Case 1 – Re-Rolling Mill

Additional working capital secured

₹ 0 Cr

Promoter equity infusion

₹ 0 Cr

Background

A mid-sized steel rolling mill in Gujarat, with revenues of ₹450 crore, was in the process of approaching formal rating agencies to secure additional working capital limits. The promoters had already availed significant term loans for plant modernization, which increased leverage on the balance sheet.

Challenge

The shadow rating exercise placed the company at BB, primarily because of two reasons: (i) a weak Debt Service Coverage Ratio (DSCR of 1.1x), and (ii) high reliance on short-term borrowings. The rating note highlighted that without intervention, the formal rating outcome would likely be below investment grade, limiting their ability to raise funds at competitive rates.

Interventions

Under a 4-month retainership arrangement, we worked closely with the finance team to:

Outcome

At the end of the engagement, the company’s financial metrics had visibly improved. DSCR rose to 1.5x, and Debt/Equity reduced from 2.1x to 1.4x. The subsequent formal rating process resulted in a BBB– rating, enabling the company to secure an additional ₹100 crore working capital line at an interest reduction of ~100 bps.

Key Takeaway

For capital-intensive industries like steel, early shadow rating diagnosis can help avoid rating downgrades and instead plan structured improvements. Proactive corrective action over 4-6 months can shift a company from speculative grade to investment grade, unlocking cheaper credit and investor confidence.