Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of AIA Engineering Ltd (AIA) to ‘Stable’ from ‘Positive’ while reaffirming the rating at ‘Crisil AA+’. The short-term rating has been reaffirmed at ‘Crisil A1+’.

 

The outlook revision follows the expected moderation in AIA’s operating performance versus previous expectation, with only a modest growth expected in fiscal 2026, after a relatively weaker fiscal 2025, which witnessed lower sales volume caused by operational challenges (logistical issues) and challenges in conversion of mines from forged steel to high chrome grinding media.

 

Operating income declined by ~12% on-year in fiscal 2025 to Rs 4,287 crore, with ~14% reduction in volume. This decline was due to challenges within the mining segment (largest revenue contributor), shipment issues and challenges in mines conversion. Additionally, destocking by few customers further contributed to the drop in volume. Despite this decline, the company managed to maintain stable operating margin of over 25% on account of favourable product mix, stable raw material costs and cost savings from its renewable energy initiatives. The revenue growth in fiscal 2026 is expected to remain moderate at ~5-7% with some recovery in demand from the key customers, though revenue will remain lower than fiscal 2024 levels. Margin is expected to remain strong at ~23-25%.

 

The company’s overall business risk profile remains strong, supported by its dominant position in the Indian market and a duopoly presence in the global high chrome grinding media and mill liners industries. Exports remain a critical component of the company’s operations, representing ~65% of the total revenue. AIA’s strong market position enables the company to command competitive pricing and pass-through increases in input and freight costs to customers, typically with a lag of 3-6 months. Although grinding media accounts for a larger proportion of the company’s volume, castings which are higher-value and higher-margin products have witnessed marginal increase in their share of overall sales, positively impacting realisation and margin in fiscal 2025.

 

In line with its growth strategy, the company has expanded its capacity in the rubber mill liner segment. Furthermore, the company increased its stake in Vega MPS Pty Ltd (VMPS) to 56% in fiscal 2025, up from 43% in fiscal 2024. This acquisition enhances the company’s strategic positioning in the mining sector, as VMPS specialises in the design and supply of mining liners, thus contributing favourably to overall profitability. Additionally, the company plans to invest $50 million in expanding its grinding media capacity by 50,000 tons per annum each in China and Ghana in a phased manner to address logistical challenges, reduce freight costs and enhance supply chain reliability.

 

Financial risk profile is robust, backed by sizeable networth of over ~Rs 6,900 crore as of March 2025 and modest working capital debt. Modest capital expenditure (capex) plans of Rs ~150-200 crore per fiscal (including Overseas Capex) to be comfortably funded through internal accrual and cash surplus.

 

The above-mentioned strengths are partially offset by large working capital requirement and partial susceptibility of profitability to fluctuations in raw material prices and foreign exchange (forex) rates.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of AIA and its subsidiaries, Welcast Steels Ltd (74.85% stake) and Vega Industries (Middle East) FZE (100%). This is because of close operational and financial linkages among all entities, which are collectively referred to as AIA.

 

Please refer Annexure - List 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: High chrome grinding media accounts for 20% of the ~3 million tonne grinding media market. AIA commands a high global market share in the high chrome grinding media segment and is the second largest player globally and the biggest in India. The company’s strong market position is driven by superior technology, presence across key segments, efficient aftersales services and longstanding client relationships in all end-user segments.

 

• Diversified revenue profile: The revenue mix benefits from diversity across end-user segments and geographical reach. AIA sells mill parts and components to the cement, mining, thermal power plants and aggregate industries. Within the mining industry, the company services ores of different minerals such as copper, gold and iron across various geographies. It derived ~65% of its revenue from exports in the past 2–3 years, and the balance from the domestic market. Revenue registered compound annual growth rate (CAGR) of ~19% from fiscal 2021 to fiscal 2024 post which fiscal 2025 experienced on-year decline of ~12% due to lower sales volume on account of shipment issues, challenges in conversion of mines and destocking by few customers. Over the medium term, revenue is expected to grow at a CAGR of ~5–7% driven by steady volume growth.

 

• Sustained healthy operating efficiency: Despite decline in revenue, the company managed to maintain stable operating margin of over 25% on account of favourable product mix, stable raw material costs and cost savings from its renewable energy initiatives. Over the medium term, the operating margin should sustain at 23-25% with changes in the product mix and volatility in raw material prices, primarily iron and steel. Strong bargaining power with customers enables AIA to pass on fluctuations in raw material prices, albeit with a lag of 1-2 quarters. Nonetheless, the company’s operating margin will remain healthy, driven by strong market position in the high chrome grinding media segment amid limited competition and low threat of substitution. Large capital requirement and technological expertise required in metallurgy to cater to the specific needs of individual mines add to the entry barriers of the industry.

 

• Robust financial risk profile: The financial risk profile is supported by large estimated networth of over ~Rs 6,900 crore as on March 31, 2025, healthy cash accrual, negligible debt leading to comfortable debt protection metrics and strong liquidity. Gearing was below 0.1 time over the past decade and will remain strong over the medium term. Besides, strong liquidity of over Rs 4,000 crore as on March 31, 2025, and healthy accrual of Rs 900–1,100 crore will comfortably fund planned capex of ~Rs 400 crore over the next two fiscals.

 

Weaknesses:

• Large working capital requirement: The company had sizeable inventory and receivables of 118 days and 71 days, respectively, as on March 31, 2025. Grinding media is an operationally critical consumable for mines and AIA maintains substantial finished goods inventory across geographies to cater to the needs of its customers. The working capital requirement is expected to remain large over the medium term and will be funded through a prudent mix of internal accrual, strong liquid surplus and external debt.

 

• Susceptibility of profitability to fluctuations in raw material prices and forex rates: The operating margin remains susceptible to changes in the prices of inputs (mainly steel scrap and ferrochrome) and forex rates, as exports account for ~65% of sales. The company has maintained its operating margin, driven by its healthy market position and the criticality of its products. The company follows a proactive and adoptive hedging policy to limit the impact of fluctuations in forex rates on receivables. AIA hedges around 50% of its net forex exposure in most markets by way of six-month rolling forwards. Additionally, given its large exports, the company avails of a cover from Export Credit Guarantee Corporation of India Ltd (ECGC) to address counterparty risk. Besides, exports to risky countries are against letters of credit or on cash against documents (CAD) basis.

Liquidity: Strong

The company had cash and marketable securities of Rs 4,000 crore as on March 31, 2025. Fund-based limit of over ~Rs 1,000 crore was utilised less than ~15% on average over the 12 months through March 2025. Healthy annual cash accrual of Rs 900–1,100 crore over the medium term should suffice to cover capex of Rs ~150–200 crore per annum.             

 

ESG profile of AIA

Crisil Ratings believes that the ESG profile of AIA supports the company’s already strong credit risk profile. The industrial machinery and consumables sector has a moderate environmental and social impact, driven by raw material sourcing strategies and energy-intensive processes.

 

ESG highlights:

• AIA’s scope 1 and 2 emissions (53,612 KgCO2e/Rs crore of revenue) and energy consumption intensities (435 GJ/Rs crore of revenue) were reduced by ~20% and ~9%, respectively, on an annual basis, calculated over fiscals 2022 to 2024.
• Share of renewable energy in the total energy mix stood at ~17-20% in fiscal 2024.
• AIA reported nil lost time injury frequency rate of employees and zero complaints under POSH for the fiscal 2024.
• The entire workforce received training on skills and safety and the overall attrition rate at ~5% was relatively low compared with the performance of the peers.
• AIA’s governance structure is characterised by ~33% of the board comprising of independent directors, ~33% women board directors, high attendance of independence directors in the board and committee meetings and extensive financial disclosures.

Outlook: Stable

The business risk profile of AIA will continue to benefit from its healthy market position and diversified revenue profile. Financial risk profile should also remain strong over the medium term on the back of steady cash accrual and large liquid surplus, notwithstanding the ongoing capex.

Rating sensitivity factors

Upward factors:

• More-than-anticipated revenue growth over the medium team and operating profitability sustained at ~25%
• Efficient working capital management and continued robust financial risk profile

 

Downward factors:

• Significant moderation in operating performance due to steep fall in revenue or decline in operating profitability to below 18% on a sustained basis
• Significant stretch in the working capital cycle, sizeable debt-funded capex or acquisition weakening the capital structure with ratio of net debt to earnings before interest, taxes, depreciation and amortisation above 1 time on a sustained basis

About the Company

AIA was set up in 1978 as Ahmedabad Induction Alloys Pvt Ltd by Mr Bhadresh Shah. It was listed on the stock exchanges with an initial public offering in 2005. AIA manufactures high-chrome grinding media, liners and diaphragms, collectively known as mill internals. These are used for crushing and grinding operations in the cement, power utility and aggregates and mining industries. AIA has one manufacturing subsidiary in India and ten marketing entities overseas. As of March 2025, the company had capacities to produce 3,40,000 MT of grinding media and 1,20,000 MT of mill liners and is in the process of adding additional capacity of 1,00,000 MT of grinding media with China and Ghana plant each having capacity of 50,000 TPA.

Key Financial Indicators (consolidated)

Particulars	Unit	2025	2024
Revenue	Rs crore	4287	4854
Profit after tax (PAT)	Rs crore	1060	1137
PAT margin	%	24.7	23.4
Adjusted debt/adjusted networth	Times	0.07	0.07
Interest coverage	Times	70.8	48.4

 

Any other information: Not applicable