| SG Mart Limited | ||||||
| 'CRISIL A/Stable/CRISIL A1' assigned to Bank Debt | ||||||
| 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 assigned its ‘CRISIL A/Stable/CRISIL A1’ ratings to the bank loan facilities of SG Mart Ltd (SG Mart).
The promoters, Mr. Dhruv Gupta (son of Mr. Sameer Gupta, who is the Managing Director of Apollo Pipes Limited; CRISIL A/Stable/CRISIL A1) and Mrs. Meenakshi Gupta (wife of Mr. Sameer Gupta) acquired SG Mart (erstwhile Kintech Renewables Ltd) in April 2023, and since then, the company has been trading in building products. It has more than 1,700 products in its portfolio, with hot-rolled (HR) coils, cut-to-length (CTL) HR coils and thermos mechanically treated (TMT) bars accounting for bulk of revenue. Further the company is co-branding its TMT bars under the brand APL Apollo SG TMT.
The company has recorded revenue of Rs 2,683 crore in fiscal 2024, with revenue scaling up from Rs 151 crore in the first quarter to Rs 1,277 crore in the fourth quarter. The company is planning to scale up substantially and has articulated scaling up over Rs 18,000 crores in the next 3 fiscals. Operating margin should remain stable in the range of at 2.3–2.5% given the trading nature of business, in line with 2.3% reported in fiscal 2024.
Capital structure should remain strong, supported by equity infusion of over Rs 1,000 crore in fiscal 2024. The total outside liabilities to adjusted networth (TOL/ANW) ratio is expected to remain below one time in the medium term, as against 0.37 time as on March 31, 2024. Debt coverage is healthy with interest cover at 8 times in fiscal 2024 and should remain between 5 and 6 times in the coming fiscals. Cash and cash equivalents of Rs 1,126 crore as on March 31, 2024, also aid liquidity.
The rating draws strength from the expectation of healthy growth in scale over the next few fiscals, efficient working capital management and the healthy distribution network of the company. The rating is partially constrained by exposure to intense competition in the building products trading business. |
Analytical Approach The CRISIL Ratings has combined the business and financial risk profile of SG Mart and its subsidiaries and taken a consolidated approach.
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:
The company has a healthy and growing network. Products are supplied throughout India via 220 dealers operating through 5 warehouses (including its 2 CTL service stations). It has 2 CTL service stations currently and plans to add 8 more stations by end of fiscal 2025. As CTL is a value-added service, the segment is likely to support growth in revenue and profitability.
Receivable days are comfortable at less than 10 days reducing any major debtor risk as well. Further, there is no dealer concentration with top customers forming 5.3% of total revenue in fiscal 2024. The number of dealers has increased from 110 on September 30, 2023, to 224 on June 30, 2024.
The company generally pays its suppliers within 10 days and has established ties with major steel companies. Top supplier forms ~15% of the total purchases. Further, SG Mart has tie-ups with top suppliers which ensures the quality of the products sold.
With healthy policies SG Mart has been efficiently managing its working capital cycle.
Weaknesses:
However, a low inventory period shields them from any adverse price fluctuations. |
Liquidity: Adequate Liquidity is marked by cash equivalent of Rs 1,000 crore as on June 30, 2024, and further supported by low bank limit utilisation. Sanctioned limit of Rs 600 crore was utilised only around 26%, over the six months through June 2024. Expected cash accrual of Rs 90-100 crore, along with the cash surplus, should suffice to fund capex of Rs 170-200 crore, going forward, in the absence of any term debt obligation. |
Outlook: Stable CRISIL Ratings believes that the strong management, supplier and dealer network should enable SG Mart to ramp up its operations in a healthy manner, and also maintain a strong financial risk profile. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company SG Mart (erstwhile Kintech Renewable Ltd) was acquired by Mr. Dhruv Gupta and Mrs. Meenakshi Gupta in April 2023. The company trades in more than 1,700 building products and derives the bulk of its revenue from HR coils, CTL HR coils and TMT bars. It is appointing channel partners to further penetrate the construction sector and has positioned itself as a one-stop solution provider for all construction needs. It is also listed on the BSE. |
Key Financial Indicators
^Company was formed in fiscal 2024 |
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 | ||||||||||||||||||||
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Criteria Details
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