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-ICRA upholds LBB+/A4+ ratings for Steel Exchange India facilities.

BANKING AND CREDIT NEWS-December 20, 2010--ICRA upholds LBB+/A4+ ratings for Steel Exchange India facilities(C)2010 M2 COMMUNICATIONS http://www.m2.com

20 December 2010 -- India's ICRA has reiterated the LBB+ and A4+ ratings on certain facilities of steel producer and trader Steel Exchange India Ltd (BOM:590037).

The agency issued the following press release:

ICRA has reaffirmed the LBB+ (pronounced L double B plus) rating to the Rs. 87.02 crore term loan and Rs. 140.00 crore (enhanced from Rs.100.00 crore) long term fund based bank facilities of Steel Exchange India Limited ("SEIL"/"the Company") +. The outlook on the rating is Stable. ICRA has also reaffirmed the A4+ (pronounced A four plus) rating to the Rs. 2.00 crore fund based bank facilities and Rs. 111.0 crore (enhanced from Rs. 86.00 crore) non fund based bank facilities of SEIL.

The retained ratings factor in the inherent cyclicality and the increasing competition in the highly fragmented steel rolled products industry, the exposure of the company to highly volatile raw material prices which has affected its operating margins during FY10 and the weak financial profile of the company characterized by high gearing, low operating profitability and low coverage indicators. However, the ratings favourably factor in the positive demand outlook for the Indian steel industry, demonstrated ability of the promoters to bring in funds by way of equity and unsecured loans and the anticipated cost savings from the backward integration of manufacturing operations, which is expected to improve margins post stabilization of operations. Though the capital expenditure towards backward integration and capacity expansion is likely to benefit the company in the long term, in ICRA's opinion the company could face off-take risks in the near term to an extent.

Company Profile

SEIL was incorporated in 1999 as a subsidiary of Pyxis Technology Solutions Ltd (PTSL). It was set up as a trading and logistics entity, to support steelexchangeindia.com, an online steel trading portal developed and launched by PTSL. Subsequently, the company ventured into steel trading and manufacturing operations. Currently the company has an installed capacity of 2,25,000 TPA for sponge iron, 3,30,000 TPA for billets/ingots, 2,70,000 TPA for TMT bars, 30,000 TPA for wires and 10 MW of power.

Recent Results

SEIL reported a Profit After Tax (PAT) of Rs. 4.96 crore on an operating income of Rs. 696.98 crore for the year ended March 31, 2010 as against a PAT of Rs. 4.79 crore on an operating income of Rs. 696.92 for the year ended March 31, 2009.

SEIL has clocked net sales of Rs. 354.13 crores for the six months ended September 2010, representing healthy growth of 16% over the sales in the corresponding period of the previous fiscal. During the same period, the company has reported a PAT of Rs. 13.68 crore against a PAT of Rs. 6.61 crore in the corresponding period of the previous fiscal.

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Publication:M2 Banking & Credit News (BCN)
Date:Dec 20, 2010
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