Bombay Coated cuts leverage as debt coverage declines

Bombay Coated And Special Steels Limited reduced debt-to-equity to 2.00 times at June 30, 2026, from 4.31 times in Fiscal 2024, as equity rose and borrowings fell from March 31, 2026. However, Bombay Coated’s debt-service coverage ratio declined from 1.98 times in Fiscal 2024 to 1.44 times for the period ended June 30, 2026.

How did Bombay Coated reduce debt-to-equity to 2.00 times?

Bombay Coated reduced its debt-to-equity ratio because total equity increased faster than total borrowings through Fiscal 2026, followed by a decline in borrowings at June 30, 2026. The company defines debt-to-equity as total long-term and short-term borrowings divided by total equity, comprising equity share capital and other equity. The ratio fell from 4.31 times in Fiscal 2024 to 3.33 times in Fiscal 2025, 2.78 times in Fiscal 2026 and 2.00 times at June 30, 2026.

Total equity increased from Rs 54.36 crore in Fiscal 2024 to Rs 121.58 crore in Fiscal 2026, while total borrowings rose from Rs 234.16 crore to Rs 338.45 crore over the same period. Equity therefore more than doubled while borrowing growth was lower in percentage terms. Bombay Coated attributed the declines in the ratio in Fiscal 2025 and Fiscal 2026 to the proportionately higher increase in equity relative to borrowings.

The June 30, 2026 balance-sheet position showed total borrowings of Rs 273.69 crore and total equity of Rs 136.62 crore. Borrowings were Rs 64.76 crore lower than the Rs 338.45 crore reported at March 31, 2026, while equity was Rs 15.04 crore higher than the Fiscal 2026 balance. The June 30, 2026 figures are not annualised, but the debt and equity amounts are point-in-time balance-sheet measures.

Why did Bombay Coated’s debt-service coverage decline?

Bombay Coated’s debt-service coverage ratio declined because debt service increased in each completed fiscal-year comparison cited by the company. Debt-service coverage measures earnings available for debt service divided by debt service. Bombay Coated’s stated framework describes debt service as principal repayments and interest obligations, making the ratio different from debt-to-equity, which compares balance-sheet borrowings with equity.

The ratio decreased by 0.21 points to 1.77 times in Fiscal 2025 from 1.98 times in Fiscal 2024, primarily because of increased principal payments, according to Bombay Coated. It then declined by 0.02 points to 1.75 times in Fiscal 2026, primarily because debt service increased. The June 30, 2026 ratio of 1.44 times was below each of the three reported fiscal-year ratios, although the company states that the period’s figures are not annualised.

Earnings available for debt service increased to Rs 89.13 crore in Fiscal 2026 from Rs 77.03 crore in Fiscal 2025. Debt service, however, increased to Rs 50.84 crore from Rs 43.44 crore, limiting the ratio despite the higher earnings figure. For the period ended June 30, 2026, earnings available for debt service were Rs 32.66 crore and debt service was Rs 22.69 crore, producing the disclosed 1.44-times ratio.

What operating measures affect Bombay Coated’s debt servicing?

Bombay Coated’s disclosed debt-service calculation is affected by profit after tax, tax expense, interest expense, depreciation and amortisation, and loss on sale of property, plant and equipment or intangible assets. In Fiscal 2026, interest expense rose to Rs 35.71 crore from Rs 31.24 crore in Fiscal 2025. Depreciation and amortisation also rose to Rs 12.60 crore from Rs 8.63 crore, contributing to earnings available for debt service under the company’s reconciliation.

Revenue from operations rose to Rs 1,266.82 crore in Fiscal 2026 from Rs 1,055.71 crore in Fiscal 2025, while earnings before interest and tax, or EBIT, increased to Rs 76.50 crore from Rs 68.40 crore. EBIT margin nevertheless declined to 6.04% from 6.48%, a reduction of 44 basis points. Bombay Coated attributed the decline primarily to an increase in cost of materials consumed as a proportion of revenue from operations.

Profit after tax margin also declined to 2.41% in Fiscal 2026 from 2.72% in Fiscal 2025, with Bombay Coated citing higher material costs and other operating expenses. Profit after tax increased in absolute terms to Rs 30.54 crore from Rs 28.67 crore, but the margin comparison shows that profit growth did not match revenue growth. Sustained improvement in coverage would therefore depend on the relationship between earnings, interest expense and principal-repayment requirements rather than on revenue alone.

How do working capital and supplier concentration affect coverage?

Bombay Coated’s working-capital requirement can affect its liquidity because the company procures raw materials, maintains inventory and extends credit to customers. Net working-capital days increased to 70 days in Fiscal 2026 from 63 days in Fiscal 2025, as average working capital increased relative to revenue. The Fiscal 2024 measure was 66 days, meaning the Fiscal 2026 result was higher than both of the preceding disclosed fiscal-year measures.

For the period ended June 30, 2026, net working-capital days were 58 days, calculated using 91 days rather than a full year. At that date, inventory was Rs 125.46 crore and trade receivables were Rs 165.41 crore. Bombay Coated states that longer customer credit periods, shorter supplier credit periods or delayed customer deliveries can increase working-capital needs, inventory holding costs and payment-collection delays.

Supplier concentration is another stated operating dependency. JSWSCP L accounted for 86.65% of Bombay Coated’s Fiscal 2026 steel-coil purchases, compared with 84.58% in Fiscal 2024 and 85.13% for the period ended June 30, 2026. Fiscal 2026 purchases from JSWSCP L were Rs 103.42 crore out of total steel-coil purchases of Rs 119.36 crore.

Bombay Coated states that a disruption to its authorised service partner arrangement with JSWSCP L, or an inability to continue it on commercially acceptable terms, could affect raw-material procurement and operations. Steel-coil costs can also be affected by domestic and international demand and supply, import volumes, logistics, tariffs, foreign-exchange movements and coking-coal availability. These factors matter to debt servicing because material costs affected Bombay Coated’s Fiscal 2026 margins.

What else must hold for the lower leverage ratio to persist?

The 2.00-times debt-to-equity ratio will remain lower than the Fiscal 2024 level only if the relationship between borrowings and equity remains favourable. At June 30, 2026, equity of Rs 136.62 crore was equal to half of total borrowings of Rs 273.69 crore, which produces the reported ratio. A future increase in borrowings without a corresponding increase in equity would change that relationship.

Plant utilisation and demand are additional disclosed conditions. At June 30, 2026, utilisation was 63.84% for the slitting line, 59.66% for the cut-to-length line, 30.49% for the embossing line and 48.06% for the shearing line. Bombay Coated states that lower demand, breakdowns or maintenance shutdowns can result in underutilisation and higher per-unit fixed costs, which may affect margins used in debt-service calculations.

Conclusion

Bombay Coated’s financial data show two different movements: balance-sheet leverage declined as equity rose relative to borrowings, while debt-service coverage declined as debt-service requirements increased. The ratio comparisons are not interchangeable, because debt-to-equity uses balance-sheet amounts whereas debt-service coverage compares the period’s earnings available for debt service with principal and interest-related debt service.

The next disclosures to watch are total borrowings, total equity, debt service, interest expense and earnings available for debt service. Bombay Coated has said it will continue to disclose the listed key performance indicators at least annually for one year after listing, or until the utilisation of issue proceeds disclosed in the offer document, or for another period required under Securities and Exchange Board of India regulations.