Brickwork Ratings [BWR) has upgraded the long-term rating to BWR BBB with a Stable outlook and short-term rating to BWR A3+ for the bank loan facilities of Rama Steel Tubes Ltd IRSTL or the company).
The rating upgrade factors in significant improvement in the business and financial risk profile of RSTL in FY21 and H1FY22. Business profile has improved via an increase in overall capacity from 1,68,000 metric tonne per annum IMTPAJ in FY20 to 2,28,000 MTPA in FY21 which has led to an increase in revenue and EBITDA. Financial risk profile has improved due to retention of profits and infusion of interest free unsecured loan by the promoters which has improved the capital structure and credit ratios (net debt to EBITDA in FY21 2.85x, FY20: 8.16x).
The rating continues to derive comfort from the company's experienced promoters, established long track record of over four decades with a demonstrated execution capability, diversified product portfolio and geographical'presence. However, these strengths are partially offset by the working capital intensive operations, susceptibility to cyclicality and fluctuation in raw material prices and intense competition in industry.
The Outlook is Stable on account of improvement in credit profile and improved demand outlook for various end-user sectors such as infrastructure, irrigation, telecom etc. RSTL has rolling orders from its customers through a distribution and dealership network, which provides revenue visibility in the medium term.
BWR has principally relied on the consolidated audited financial results of RSTL upto 31 March 2021, H1FY22 results and projected financials for FY22 and FY23, and publicly available information / clarifications provided by the company's management.
Shares of Rama Steel Tubes Limited was last trading in BSE at Rs. 218.25 as compared to the previous close of Rs. 228.05. The total number of shares traded during the day was 3129 in over 218 trades.
The stock hit an intraday high of Rs. 220.70 and intraday low of 213.70. The net turnover during the day was Rs. 675293.00.