| Swastik Pipe Limited | ||||||
| Ratings migrated to 'CRISIL BB/Stable/CRISIL A4+'; Ratings Withdrawn | ||||||
| Rating Action | ||||||
| ||||||
| & *Issuer did not cooperate; based on best-available information^ *Issuer did not cooperate; based on best-available information | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Due to inadequate information and in line with the Securities and Exchange Board of India guidelines, CRISIL Ratings had migrated its ratings on the bank facilities of Swastik Pipe Limited (SPL) to 'CRISIL BB/Stable/CRISIL A4+ Issuer Not Cooperating'. CRISIL Ratings has withdrawn its rating on bank facility of SPL following a request from the company and on receipt of a 'no objection certificate' from the banker. Consequently, CRISIL Ratings is migrating the rating on bank facilities of SPL from 'CRISIL BB/Stable/CRSIL A4+ Issuer Not Cooperating’ to 'CRISIL BB/Stable/CRISIL A4+'. The rating action is in line with CRISIL Ratings’ policy on withdrawal of bank loan ratings.
The ratings reflect the extensive experience of the promoter in the pipe and pipe fittings industry, longstanding relationships with suppliers and customers, the company’s diversified product portfolio and established market position, and its healthy networth and capital structure. These strengths are partially offset by weak debt protection metrics, large working capital requirement, modest scale of operations and geographical concentration in revenue. |
Analytical Approach Unsecured loan, estimated at Rs 1.96 crore as on March 31, 2022, from the promoter and related parties has been treated as neither debt nor equity as the loan is interest-free and will remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoter and longstanding relationships with suppliers and customers: The company benefits from the extensive experience of the promoter, his technical expertise and the support extended by the Jindal group. It has a vast network of branches, distributors, dealers and retailers across the country (150 dealers and distributors across India). This has led to increase in revenue to Rs 604 crore in fiscal 2022 from Rs 522 crore in fiscal 2021. The promoter’s experience and strong relationships with suppliers will continue to support the business.
Diversified product portfolio and established market position: Revenue profile is diversified, with significant presence in pipes and cold-rolled (CR) coils, which account for 85-90% of total revenue (pipes contributed 52% and CR coils 43% in fiscal 2022). The remaining comes from swaged-type tubular poles, precision pipes and wires.
Healthy networth and moderate capital structure: Networth was Rs 73.65 crore as on March 31, 2021, and is estimated to have improved to Rs 136 crore as on March 31, 2022, backed by conversion of unsecured loan of Rs 30 crore into equity, infusion of additional capital of Rs 9.9 crore, steady operating margin and accretion to reserve.
Weakness: Weak debt protection metrics: Interest coverage and net cash accrual to adjusted debt ratios were 1.21 times and 0.03 time, respectively, in fiscal 2021. With sale of part of the Bahadurgarh property at profit of Rs 17.7 crore, net cash accrual improved to an estimated Rs 26 crore in fiscal 2022, resulting in net cash accrual to adjusted debt ratio above 0.2 time.
Large working capital requirement: Gross current assets (GCAs) were at 178 days as on March 31, 2021, because of sizeable receivables and inventory of 107 days and 51 days, respectively, owing to extended credit offered during the Covid-19 pandemic. The GCAs are estimated at 150-160 days as on March 31, 2022, driven by receivables of 95-100 days and inventory of 40-45 days. The working capital cycle is supported by bank limit (utilised 98% on average over the 12 months through March 2022) and partly by estimated payables of 45-50 days as on March 31, 2022.
Modest scale of operations and geographical concentration in revenue: Operating income was subdued at Rs 521.9 crore in fiscal 2021 and Rs 604 crore in fiscal 2022. Also, majority of income comes from north India. However, the company’s brand, TT Swastik, has strong recall in Rajasthan, Uttar Pradesh, Punjab, Gujarat and Uttarakhand |
Liquidity: Stretched Bank limit utilisation was high at 98% on average during the 12 months through March 2022. Expected net cash accrual of Rs 12-15 crore in fiscal 2023 will comfortably cover debt obligation of Rs 6.7 crore. The company sold part of its industrial property and the promoter infused additional capital of Rs 9.9 crore in fiscal 2022 to support liquidity. |
Outlook: Stable SPL will continue to benefit from the extensive experience of the promoter |
Rating Sensitivity Factors Upward factors
Downward factors
|
About the Company Incorporated in 1973, SPL manufactures ERW (electric resistance welded) pipes and tubes for automobiles, infrastructure and water transportation purposes. Product portfolio includes mild steel black pipes, iron pipes, hollow section pipes, stainless steel tubes, API (American Petroleum Institute)-grade pipes, swaged-type tubular poles and CR coils. It has manufacturing units in Bahadurgarh, Haryana, and Kosi Kalan, Uttar Pradesh. It has installed production capacity of 180,000 tonne per annum (tpa) for pipes and 60,000 tpa for CR coils and strips. It is promoted by Mr Sandeep Bansal. |
Key Financial Indicators
|
Status of non cooperation with previous CRA SPL did not cooperate with India Ratings and Research Private Limited, which has classified the company as non-cooperative through rationale dated 24th August 2018. The reason provided by India Ratings and Research Private Limited is non furnishing of information for monitoring the ratings.
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)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
* - Issuer did not cooperate; based on best-available information
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 06-May-2022 in line with the lender-wise facility details as on 26-Apr-2022 received from the rated entity..
Criteria Details
|