Swastik Pipe Limited

May 06, 2024

Ratings
Facility Amount Ratings Rating Action Complexity
(Rs. Crore) Indicator
22.74 * IVR BBB-; Stable
Long Term Bank
(Reduced from (IVR Triple B Minus Reaffirmed Simple
Facilities – Term Loan
Rs.27.95 crore) with Stable outlook)
IVR BBB-; Stable
Long Term Bank
70.81 (IVR Triple B Minus Reaffirmed Simple
Facilities – Cash Credit
with Stable outlook)
IVR BBB-; Stable
Long Term Bank 20.00
(IVR Triple B Minus Assigned Simple
Facilities – Cash Credit (Proposed Limit)
with Stable outlook)
79.24
Short Term Bank IVR A3
(including proposed Reaffirmed Simple
Facilities – ILC/FLC/ BG (IVR A Three)
limit of Rs.14.24 crore)
Short Term Bank 5.76 IVR A3
Assigned Simple
Facilities – ILC/FLC/ BG (Proposed Limit) (IVR A Three)
Total 198.55
(Rupees One hundred
and ninety-eight crore
and fifty-five lakhs
only)
#Outstanding as on February 29, 2024
Details of Facilities are in Annexure 1
Detailed Rationale
The assignment and reaffirmation of the ratings to the bank facilities of Swastik Pipe Limited
(SPL) continues to derive comfort from long track record of its operations under experienced
top management, diversified product portfolio and established relationship with customers and
suppliers. The ratings also consider its comfortable capital structure; albeit moderation in debt
coverage indicators in FY2023. The rating also positively notes the growth in scale of
operations in FY2023 and subsequently H1FY2024. However, these rating strengths
continues to remain partially offset by working capital intensive nature of its operations and
exposure to cyclicality associated with the steel industry.
Key Rating Sensitivities:
Upward factors
• Sustained growth in scale of operations with improvement in profitability and gross cash
accruals

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• Improvement in capital structure and improvement in debt protection metrics with
improvement in interest coverage to over 2.0x.
• Improvement in operating cycle and overall liquidity position of the company.
Downward Factors
• Deterioration in scale of operations and/or moderation in profitability resulting in moderation
in ICR to below 1.50x
• Moderation in the capital structure with overall gearing deteriorated above 1.5x
• Any large debt funded capital expenditure and/or further elongation of the working capital cycle
leading to deterioration in the financial risk profile.
List of Key Rating Drivers with Detailed Description
Key Rating Strengths
Experienced top management
SPL was incorporated in 1973 by Late Mr. Devki Nandan Bansal who had vast experience of
over 50 years in this industry. His son, Mr. Sandeep Bansal, is currently the Managing Director
of the company. He is a postgraduate in Business Management and has around 30 years of
experience in the industry. Other members of the board are also well-qualified and have more
than two decades of overall industry experience.
Long track record of operations and established relationship with customers and
suppliers
SPL has an operational track record of over four decades in the steel pipes and tubes industry.
Long standing presence in the industry has helped the Company establish healthy
relationships with both customers and suppliers. While the company procures HR coil, its
primary raw material from Tata Steel and SAIL, it sells its products to a diversified customer
base. The top ten customers contributed ~40% and ~36% of the total sales of the Company
in FY2023 and 9MFY2024 respectively. The Company is likely to benefit from its established
presence as well as healthy relationship with both customers and suppliers going forward.
Diversified product portfolio
SPL has a diversified product portfolio comprising of galvanized pipes, black pipes, CR coils,
precision pipes, tubular poles and mounting structures. These products have varied industrial
uses and are widely used for irrigation & sewage, water supply & plumbing, oil & gas and
automobiles. The company sells all its products under its registered brand “T.T. Swastik”.
Growth in scale of operation in FY2023 and in H1FY2024

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Total operating income of the company registered a y-o-y growth of ~17% in its total operating
income from Rs.608.71 crores in FY22 to Rs.711.32 crore in FY23 driven by steady
improvement in volume sales as well as average sales realisation owing to rising demand of
the main product manufactured by the company i.e., Steel pipes, CR/HRPO (Steel Coil and
Sheets) and ST Poles. In H1FY24, the company has achieved a topline of ~Rs.362 crore.
Further, the company estimated to achieve a top line of ~Rs.744 crore in FY2024. The EBITDA
margin of the company moderated marginally from 4.23% in FY22 to 3.84% in FY23 mainly
due to an increase in raw material cost and other operational and administrative overheads.
Consequently, the PAT margin moderated from 4.56% in FY22 to 1.26% in FY23. SPL
generated a PAT of Rs.4.10 crore on a TOI of Rs.361.68 crore during H1FY2024 as against
a PAT of Rs.0.45 crore on a top line of Rs.313.07 crore during H1FY2023. The improvement
in topline and profit in FY2024 fiscal year is in view of steady demand resulting in an increase
in volume sales. Also, the increase in scale of operations have resulted in better absorption of
fixed overheads thereby leading to increase in profit margins. The company’s ability to sustain
the growth in its topline while improving its profit margins will be a key rating monitorable,
going forward.
Comfortable capital structure; albeit moderate debt coverage indicators
The capital structure of the company remained comfortable as on March 31,2023, marked by
its comfortable leverage ratios and satisfactory tangible net worth base. The leverage ratios,
continued to remain comfortable and improved driven by continues accretion of profit to
reserves along with scheduled repayment of term loans. The long-term debt equity ratio and
overall gearing ratio stood comfortable at 0.18x and 0.59x respectively as on March 31,2023
(0.23x and 0.95x respectively as on March 31, 2022). Total indebtedness of the company
remained comfortable marked by TOL/TNW at 0.83x as on March 31,2023. However, the debt
protection metrics of the company as indicated by interest coverage ratio though improved
continues to remain moderate at 1.67x in FY23 vis-a-vis 1.35x in FY22. Total debt to EBITDA
and Total debt to GCA remained moderate at 4.68x and 7.62x respectively as on March
31,2023 (5.41x and 5.39 years respectively as on March 31,2022).
Key Rating Weaknesses:
Working capital intensive operations
The operating cycle of the company though improved to 99 days in FY2023 (116 days in
FY2022) continues to remain moderate. The company sells its products to traders, EPC
Contractors, tier 2 vendors of OEM’s such as Maruti, Bajaj, MNC’s as well as Government
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institutions. While payment from traders, EPC Contractors, vendors of OEM are received in 7-
30 days’ time, payment from Government is at times stretched up to 5-6 months. Also, the
company maintain inventory of around 40-45 days as a regular business practice. Further, the
company avails a credit of around 20-30 days from some of its raw material suppliers. The
average utilization of fund based working capital limits for twelve months through February
2024, stood high at ~95%.
Exposure to cyclicality associated with the steel industry
The primary raw material for the company is HR coil, the prices of which have been volatile in
nature. Hence, operating margin and realisations are susceptible to volatility in steel prices.
Also, the steel industry is sensitive to the shifting business cycles, including changes in the
general economy, interest rates and seasonal changes in the demand and supply conditions
in the market.
Analytical Approach: Standalone
Applicable Criteria:
Rating Methodology for Manufacturing Companies
Financial Ratios & Interpretation (Non-Financial Sector)
Criteria of assigning rating outlook
Policy of default recognition
Criteria – Complexity Level of Rated Instruments/Facilities
Liquidity: Adequate
SPL has adequate liquidity marked by its comfortable expected cash accruals over the
medium term as against debt repayment obligations. The company has a strong gearing
headroom as the overall gearing remained comfortable at 0.59x as on March 31, 2023
(considering subordinated unsecured loans of Rs.7.96 crore outstanding as on March 31,
2023, as quasi equity). However, the company’s operations are working capital intensive and
the average utilization of fund based working capital limits for the past twelve months through
February 2024, stood at ~95%. The current ratio stood comfortable at 2.20x as on March 31,
2023.
About the Company
Incorporated in 1973, New Delhi based Swastik Pipe Ltd (SPL), manufactures wide varieties
of Mild Steel/Carbon Steel ERW Black and Galvanized Pipes/ Tubes and tubular poles, which
have diversified industrial use such as for irrigation & sewage, water supply & plumbing, oil &
gas and automobiles. All the products of the Company are sold under its registered brand
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 “T.T. Swastik”. The manufacturing facilities of the Company are located at Bahadurgarh
(Haryana) and Kosi Kalan (Uttar Pradesh). The combined annual installed production capacity
of both the manufacturing facilities is 250,000 MT. The company has listed itself in National
Stock Exchange under SME Platform from October 12, 2022.

Financials (Standalone):
(Rs. crore)
For the year ended* / As On 31-03-2022 31-03-2023
Audited Audited
Total Operating Income 608.71 711.32
Total Income 612.20 717.13
EBITDA 25.77 27.29
PAT 27.94 9.06
Total Debt 139.37 127.75
Tangible Net worth (including quasi equity) 146.96 216.28
EBITDA Margin (%) 4.23 3.84
PAT Margin (%) 4.56 1.26
Overall Gearing Ratio (x) 0.95 0.59
*Classification as per Infomerics’ standards.
Status of non-cooperation with previous CRA:
India Ratings vide its press release date July 24, 2023 has maintained the rating in issuer not
cooperating category due to non-submission of information by the company.
Any other information: Nil
Rating History for last three years:
Sr. Name of Current Rating (Year 2024-25) Rating History for the past 3 years
No Instrument/ Type Amount Rating Date(s) & Date(s) & Date(s) & Rating(s)
. Facilities outstanding Rating(s) Rating(s) assigned in 2021-22
(Rs. Crore) assigned in assigned
2023-24 in 2022-23
April 04, 2023 - March 22, Septembe
2022 r 21, 2021
1 Long 22.74 * IVR BBB- IVR BBB-/Stable - IVR BBB- IVR
Term (Reduced from /Stable /Stable BB+/Stabl
Term Loan
Rs.27.95 e
crore)
2 Long IVR BBB- IVR BBB-/Stable - IVR BBB- IVR
Cash Credit Term 70.81 /Stable /Stable BB+/Stabl
e
3 Short 79.24 IVR A3 IVR A3 - IVR A3 IVR A4+
Term (including
ILC/FLC/
proposed limit
BG
of Rs.14.24
crore)

5
Sr. Name of Current Rating (Year 2024-25) Rating History for the past 3 years
No Instrument/ Type Amount Rating Date(s) & Date(s) & Date(s) & Rating(s)
. Facilities outstanding Rating(s) Rating(s) assigned in 2021-22
(Rs. Crore) assigned in assigned
2023-24 in 2022-23
April 04, 2023 - March 22, Septembe
2022 r 21, 2021
4 Long 20.00 IVR BBB- - - - -
Cash Credit Term (Proposed /Stable
Limit)
5 Short 5.76 IVR A3 - - - -
ILC/FLC/
Term (Proposed
BG
Limit)
#Outstanding as on February 29, 2024
Name and Contact Details of the Rating Analyst:
Name: Ms. Harshita Gupta Name: Mr. Avik Podder
Tel: (033) 46022266 Tel: (033) 46022266
Email: hdidwania@infomerics.com Email: apodder@infomerics.com

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Infomerics credit ratings are an opinion on the credit risk of the issue / issuer and not a recommendation to buy,

6
 hold or sell securities. Infomerics reserves the right to change or withdraw the credit ratings at any point in time.
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Annexure 1: Details of Facilities

Name of Facility Date of Coupon Maturity Size of Facility Rating Assigned/
Issuance Rate/ IRR Date (Rs. Crore) Outlook
March 22.74 * IVR BBB-/Stable
Term Loan - - 2028 (Reduced from
Rs.27.95 crore)
Cash Credit - - - 70.81 IVR BBB-/Stable
79.24 IVR A3
(including
ILC/FLC/ BG - -
- proposed limit of
Rs.14.24 crore)
- 20.00 IVR BBB-/Stable
Cash Credit - -
(Proposed Limit)
- 5.76 IVR A3
ILC/FLC/ BG - -
(Proposed Limit)
#Outstanding as on February 29, 2024
Annexure 2: Facility wise lender details:
https://www.infomerics.com/admin/prfiles/len-SwastikPipe-may24.pdf
Annexure 3: List of companies/Entities considered for consolidated analysis: Not
Applicable
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.