May 03, 2013

Mumbai

Sri Rama Steels Limited

Ratings suspended

Total Bank Loan Facilities Rated	Rs.703 Million
Long-Term Rating	Suspended
Short-Term Rating	Suspended

(Refer to Annexure 1 for details on facilities)

CRISIL has suspended its rating on the bank facilities of Sri Rama Steels Ltd (SRSL). The suspension of ratings is on account of non-cooperation by SRSL with CRISIL's efforts to undertake a review of the ratings outstanding. Despite repeated requests by CRISIL, SRSL is yet to provide adequate information to enable CRISIL to assess SRSL’s ability to service its debt. The suspension reflects CRISIL's inability to maintain a valid rating in the absence of adequate information. CRISIL views information availability risk as a key credit factor in its rating process and views non-sharing of information as a first signal of possible credit distress, as outlined in its criteria “Information availability risk in Credit ratings".

About the Group

The Srirama group commenced operations in 1981 by setting up SRSL for manufacturing mild-steel billets. SRSL has two manufacturing units in Solan (Himachal Pradesh), with a combined installed manufacturing capacity of 124,500 tonnes per annum (tpa). However, one of the units of SRSL, having an installed capacity of 42,500 tpa, has stopped operations since October 2010 because of poor liquidity and large working capital requirements at the unit. In 2006-07 (refers to financial year, April 1 to March 31), the group’s management, to forward-integrate its operations, commenced construction of a rolling mill for manufacturing thermo-mechanically treated (TMT) steel bars under CISCL, with an installed capacity of 500 tonnes per day (tpd). CISCL too has closed its operations since October 2010 because of poor liquidity.

CRISIL has combined the business and financial risk profiles of SRSL and Chandigarh Iron and Steel Company Ltd (CISCL). This is because the two companies, together referred to as the Srirama group, are under the same management, in the same line of business, and have significant operational linkages and fungible cash flows. The entire raw material of CISCL is sourced from SRSL on favourable credit terms. The two companies have also provided cross-corporate guarantees for each other’s bank facilities.

Annexure 1 - Details of various bank facilities

Current facilities			Previous facilities
Facility	Amount (Mln)	Rating	Facility	Amount (Mln)	Rating
Cash Credit	230	Suspended	Cash Credit	230	CRISIL D
Letter of Credit	473	Suspended	Letter of Credit	473	CRISIL D
Total	703	--	Total	703	--

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Last updated: March 7, 2013

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May 03, 2013	http://www.crisil.com