| ACC Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities of ACC Limited (ACC).
CRISIL Ratings notes the announcement on May 15, 2022 by Holcim Ltd (Holcim), ultimate parent of Ambuja Cements Ltd (Ambuja Cements; 'CRISIL AAA/Stable/CRISIL A1+'), to divest its entire shareholding in Ambuja Cements and ACC by signing a binding share purchase agreement with India’s Gautam Adani-led Adani group for a total consideration of Rs 50,181 crore. Holcim holds 63.11% shares in Ambuja Cements and 54.53% in ACC (50.05% through Ambuja Cements and 4.48% directly). Subsequently, the Adani group via its acquisition vehicle -- Endeavour Trade and Investment Ltd -- made an open offer for acquisition of additional 26% stake in each of Ambuja Cements and ACC. At full subscription, the size of the open offer would be Rs 31,140 crore. CRISIL Ratings is monitoring the progress and further developments with respect to this transaction.
The ratings continue to reflect robust operating efficiency of ACC and strong financial risk profile because of healthy cash flow. These strengths are partially offset by susceptibility to the commoditised and cyclical nature of the cement industry. Any substantial leveraging of the balance sheet or change in financial policies, which may weaken the financial risk profile, will be a key rating sensitivity factor.
For the three months through March 2022, the standalone sales volume declined around 3% (year-on-year) owing to muted demand over the high base of the corresponding quarter in the previous year. During the first quarter of 2022 (January to March), EBITDA margin declined to 14.7% from 20.4% in the corresponding quarter of the previous year due to steep rise in fuel prices and freight cost. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of ACC and Ambuja Cements Ltd (Ambuja Cements; 'CRISIL AAA/Stable/CRISIL A1+'). This is because, post the restructuring between ACC and Ambuja Cements, ACC became a subsidiary of Ambuja Cements. Moreover, both the companies have a common line of business, and have entered into a master supply agreement, which helps them operate symbiotically, optimising each other's plant capacities and spare inventories, and thus, benefit from operational and financial synergies.
Please refer annexure - Llist of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths Healthy market position ACC had total installed capacity of 36.0 million tonne per annum (MTPA) as on March 31, 2022. It has a large marketing infrastructure, pan-India presence and strong operational linkages with Ambuja Cements (31.45 MTPA capacity as on March 31, 2022). The companies together have 12-13% capacity share in the Indian cement market. Their nationwide presence shields operations from regional price volatility and demand-supply imbalances.
Strong financial risk profile Consolidated gearing has been healthy. Strong cash flow and nil debt translate into robust debt protection metrics. Reported networth of more than Rs 25,000 crore and cash & equivalents of Rs 11,359 crore at a consolidated level (Ambuja + ACC) as on December 31, 2021 also strengthen the balance sheet.
Weaknesses Susceptibility to volatility in input cost and realisations, and cyclicality in the cement industry |
Liquidity: Superior Under ACC, liquidity remains robust in the absence of external debt. Expected capital expenditure (capex) of around Rs 3,500 crore over the medium term, towards capacity addition and efficiency capex, is likely be funded through internal accrual. Cash and cash equivalent stood at Rs 7,570 crore as on December 31, 2021. Unutilised bank limit and healthy cash accrual will be sufficient to meet capex and working capital requirement.
Under Ambuja Cements, cash and equivalent stood at Rs 3,985 crore as on December 31, 2021. The company has announced a several capital expenditure (capex) to be spent over 2-3 years towards capacity addition, captive power plant, plant maintenance and other infrastructure developments. Unutilised bank lines and healthy cash accrual will sufficiently cover capex and working capital requirement. |
Outlook: Stable CRISIL Ratings believes ACC will maintain its strong financial risk profile over the medium term, supported by healthy cash accrual and low reliance on debt |
Rating Sensitivity Factors Downward Factors
|
About the Company ACC is the oldest cement company in India, with total installed capacity of 36.0 MTPA as on March 31, 2022. The company also manufactures ready-mix concrete and has 50 plants across the country. ACC and Ambuja Cements are parts of the Holcim group. As on March 31, 2022, Holcim held 63.11% stake in Ambuja Cements, which held 50.05% stake in ACC; Holcim also holds 4.48% stake in ACC through Holderind Investments Ltd.
For the three months ended March 31, 2022, ACC’s consolidated profit after tax (PAT) was Rs 396 crore on operating income of Rs 4,427 crore, compared with Rs 563 crore and Rs 4,292 crore, respectively, for the corresponding period last year.
For the three months ended March 31, 2022, Ambuja Cements’ consolidated (ACC + Ambuja) PAT was Rs 856 crore on operating income of Rs 7,900 crore, compared with Rs 1,228 crore and Rs 7,715 crore, respectively, for the corresponding period last year. |
Key Financial Indicators* (ACC - Consolidated)
*as per CRISIL Ratings-analytical adjustment
Key financial Indicators* (Ambuja Cements - Consolidated)^
*as per CRISIL analytical adjustment ^Financials for the year ended December 31; includes consolidated numbers of ACC |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
|
Annexure - List of Entities Consolidated
*Subsidiaries of Ambuja Cements | ^JV of Ambuja Cements #ceased to be a subsidiary w.e.f. November 18, 2020 |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 23-May-2022 in line with the lender-wise facility details as on 20-Aug-2021 received from the rated entity.
Criteria Details
|