Rationale

 The assigned rating draws strength from Surya Roshni Limited's (SRL) strong operational profile, supported by its established market position in the domestic electric resistance welded (ERW) pipes industry, its geographically-diversified manufacturing base and a pan-India distribution network, long-standing track record of over four decades and its established brands, Surya and Prakash Surya. The rating also takes into account the continued improvement in SRL's financial risk profile, led by sustained healthy operating performance, improved working capital management and ongoing de-leveraging of its balance sheet. ICRA expects the trend in improvement to continue and company's financial risk profile to strengthen over the medium term. The company is expected to clock a robust double-digit growth in FY2022, led by a surge in realisations as well as continued volumetric ramp up. ICRA expects the company to sustain healthy volumes. Together with steady profit margins, this is expected to help the company maintain healthy coverage metrics, despite working capital intensive nature of operations. ICRA notes that the steps being taken by the company to streamline its working capital cycle are favourably contributing to its cash flow generation and have enabled the company to prepay part of its debt obligations, facilitating faster deleveraging of its balance sheet. The rating is, however, constrained by the intense competition in the steel, lighting, as well as consumer appliances segment due to the presence of both organised and unorganised players. This moderates SRL's pricing power, making it more vulnerable to the volatility in raw material prices. Moreover, cyclicality inherent in the steel business is likely to keep margins and cash flows vulnerable to fluctuations in the raw material prices and demand for final products.