material for the company. Revenues in fiscal 2021 remained flattish at Rs. 1527 crores owing to lower volumes amidst drop in demand due to the pandemic induced lockdowns.
Company’s financial risk profile remains comfortable marked by healthy capital structure resulting from networth estimated at over Rs. 230 core as on March 31, 2022 and total debt of crore. Total debt decreased to an estimated ~Rs. 252 crore as on March 31, 2022 with the company prepaying a part of their term debt obligations. With steady improvement in cash accruals and no major debt funded capex plans, reliance on external debt is expected to remain low over the medium term. This, coupled with growing scale and improving profitability should lead to further improvement in financial risk profile over the medium term. RRWL also benefits immensely from the financial flexibility of its promoters who are expected to provide need based support as evidenced in the past also. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of RRWL and its subsidiary, Global Copper Pvt Ltd. CRISIL Ratings has also proportionately consolidated RRWL's joint venture (JV), RR-Imperial Electricals Ltd, to the extent of its shareholding in the JV, to reflect support required to the extent of its interest in this business.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths
Weaknesses:
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Liquidity: Adequate Cash accrual is expected to be Rs 40-50 crore per annum in the forthcoming fiscals against annual term debt obligation of Rs 17-23 crore. Utilisation of the fund-based limit averaged around 75% as on March 31, 2022 internal accrual and unutilized bank limit will be sufficient to repay debt and meet incremental working capital requirement. |
Outlook: Stable CRISIL Ratings believes RRWL will maintain its healthy business risk profile backed by its leadership position amidst improving demand scenario. Increase in scale of operations resulting in increased cash generation and absence of major capex should improve the financial risk profile over the medium term |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company RRWL manufactures enamelled copper winding wires under the RR Shramik brand. The company was set up in 1995 by Mr Rameshwarlal Kabra and his sons, Mr Tribhuvan Prasad Kabra, Mr Mahendra Kumar Kabra, and Mr Shreegopal Kabra. The promoter family also owns MEW Electricals Ltd (‘CRISIL BBB-/Stable/CRISIL A3'), which manufactures enamelled copper winding wires; and RR Kabel Ltd, which produces light duty electrical cables. |
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 – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 8.4 | Corporation Bank | CRISIL BBB+/Stable |
| Cash Credit | 19.1 | Corporation Bank | CRISIL BBB+/Stable |
This Annexure has been updated on 17-Mar-2023 in line with the lender-wise facility details as on 14-Mar-2023 received from the rated entity.
Criteria Details
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