Rationale

 The revision in outlook to Stable on the long-term and issuer ratings of Maharashtra Seamless Limited (MSL or the company) factors in the expectation of a steady operational and financial risk profile, backed by improved outlook on upstream capital spending and timely re-deployment of the acquired off-shore drilling rig. While the second wave of the pandemic is resulting in operational disruptions, similar to last year, these are expected to be temporary in nature. Comfortable order-book position, together with continued ramp up of operations at United Seamless Tubulaar Private Limited (USTPL) (entity acquired under the Insolvency and Bankruptcy Code (IBC) proceedings) are expected to support the company's revenues in the near term. Further, despite the performance pressures faced by the company in FY2021, owing to the pandemic impact in H1 FY2021, its financial profile remained strong underpinned by healthy and range-bound profit margins and low financial leverage at a consolidated level (estimated Total Debt/Tangible Net Worth) of 0.3 time as on March 31, 2021 (Estimated; E) and Net Debt/OPBDITA of 0.8 times for FY2021 E). Despite the low financial leverage, the ratings factor in the sizeable credit support extended by the company to its overseas associates in the form of corporate guarantees and stand-by letters of credit (SBLCs), adjusting for which the leverage ([net debt + guaranteed debt]/ operating profit) stands higher (estimated at ~1.6 times as on March 31, 2021 E). In this context, ICRA draws comfort from a gradual reduction in guaranteed debt obligations over the years, besides improved earnings visibility from the underlying assets following lease charter renewals over a past couple of years, which is expected to keep the reliance of these entities on incremental funding support low from MSL in the near to medium term, unlike the recent years. The ratings also continue to draw strength from MSL's leadership position in the domestic seamless pipes sector, supported by its sizeable capacity, presence in the high value-added, large-diameter pipe segment, which faces relatively low competition, and its status as a registered vendor for major domestic oil producers and refiners. The ratings, however, remain constrained by the sizeable exposure to group companies, which continues to constrain its return metrics. Moreover, the impact of discontinuance of anti-dumping duty (ADD; valid till October 2021 at present) on the company's sales and profitability, if any, remains to be seen and, hence, remains a rating sensitivity. In this context, ICRA draws comfort from the protectionist measures adopted by the Government.