Rama Steel hits 5% upper limit, stock up 89% in 13 days on improved outlook

On December 20, Brickwork Ratings [BWR) had upgraded the long-term rating to BWR BBB with a Stable outlook and short-term rating to BWR A3+ for the bank loan facilities of RSTL

Shares of Rama Steel Tubes (RSTL) hit a new high, and were frozen at the 5 per cent upper circuit at Rs 412.90 on the BSE on Thursday in an otherwise weak market on improved demand outlook. Since December 20, 2021, in 13 trading days, the stock of iron & steel products company has zoomed 89 per cent from levels of Rs 218.25.

Till 09:48 am; a combined 328,160 equity shares had changed hands and there were pending buy orders for 116,485 shares on the NSE and BSE. In comparison, the S&P BSE Sensex was down 1.3 per cent at 59,433.

RSTL is Ieading manufacturer in the steel tube industry. RSTL products range includes MS ERW black pipes from 15mm to 200mm diameter pipes and G.l. Pipes from 15mm to 150mm NB in light, medium and heavy sizes. RSTL has a subsidiary in UAE and a step-down subsidiary in Nigeria which has strengthened the company's presence in global markets.

On December 20, Brickwork Ratings [BWR) had upgraded the Iong-term rating to BWR BBB with a Stable outlook and short-term rating to BWR A3+ for the bank loan facilities of RSTL.

The rating upgrades factors in significant improvement in the business and financial risk profile of RSTL in FY21 and H1FY22. Business profile has improved via an increase in overall capacity from 168,000 metric tonne per annum IMTPAJ in FY20 to 228,000 MTPA in FY21 which has led to an increase in revenue and EBITDA. Financial risk profile has improved due to retention of profits and infusion of interest free unsecured loan by the promoters which has improved the capital structure and credit ratios (net debt to EBITDA in FYZ1 2.85x, FY20: 8.16x).

The Outlook is Stable on account of improvement in credit profile and improved demand outlook for various end-user sectors such as infrastructure, irrigation, telecom etc. RSTL has rolling orders from its customers through a distribution and dealership network, which provides revenue visibility in the medium term, the rating agency said.

Meanwhile, on December 28, RSTL had announced capacity expansion of additional 30,000 MTPA at Khopoli Plant, Maharashtra. The total installed capacity at unit at Khopoli is 132,000 MTPA. Out of this additional capacity of 60,000 MTPA was added in FY 21, the company said.