India Ratings and Research (Ind-Ra) has assigned an 'IND A'/Stable rating to BMW Industries Limited's additional bank loan facilities of ₹4,800.00 million, while affirming existing ratings on ₹2,566.80 million bank facilities at 'IND A'/Stable/'IND A1'. This rating action reflects the company's sustained operating and financial performance, driven by improved realizations and stable contribution from its conversion business.

Key Highlights

• BMW Industries operates primarily in the conversion business, accounting for over 75% of sales
• Long-term association with key customer Tata Steel Limited, with contracts renewed until March 2029
• Consolidated revenue of ₹6,286.00 million with EBITDA margins of 23.40%
• Capacity enhancement in the tube segment and planned greenfield facility commissioning in Bokaro

Financial Performance and Outlook

BMW Industries has demonstrated a steady operational performance. The company's consolidated revenue increased to ₹6,286.00 million, up from ₹5,982.00 million in the previous year. The EBITDA margins remained largely stable at 23.40%, compared to 24.50% in the previous period.

Rating Rationale

The rating factors in BMW Industries' sustained operating and financial performance, driven by:

1. Improved realizations
2. Stable contribution from the conversion business
3. Renewal of contracts with key customer Tata Steel Limited
4. Capacity enhancement in the tube segment

Debt-Funded Capex and Future Prospects

While the rating is supported by the company's growth prospects, it is constrained by the ongoing debt-funded capex of around ₹7,500.00 million for the Bokaro project. This significant investment may moderate credit metrics. However, Ind-Ra expects BMW Industries' business profile to strengthen in the near to medium term, aided by:

• Higher capacity utilization in the pipe and tube segment
• Phased commissioning of its greenfield facility in Bokaro

Product Portfolio and Customer Concentration

BMW Industries maintains a diversified product portfolio, including:

• TMT bars
• Steel pipes
• Galvanized sheets

However, the company faces high customer concentration, with 68% of revenue coming from its key customer. This concentration is expected to reduce with the commissioning of the new greenfield manufacturing facility.

Liquidity and Debt Obligations

The company's liquidity position is considered adequate:

• Cash flow from operations improved to ₹1,155.00 million
• Average utilization of fund-based limits (₹680.00 million) was around 75%
• Debt obligations of approximately ₹270.00 million and ₹280.00 million for the next two years, respectively

Conclusion

BMW Industries' rating reflects its strong operational performance and strategic expansion plans. While the debt-funded capex poses some challenges, the company's long-term contracts and diversification efforts are expected to support its credit profile. Investors and stakeholders should monitor the timely completion and ramp-up of the greenfield project, as it will be crucial for maintaining healthy credit metrics in the future.

BMW Industries Limited , a leading steel processing company, reported a challenging first quarter, with revenue declining 14.4% year-on-year to Rs 148.70 crores. The company attributed this drop primarily to temporary shutdowns by key customers, which impacted volumes across its Cold Rolled Mill (CRM), rolling mill, and tube segments.

Financial Performance

Despite the revenue setback, BMW Industries maintained a relatively strong operating EBITDA margin of 21.2%, though this represented a contraction from 24.4% in the same quarter of the previous year. The company's profit after tax stood at Rs 15.20 crores, translating to a 9.9% margin.

Operational Highlights

During the quarter, BMW Industries made significant strides in expanding its manufacturing capabilities:

• Commissioned two additional tube mills at the Jamshedpur facility
• Installed a 1.28-megawatt rooftop solar installation at Jamshedpur
• Increased tube manufacturing capacity by 60,000 metric tons annually, bringing the total to approximately 600,000 metric tons per annum across all units

Bokaro Greenfield Expansion

The company reported that Phase-1 of its Bokaro Greenfield expansion remains on schedule. BMW Industries expects to commence revenue generation from the color-coated sheet plant by Q4, marking a significant milestone in its growth strategy.

Future Outlook

Management provided an optimistic medium-term guidance, projecting:

• 75% revenue CAGR over the next three fiscal years, driven by the Bokaro project
• 45% CAGR in operating EBITDA over the same period
• Operating EBITDA margins expected to stabilize at about 11% by FY28
• PAT growth at a robust 40% CAGR over the next three years
• PAT margin anticipated to stabilize at about 5% by FY28
• Return on capital employed projected to exceed 18%

Order Book

BMW Industries highlighted two major contracts from Tata Steel:

1. A Rs 365.00 crore contract for the Tubes division, extended until H1 FY25
2. A Rs 1,700.00 crore contract for CGL-3 (Continuous Galvanizing Line)

Debt Position

The company's net debt increased from Rs 120.00 crores in March to Rs 160.00 crores in June. However, management assured that the debt-equity ratio is expected to remain below 2:1 even at peak levels during the expansion phase.

Harsh Bansal, Managing Director of BMW Industries, commented on the results: "Despite short-term challenges, our fundamentals remain strong, and we are well-positioned to deliver sustained profitable growth. We continue to execute with discipline and strategic clarity, focusing on long-term value creation."

As BMW Industries navigates through this transitional phase, the company remains confident in its ability to capitalize on the growing demand for value-added steel products in India, supported by its strategic expansions and operational enhancements.