| Ratnamani Metals and Tubes Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of Ratnamani Metals and Tubes Limited (Ratnamani).
The ratings continue to reflect the company’s strong business risk profile, supported by market leadership in the stainless steel tubes and pipes (SSTP) segment, diversified revenue, and a healthy financial risk profile because of low gearing and comfortable debt protection metrics. These strengths are partially offset by large working capital requirement and susceptibility to slowdown in end-user industries. |
Analytical Approach To arrive at its ratings, CRISIL Ratings has consolidated the business and financial risk profiles of Ratnamani and its wholly owned subsidiary, Ratnamani Inc (based in the US), because of strong operational and financial linkages between them.
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:
Ratnamani has a diversified product profile comprising SSTP and carbon steel pipes, which are used in various end-user industries such as power, oil and gas, chemicals, water, and refineries. The company is one of the largest players in the SSTP segment in India and has steadily enhanced stainless steel capacity to 61,500 (from 31,500) tonne per annum (tpa). The company also has presence in carbon steel LSAW/helical submerged arc welded (HSAW) and electric resistance welded (ERW) pipes and has steadily enhanced its capacity to 5,10,000 tpa (from 3,60,000 tpa). Strong technological competitiveness has led to above industry-average profitability over the years.
Operating performance has continued to remain comfortable, wherein the company has acquired the necessary approvals and developed expertise to manufacture high-end application products, allowing it to earn above-industry-average profits. It maintains strong relationships with customers by producing customised and quality products. The company has also been able to diversify its revenue base through exports over the past few years.
While the order book execution during the first quarter of fiscal 2021 had a short term impact due to Covid-19 induced lockdown restrictions, the overall performance for fiscal 2021 has still remained comfortable with Rs 399 crore of EBITDA recorded as compared to Rs 424 crore during fiscal 2020.
While a similar impact in the first quarter of fiscal 2022 was experienced due to the second wave of pandemic, performance for the year is expected to still remain strong supported by the robust order book visibility. Given the typical order execution cycle of 6-9 months, most of the existing orders will be executed in this fiscal itself. The company is expected to earn comfortable average EBITDA margins ranging 16-18% over the medium term, which would vary depending on the value added requirements and product mix.
Ratnamani’s financial risk profile is driven by healthy capital structure and robust debt protection metrics. Debt protection metrics continue to remain comfortable, despite the continued capacity expansions undertaken. Overall gearing further improved to 0.10 times as on March 31, 2021 (as compared to 0.15 times as on March 31, 2020).
Weaknesses:
Integral to the nature of business undertaken, Ratnamani’s operations continue to remain working capital intensive. Gross current assets (GCA) reduced to 157 days as on March 31, 2021, from 201 days as on March 31, 2020. The higher GCA days as on March 31, 2020 was on account of a rise in inventory that had to be maintained owing to a halt in dispatches following the lockdown the fourth quarter of fiscal 2020. The company generally maintains a higher inventory level due to the company’s policy to cover its raw material requirement on a back-to-back basis, based on receipt of orders. Operations are expected to continue to remain working capital intensive going forward.
Demand for steel tubes and pipes depends on end-user industries such as oil and gas, fertilisers, power, and water and irrigation. Any slowdown in these segments could weaken the demand for SSTP, thereby affecting the company’s operating performance. However, diversified products and non-dependence on a single end-user industry have kept this risk low in the past. |
Liquidity: Strong Cash accruals are expected to be more than Rs 300 crore per annum in fiscals 2022 and 2023 against a term debt obligation of Rs 51 crore in both the years. The fund-based limit of Rs 149 crore was utilised negligibly over the 12 months through July 2021. Current nameplate capacity is expected to be sufficient for the next two fiscals and accordingly the company has no major capex plans till fiscal 2024. Cash and cash equivalents (including mutual fund) of around Rs 600 crore as of June 2021 provides strong liquidity buffer. Internal accrual and unutilised bank limit will be sufficient to meet incremental working capital and capex requirements over the medium term. |
Outlook: Stable CRISIL Ratings believes Ratnamani will maintain its leadership position in the SSTP segment and benefit from its diversified revenues. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Ratnamani, incorporated in 1983, manufactures a wide range of welded and seamless SSTP (installed capacity of 61,500 tpa) and carbon steel pipes (installed capacity of 5,10,000 tpa) of LSAW, HSAW, circumferential seam submerged arc welded [CSAW], and ERW pipes. The company is promoted by Mr Prakash Sanghvi, who is its chairman and managing director. |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
*inter-changeable with export packing credit/packing credit in foreign currency ^inter-changeable with buyer’s credit/supplier’s credit $inter-changeable with non-fund based limits |
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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*inter-changeable with export packing credit/packing credit in foreign currency
^inter-changeable with buyer’s credit/supplier’s credit
$inter-changeable with non-fund based limits
This Annexure has been updated on 14-Oct-2021 in line with the lender-wise facility details as on 03-Aug-2021 received from the rated entity.
Criteria Details
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