Iron Ore

Crisil Ratings has reaffirmed its ratings on the bank facilities ofAgravanshi Private Limited (APL) at ‘Crisil BBB/Stable/Crisil A3+’. The ratings reflect the extensive experience of the promoters of APL in the trading business and the company’s healthy financial risk profile. These strengths are partially offset by its small scale of operations and exposure to intense competition, cyclicality in the end-user industry andsignificant investments in non-related business

Crisil Ratings has evaluated the standalone business and financial risk profiles of APL

Extensive industry experience of the promoters: The promoters’ experience of about two decades in trading of iron and allied products, understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. Presence of over 17 years in iron ore trading has enabled APL to maintain margins of 5-6% for the past fiscals. However, in fiscal 25, on account of the negative-price trends of iron-ore impacting the realisations and higher raw material prices, the margins had been impacted to an estimated 1.6%. However, the performance has revived in improved realisations from fiscal 26, considering which the margins are estimated in the range of 5-5.5%. APL mainly procures from Rungta Mines Ltd, one of the largest mining players in eastern India. Being one of the largest customers of Rungta Mines Ltd and given the long-term association, APL enjoys cash discounts and timely delivery. Healthy financial risk profile: Capital structure is healthy due to low reliance on external funds as indicated by estimated gearing of 0.15 time and estimated total outside liabilities to adjusted networth (TOLANW) ratio of 0.57 time as on March 31, 2025. Debt protection metrics have been moderate due to low leverage and healthy profitability.The interest coverage and net cash accrual to total debt (NCATD) ratios were 3.43 times and 0.52 time, respectively, for fiscal 2025 on account of one-off reduction experienced in operating margins due to industrial downturn. The debt protection metrics are expected to revive back to earlier levels of 11-13 times with improved margins in the medium term.

Small scale of operations: Business risk profile remains constrained by the company’s limited scale of operations as indicated by topline of Rs 235 crore in fiscal 2025, on account of exposure to susceptible risks of iron-ore prices fluctuations, which could impact the realisations. Sustained expansion in volume along with stable realisation, leading to steady growth in scale, will remain monitorable. Presence in a highly fragmented industry: The iron ore material trading industry has organised playersas well as numerous local and unorganised entities catering to regional markets. This limits bargaining power with customers and suppliers, resulting in a low operating margin. Any significant change in scale and operating margin will remain a key rating sensitivity factor. Significant investments in non-related business: The Company has invested amounts of Rs. 79 crores in purchase of a resort, through an asset reconstruction company, which is expected to be refunded in the medium term. Further investment in unrelated businesses or cash flow to refurbish the existing facilities may adversely affect APL’s capital structure and liquidity and will remain monitorable.

Bank limit utilisation was at a 41%average for the 12 months through August 25. Annual cash accrual is expected at Rs13-14 crore against yearly term debt obligation of Rs 29-35lakh over the medium term. The estimated current ratio is healthy at 2.71 times on March31,2025. The promoters are likely to extend support in the form of equity and unsecured loan to meet working capital requirement and repayment obligations. Low gearing and moderate networth provide financial cushion in case of any adverse condition or downturn in the business

Stable Crisil Ratings believes APL will continue to benefit from its longstanding relationships with principal suppliers and the experience of the management to mitigate the inherent risks in the trading business

Upward Factors - Increase in revenue by more than 25% with moderate profitability leading to higher-than-expected net cash accrual - Improvement in the working capital cycle leading to reduction in gross current assets Downward Factors - Significant decline in revenue or fall in operating margin leading to net cash accrual of less than Rs 7 crore - Large working capital requirement or major debt-funded capital expenditure - Significant increase in unrelated business investment adversely impacting the capital structure and liquidity.