Faridabad Steel Mongers Private Limited

January 24, 2023

Ratings
Sl. Instrument/ Amount Current Previous Rating Complexity
No. Facility (Rs. Crore) Ratings Ratings Action Indicator
IVR BBB/
Long Term
Stable
Bank
1. 9.25 (IVR Triple B - Assigned Simple
Facility -
with Stable
Term Loan
Outlook)
IVR BBB-/
IVR BBB/
Long Term Stable
Stable
Bank (IVR Triple B
2. 67.75* (IVR Triple B Revised Simple
Facility - Minus with
with Stable
Cash Credit Stable
Outlook)
Outlook)
Total 77.00 Rs. Seventy-Seven Crores only
*includes proposed facilities of Rs. 4.00 crore
Details of Facilities are in Annexure 1.

Detailed Rationale
The rating revision of Faridabad Steel Mongers Private Limited considers the significant
improvement in scale of operations, better overall financial risk profile, continuous healthy
performance in FY22 & 9MFY23. Further rating continues to derive comfort from experienced
management, comfortable net worth & financial risk profile. However, these rating strengths
remain constrained by vulnerability to fluctuations in input prices; fragmented and competitive
industry & very thin profitability margins.

Upward Factors

• Continuous improvement in the operating margin combined with adequate cash

accruals leading to high reinvestment in the company
• Significant improvement in debt protection parameters
Downward Factors
• Large debt-funded capex plans leading to weakening of the capital structure
• Reduction in profitability ratios

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List of Key Rating Drivers with Detailed Description
Key Rating Strengths

• Extensive experience of the promoters in the industry:

More than 2 decades of experience of promoters in the trading business of iron & steel
products and long-term relationships with key customers support the business profile.
• Improvement in scale of operations & absolute margins:

Over the past three financial years, (FY20-FY22) total operating income of FSMPL has
increased by a CAGR of ~18.64%. Due to Covid-19, there is a decline in the top line at Rs.
622.53 crore in FY20. As the demand of steel has risen, the company was able to achieve the
top line of Rs. 655.79 crore in FY21 and subsequently Rs. 1039.45 crore in FY22.The EBITDA
has also improved marginally from Rs. 11.32 Crores in FY21 to Rs. 14.38 Crores in FY22.
• Comfortable net worth & financial risk profile:

With consistent accretion of profits to reserves, the long-term debt to equity ratio remained
comfortable at 0.24x in FY22 and overall gearing stands at 2.24 in FY22 as compared to 2.46
in FY21. The Company has satisfactory tangible net worth base and it improved to Rs. 34.47
Crores in FY22 from Rs. 29.63 Crores in FY21 due to accretion of profit to reserves. The debt
protection indicators of the company remained satisfactory and further improved such as
interest coverage improved from 1.69x in FY21 to 2.36x in FY22. The DSCR improved
significantly to 2.06x in FY22 from 1.51x in FY21.
Key Rating Weaknesses

• Vulnerability to fluctuations in input prices; fragmented and competitive

industry:

The steel industry in India is characterised by intense competition and fragmentation, with the
presence of many units, because of low entry barriers. This restricts the ability of players to
pass on any increase in the raw material prices to customers. Therefore, any sharp increase
in input prices is likely to have a significant impact on the profitability of the companies
operating in the sector.
• Very Thin Profitability Margins:

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The traders of steel products are essentially price-takers in the market, which directly exposes
their cash flows and profitability to volatility in the input prices. EBITDA in terms of margin
percentage, it has remained fairly consistent from 1.73% in FY21 to 1.38% in FY22. The Profit
after Tax (PAT) improved from Rs. 3.02 Crores in FY21 to Rs. 4.75 Crores in FY22. While in
percentage terms, it has remained consistent from 0.46% in the last two fiscal years.
Analytical Approach: Standalone Approach

Applicable Criteria:

Rating Methodology for Trading Companies

Financial Ratios & Interpretation (Non-financial Sector)
Criteria of assigning rating outlook

Liquidity – Adequate
The gross cash accruals stood comfortable Rs. 6.78 Cr. against a repayment obligation of Rs.
0.11Cr in FY22. The company also has an adequate current ratio of 1.29 in FY22. Liquidity is
expected to remain Adequate. The company is expected to generate cash accruals in the
range of Rs. 7.39 crore to Rs. 9.62 crore in FY23-FY25 as against the repayment of Rs. 0.22
crore to Rs. 1.76 crore indicating sufficient repaying capability. The average fund-based
utilisation remained high at ~90.32% during the past 11 months ended November 2022.

About the Company

Faridabad Steel Mongers Pvt Ltd, incorporated on June 01, 2009, is mainly into wholesale
trading of Iron & Steel products namely HR Coil, CR Coil, HR Sheet, CR Sheet, PM Plates,
TMT Bars. FSMPL, based in Faridabad, Haryana, was set up by Mr. Yogesh Kumar Gupta in
2004 as a partnership firm named SP Industries, and was reconstituted as a private limited
company with the present name in June 2009. Company is in this line of business since last
18 years. Apart from above mentioned work, company also does relate job work like sheet
cutting, pressing etc. The company is one of the biggest distributors of SAIL (Steel Authority
of India Ltd) products in Faridabad Region and mainly a price maker for Faridabad steel
market. The promoters have established relationships with suppliers and customers, which
allow them to get repeat business. Company is one of the biggest bulk purchasers from SAIL

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 and accordingly gets higher bulk discount from others, this helps in maintaining margins and
creating market price for smaller players.

Financials (Standalone):
(Rs. crore)
For the year ended*/As on 31-03-2021 31-03-2022
Audited Audited
Total Operating Income 655.53 1039.45
EBITDA 11.32 14.38
PAT 3.02 4.75
Total Debt 71.16 75.37
Adjusted Tangible Net worth 31.36 36.19
EBITDA Margin (%) 1.73 1.38
PAT Margin (%) 0.46 0.46
Overall Gearing Ratio (x) 2.27 2.08
*Classification as per Infomerics’ standards

Status of non-cooperation with previous CRA: The other CRA BWR has moved to Issuer
not Cooperating category on 17.12.2021 due to non-submission of information and has been
in the INC category ever since.
Any other information: Nil

Rating History for last three years:

Sr. Name of Current Rating (Year 2022-23) Rating History for the past 3 years
No. Instrument/ Type Amount Rating Date(s) & Date(s) & Date(s) &
Facilities outstanding (05 December Rating(s) Rating(s) Rating(s)
(Rs. Crore) 2022) assigned in assigned assigned
2021-22 in 2020-21 in 2019-20
(26 October
2021)
IVR BBB/ Stable - -
Long
1. Term Loan 9.25 (IVR Triple B with -
Term
Stable Outlook)
IVR BBB/ Stable IVR BBB-/ Stable - -
Long (IVR Triple B with
2. Cash Credit 67.75* (IVR Triple B
Term Stable Outlook)
Minus with Stable
Outlook)
* includes proposed facilities of Rs. 4.00 crore
Note on complexity levels of the rated instrument: Infomerics has classified instruments
rated by it on the basis of complexity and a note thereon is available at www.infomerics.com.
Name and Contact Details of the Rating Analyst:
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Name: Abhijeet Name: Om Prakash Jain

Tel: (011) 24611910 Tel: (011) 24611910

Email: [email protected] Email: [email protected]

About Infomerics:
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Annexure 1: Details of Facilities

Name of Facility Date of Coupon Maturity Size of Rating

Issuance Rate/ Date Facility Assigned/
IRR (Rs. Crore) Outlook
Long Term- Term IVR BBB/ Stable
- - - 9.25 (IVR Triple B with
Loan
Stable Outlook)
Long Term Bank IVR BBB/ Stable
- - - 67.75* (IVR Triple B with
Facility – Cash Credit
Stable Outlook)
* includes proposed facilities of Rs. 4.00 crore
Annexure 2: List of companies considered for consolidated analysis: Not Applicable

Annexure 3: Facility wise lender details

https://www.infomerics.com/admin/prfiles/Len-Faridabad-Steel-jan23.pdf

Annexure 4: Detailed explanation of covenants of the rated instrument/facilities: Not

Applicable

Note on complexity levels of the rated instrument: Infomerics has classified instruments
rated by it on the basis of complexity and a note thereon is available at www.infomerics.com.