Credit Rating Details

Rating Agency: CARE Ratings Limited

Nature of Event: Upgradation

Facility 1: Long Term/Short Term Bank Facilities

  • Amount: ₹25.00 Crore
  • Previous Rating: CARE BBB; Stable / CARE A3
  • Revised Rating: CARE BBB+; Stable / CARE A3+

Facility 2: Long Term Bank Facility

  • Amount: ₹95.01 Crore
  • Previous Rating: CARE BBB; Stable
  • Revised Rating: CARE BBB+; Stable

Reason for Rating Revision

The rating upgrade factors in improvement in capacity utilization and financial risk profile of the company. CARE Ratings also considers the classification of Bengal Energy Limited (BEL; rated CARE A; Stable/ CARE A1) as a related party from FY26 onwards, following reclassification of ultimate shareholding at promoter level where Thermic Steel Company Pvt Ltd (TSCPL) became the ultimate holding company for both KML and BEL.

Key Rating Drivers

Strengths:

  • Experienced and resourceful promoters with Radhey Shyam Jalan, CMD, overseeing day-to-day operations
  • Improvement in capital structure with overall gearing ratio improving to 0.59x as on March 31, 2026 from 0.71x as on March 31, 2025
  • Debt protection metrics improved significantly: interest coverage ratio improved to 2.59x in FY26 from 1.23x in FY25
  • Gross cash accruals improved to ₹16.41 crore in FY26 from ₹3.25 crore in FY25
  • Total debt/GCA improved to 6.25x as on March 31, 2026 from 38.15x as on March 31, 2025
  • Strategic relationship with Bengal Energy Limited: 35% of KML's purchases sourced from BEL in FY26
  • Presence of backward integration with sinter plant (3,60,000 MTPA) and 4.7 MW waste heat-based power plant
  • Improved capacity utilization: 90% in FY26 (from 72% in FY25) and further to 96% in Q1FY27

Financial Performance:

  • Total operating income: ₹782.89 crore in FY26 (₹717.68 crore in FY25) - 9% YoY growth
  • PBILDT: ₹25.07 crore in FY26 (₹12.76 crore in FY25)
  • PBILDT margin: 3.20% in FY26 (1.78% in FY25)
  • PAT: ₹1.05 crore in FY26 (-₹6.09 crore in FY25)
  • Q1FY27 performance: TOI ₹228.23 crore, PBILDT ₹7.29 crore, PAT ₹1.02 crore, interest coverage 7.52x

Weaknesses:

  • Exposure to commodity price fluctuations (raw materials account for 84% of cost of sales in FY26)
  • Cyclical nature of steel industry with intense competition from unorganized sector
  • Single-product profile with low profitability margins
  • Exposure to increasing environmental compliance requirements

Liquidity Position

Adequate liquidity as of March 31, 2026:

  • Cash and liquid investments: ₹10.07 crore
  • Current ratio: 1.18x
  • Average fund-based working capital utilization: 65.43% during 12 months ended July 2026
  • Debt repayment obligation: ₹5.30 crore in FY26 (fully prepaid)
  • FY27 debt repayment obligation: negligible

Rating Sensitivities

Positive Factors:

  • Increase in scale of operations and operating margin beyond 6% sustained
  • Maintenance of overall gearing ratio below 0.4x with TD/PBILDT ratio below 2x

Negative Factors:

  • Moderation in average sales realization from current levels
  • Substantial debt-funded capex resulting in gearing above 1.00x

Outlook: Stable

The stable outlook reflects that the entity is likely to sustain its satisfactory financial risk profile backed by favourable demand scenario in the near to medium term.

Additional Information

  • Company contemplating forward integration unit (under discussion stage, not finalized)
  • Full linkage with Orissa Mining Corporation Limited for iron ore procurement
  • Installed pig iron capacity: 2,35,000 MTPA
  • Promoter support: TSCPL infused ₹5 crore as unsecured loans in FY26