Sponge Iron

Incorporated in 2004, Kalindi Ispat Private Limited (KIPL) is based in Bilaspur, Chhattisgarh and promoted by the Singhania family. The company is engaged in the manufacturing of sponge iron and has two DRI Kiln with an installed capacity of 60,000 metric tonne per annum (MTPA). The company purchases both domestic coal & South African coal and crude iron as its raw material for manufacturing of sponge iron. The company sells mainly in the markets of Chhattisgarh, Madhya Pradesh and adjacent states to the billet and TMT bar manufacturers.

Acuité has considered the standalone business and financial risk profile of KIPL to arrive at this rating.

Adequate The company’s liquidity is adequate marked by steady net cash accruals and low fund based bank limit utilisation. The net cash accruals stood at Rs. 8.19 Cr in FY 2023 as against long term debt repayment of only Rs. 1.83 Cr during the same period. The fund based limit utilization for the past six months ended September, 2023 stood at low levels at only 8.47 per cent. Further, the current ratio also stood comfortable at 2.22 times as on March 31, 2023. The cash and bank balances of the company stood at Rs. 0.13 Cr as on March 31, 2023. However, working capital management of KIPL is intensive in nature marked by Gross Current Assets (GCA) days at 120 days as on March 31, 2023 as compared to 112 days as on March 31, 2022 on account of moderate inventory days and significant advances to the suppliers. Furthermore, KIPL is undergoing a capex plan to enhance the sponge iron production capacity and install a billet unit along with a captive power plant. The total cost of the project is Rs.136.65 Cr out of which, Rs.94 Cr will be funded through a term loan and rest is to be financed by promoters’ contribution and internal accruals. The term loan is yet to be sanctioned. Acuité believes that, going forward the liquidity position of the company will remain adequate owing to the steady cash accruals.

Acuité believes that the outlook on KIPL will remain 'Stable' over the medium term on account of the long track record of operations, experienced management and healthy financial risk profile. The outlook may be revised to 'Positive' in case of significant growth in revenue while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile or further elongation in its working capital cycle.