| Alicon Castalloy Limited | ||||||
| Ratings reaffirmed at 'Crisil A/Positive/Crisil A1' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its 'Crisil A/Positive/Crisil A1' ratings on the bank facilities of Alicon Castalloy Ltd (ACL).
The ratings reflect the sustenance of healthy business risk profile of ACL aided by strong orderbook, increasing wallet share for existing customers and change in revenue and product mix. Further, the financial risk profile continues to be strong, supported by healthy capital structure and comfortable debt protection metrices of the company.
In fiscal 2025, the company registered revenue growth of 10% on-year at Rs 1,720 crore, driven by healthy offtake from original equipment manufacturers (OEMs), especially in the passenger vehicle (PV) segment. The company recorded double-digit revenue growth despite a weak performance in the third quarter of fiscal 2025 owing to subdued demand in the key overseas market.
Over the medium term, the company’s revenue is expected to grow by 10-12% per annum, driven by increasing wallet share of existing clients, addition of new products and customers that will be further backed by rising proportion of four-wheeler segment in the orderbook which require products with high weightage, and launch of new products for electric vehicle (EV)/tech-agnostic products. The business risk profile will be supported by healthy segmental diversity, diversified product portfolio, established relationship with its clientele and change in segmental mix towards PV and commercial vehicle (CV) segments from current skewness towards two-wheelers.
The operating margin in fiscal 2025 moderated to 11.3% (12.6% in fiscal 2024) owing to impact of decline in the gross margin and shift in the sales mix as low sales in the CV segment and carbon neutral products were not entirely compensated by the growth in two-wheeler volume. Over the medium term, with increasing share of high margin products partly offset by the increased overhead costs for new product developments will result in sustenance of operating margin at 12-12.5%.
ACL also plans to carry out capital expenditure (capex) of Rs 300-400 crore during fiscals 2026 to 2028, which is expected to be funded by a prudent mix of internal accrual and debt. Overall debt will remain around Rs 400 crore over the medium term. Consequently, debt/earnings before interest, depreciation, taxes and amortisation (Ebitda) is expected to remain below 1.8 times (fiscal 2025: 1.8 times) and interest coverage ratio to sustain at 4.5-5.0 times as against 4.45 times in fiscal 2025.
The ratings continue to reflect the established market position of ACL in the aluminium die-casting auto components sector, driven by a diverse clientele and longstanding customer relationship. The ratings also factor in healthy financial risk profile because of low gearing, above average debt protection metrics and healthy liquidity. These strengths are partially offset by moderately large working capital requirement due to increasing exports and growth in new business and volatility in demand in the two-wheeler and PV segments. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of ACL and its wholly owned subsidiaries, Alicon Holding GmBH, Austria-based Illichmann Castalloy GmbH and Slovakia-based Illichmann Castalloy S.R.O. That is because all the entities, collectively referred as ACL, have significant operational linkages and are under a common management. |
Key Rating Drivers & Detailed Description Strengths: Established market position in aluminium casting auto-component sector ACL has a diversified product profile in the aluminium casting business, including cylinder heads, intake manifolds, engine support brackets, motor housing, battery housing and compressor housing. It has established market position in the aluminium casting auto component sector, driven by established client relationship and operations in India, Austria and Slovakia. Clientele includes major auto OEMs such as Hero Motocorp Ltd ('Crisil AAA/Stable/Crisil A1+'), Bajaj Auto Ltd ('Crisil AAA/Stable/Crisil A1+'), Maruti Suzuki India Ltd ('Crisil AAA/Stable/Crisil A1+'), Daimler India Commercial Vehicles Pvt Ltd ('Crisil AAA/Stable'), Mahindra and Mahindra Ltd ('Crisil AAA/Stable/Crisil A1+'), Honda Motors & Scooters industries, Toyota Industries Engine India and Ashok Leyland Ltd. Increase in business from new customers in the auto (mainly PV segment) and non-auto segments over the past three years further improved customer diversity. With the increasing share of business from new customers, contribution from new products, readiness of products for EV segment and improving exports, revenue growth is likely to be better. Crisil Ratings expects revenue growth to sustain at 10-11% year-on-year over the medium term.
Diversified revenue profile The company has geographic diversity in terms of exports and domestic sales with 22% export contribution in fiscal 2025, as well as customer diversity. Further, increasing sales from EV products and non-auto sales aid revenue. Improvement in revenue diversity is expected owing to ramp-up of new orders from existing as well as new customers with a strong and new product pipeline. This should help ACL to report better-than-industry growth in the medium term.
Healthy financial risk profile Debt protection metrics remained healthy with interest coverage and net cash accrual to total debt ratios of 4.45 times and 40%, respectively, in fiscal 2025. Debt/Ebitda stood at 1.78 times in fiscal 2025 and will remain below 1.8 times in the medium term. With improving profitability, the financial risk profile will strengthen over the medium term. The company is also likely to fund planned capex with a prudent mix of debt and internal accrual. Weaknesses: Large working capital requirement, led by increasing exports and growth in new business Despite working capital-intensive operations, the company has constantly managed to optimised its working capital cycle as reflected in gross current assets, receivables and inventory improving to 149, 106, and 32 days, respectively, as on March 31, 2025, compared with 163 days, 128 days and 36 days, respectively, as on March 31, 2024. Receivables, though have lowered compared with previous fiscal, are still high mainly due to increasing share of exports wherein receivable period is comparatively higher than for domestic customers. The prudent management of working capital with low dependence on short-term borrowings will remain monitorable.
Further, any delay in operationalisation of capex executed in recent years may impact the return on capital employed (RoCE), which stood at 12.5% in fiscal 2025. Ramp-up in scale of operations and profitability along with efficient working capital management will be crucial to improve RoCE on a sustained basis to over 13% and will remain monitorable.
Susceptibility to cyclicality in demand in the automobile industry The company currently derives more than 40% of the revenue from the two-wheeler segment. Currently the industry is growing at slow pace and is yet to reach the pre-pandemic level. While the revenue profile of ACL benefits from healthy customer diversity with none of the customers contributing to more than 15% of the revenue, the company remains susceptible to risks related to cyclical demand patterns inherent to the auto industry and ability of the OEMs to sustain their market share in the domestic and overseas markets. The company is focusing on reducing its two-wheeler concentration and improving its share in the PV and CV segments. High focus on research and development, wide product portfolio and faster adoption of new technologies like EV/tech-agnostic parts are expected to increase the share of business with customers over the medium term. |
Liquidity: Strong ACL is likely to enjoy healthy liquidity position supported by expected annual cash accrual of Rs 150-190 crore against yearly debt obligation Rs 60-80 crore over the medium term. Further, liquidity is aided by cash surplus of Rs 12 crore as on March 31, 2025. The company also had fund-based bank limit of Rs 250 crore which was utilised around 90% on average for the six months and is expected to improve with further optimisation of the working capital cycle. |
Outlook: Positive The business risk profile of ACL will continue to benefit from revenue diversification across auto segments and across customers. Revenue is expected to grow at a healthy rate of 9-14% over the medium term along with healthy operating margin, supported by its diversified product mix, established customer base along with strong orderbook. The financial risk profile is expected to remain healthy, supported by steady growth in cash accrual and healthy networth base despite elevated capex. |
Rating Sensitivity Factors Upward Factors
Downward Factors * Sharp decline in operating performance, resulting in decline in operating margin below 8% on a sustained basis. |
About the Company ACL was established as Enkei Castalloy Ltd (Enkei Castalloy), a joint venture between Pegasus Castalloy Ltd (an Indian company that manufactures cast-aluminium automotive components since 1990) and Enkei Corporation (in Japan; one of the largest manufacturers of alloy wheels in the world). Owing to sustained losses in the alloy wheels division, the promoters hived it off as a separate company, Enkei Wheels Ltd, and retained the casting business with effect from April 1, 2009. Enkei Castalloy was renamed as ACL on December 27, 2010. ACL manufactures aluminium castings including cylinder heads, support brackets, intake manifolds, crankshafts, and engine brackets, for use in the auto industry. Clients include key Indian auto OEMs as well as auto and engineering OEMs in the European market through its subsidiaries. ACL has manufacturing units in Pune (Maharashtra) and Binola (Haryana). |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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