| Venus Pipes and Tubes Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings Reaffirmed; Rated amount enhanced for Bank Debt | ||||||
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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 Venus Pipes and Tubes Ltd (VPTL) to ‘Positive’ from ‘Stable’ and reaffirmed the rating at ‘CRISIL A-’; The short-term rating has been reaffirmed at ‘CRISIL A2+’.
The revision in outlook reflects 45% year-on-year growth in revenue, to Rs 802 crore in fiscal 2024, in line with expectations. Growth was driven by higher volume (up 68.4%), with capacity additions, timely ramp up, and healthy utilisation of installed capacity, though partly offset by moderation in commodity prices (by 8%). Operating margin rose to 18.5% in fiscal 2024, from 12.6% in fiscal 2023, aided by backward integration of operations and set up of the piercing plant. Going forward, the company plans to establish fitting plant and other manufacturing facilities, and timely stabilisation remains a key monitorable. Operating revenue should grow in double digits over the medium term, with healthy operating margin above 17% over the medium term.
Financial risk profile is marked by a healthy networth, low gearing and total outside liabilities to tangible networth ratios and comfortable debt protection metrics. Liquidity is adequate, with healthy cash accrual and moderate bank limit utilisation.
The ratings also reflect the extensive experience of the promoters in the stainless steel (SS) pipes business, rising scale of operations with healthy operating margin and healthy financial risk profile. These strengths are partly offset by the large working capital requirement and timely completion of capex and ramp up in scale. |
Key Rating Drivers & Detailed Description Strengths:
The company undertook a large capital expenditure (capex) in May 2023, towards capacity expansion and manufacture of new products. The capex, which has been met through funds raised through the initial public offering, internal accrual and moderate external debt, will help scale up operations. The financial risk profile is still likely to remain healthy over the medium term, aided by steady and healthy accretion to reserves and moderate debt.
Weaknesses:
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Liquidity: Adequate Bank limit utilisation averaged around 77.07% for the 12 months ended April 30, 2024. Expected cash accrual of Rs 125-150 crore should suffice to cover the term debt obligation of Rs 15-16 crore over the medium term. Current ratio was moderate at 1.36 times as on March 31, 2024. Low gearing and moderate networth provide financial flexibility in case of any adverse conditions or downturn in the business. |
Outlook: Positive Business risk profile of VPTL will remain strong, driven by growth in operating revenue, Extensive experience of the promoters and their established relationship with clients should continue to boost the business. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company VPTL was incorporated in February 2015, by Mr Megharam Chaudhary, Mr Jayantiram Chaudhary, Mr Arun Kothari and Mr Dhruv Patel. The Bhuj (Gujarat)-based company manufactures SS pipes and tubes used in multiple industries. Its manufacturing facility is on the Bhuj-Bhachau highway near Dhaneti in Kutch, Gujarat, and thus, the company enjoys proximity to the Kandla and Mundra ports. It has a manufacturing capacity of 38,400 tonnes per annum (TPA) of wielded and seamless pipes and tubes, and 14,400 TPA of mother hollow pipes. |
Key Financial Indicators
*Provisional |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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