Rating Rationale
January 25, 2018 | Mumbai
Ambuja Cements Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.800 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
Rs.100 Crore Short Term Debt CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank facilities and debt programme of Ambuja Cements Ltd (Ambuja Cements) at 'CRISIL AAA/Stable/CRISIL A1+'.

The ratings continue to reflect the company's healthy market position in northern and western India, robust operating efficiency, and strong financial risk profile because of healthy cash flows. These strengths are partially offset by exposure to risks related to commoditised and cyclical nature of the cement industry.

Analytical Approach

CRISIL has combined the business and financial risk profiles of Ambuja Cements and ACC Ltd (ACC; rated 'CRISIL AAA/Stable/CRISIL A1+'). This is because post the restructuring between ACC and Ambuja Cements, ACC has now become a subsidiary of Ambuja Cements. Moreover, both companies have a common line of business, which helps them operate symbiotically, and thus, benefit from operational and financial synergies. 

Key Rating Drivers & Detailed Description
* Healthy market position
Ambuja Cements had a total installed capacity of 29.65 million tonne per annum (mtpa) as on December 31, 2017, with capacity spread across North and Central (41%), West and South (37%), and East (22%) India. Ambuja Cements and ACC together have a 16% 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 was healthy (debt of Rs 37 crore and networth of Rs 16,014 crore as on December 31, 2016) and liquidity sufficient (Rs 4428 crore). Strong cash flow and low debt levels translate into robust debt protection metrics. There is no major debt-funded capital expenditure (capex) plan over the medium term.
Ambuja Cements has acquired a majority stake in ACC from LafargeHolcim for Rs 3,500 crores and issued fresh shares to LafargeHolcim. Extent of outflow from the Indian operations of LafargeHolcim will be limited to dividend payout and will not impact the company's financial risk profile.
* Susceptibility to risks relating to input cost, realisations, and cyclicality in the cement industry
Capacity addition in the cement industry tends to be sporadic because of long gestation period for setting up of facility and the large number of players adding capacity during the peak of a cycle. This has led to unfavourable price cycles in the past. Moreover, profitability remains susceptible to volatility in prices of inputs, including raw material, power, fuel, and freight. Increase in pet coke prices over the past year has impacted the profitability of several cement players. Realisations and profitability are also affected by demand, supply, offtake, and other regional factors.
Outlook: Stable

CRISIL believes Ambuja Cements will maintain its strong debt protection metrics over the medium term, supported by low debt levels.
Downside scenario
* Inorganic growth plan or larger-than-expected capex weakening financial risk profile
* LafargeHolcim utilising Ambuja Cements' financial resources to support group companies

About the Company

Ambuja Cements is one of India's leading cement manufacturers. In January 2006, Holcim Ltd (Holcim) acquired 14.8% of Ambuja Cements' equity shares. Following an open offer in April 2006, Holcim assumed management control of the company. Globally, Holcim and Lafarge SA announced their merger in April 2014. Completed in July 2015, the merged entity was renamed LafargeHolcim Ltd (LafargeHolcim; rated 'BBB/Negative/A-2' by S&P Global). Post the proposed restructuring between ACC and Ambuja Cements becoming effective from August 12, 2016, ACC has now become a subsidiary of Ambuja Cements.

Key Financial Indicators
Particulars Unit 2016* 2015
Revenue Rs crore 20345 9481
Profit After Tax (PAT) Rs crore -1171^ 699
PAT Margins % -5.8 7.4
Adjusted debt/adjusted networth Times 0.00 0.00
Interest coverage Times 40.94 49.12
*Includes consolidated numbers of ACC Limited post September 2016.
^Adjusted for amortisation of goodwill (Rs 2592 crore) arising on amalgamation of Holcim (India) Pvt. Ltd. with Ambuja Cements

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size
(Rs  Crore)
Rating Assigned 
with Outlook
NA Short Term Debt NA NA 7-365 days 100 CRISIL A1+
NA Cash Credit NA NA NA 100 CRISIL AAA/Stable
NA Letter of credit & Bank Guarantee NA NA NA 700 CRISIL A1+
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Short Term Debt  ST  100  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Fund-based Bank Facilities  LT/ST  100  CRISIL AAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AAA/Stable 
Non Fund-based Bank Facilities  LT/ST  700  CRISIL A1+    No Rating Change  03-04-17  CRISIL A1+    --    --  -- 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 100 CRISIL AAA/Stable Cash Credit 100 CRISIL AAA/Stable
Letter of credit & Bank Guarantee 700 CRISIL A1+ Letter of credit & Bank Guarantee 700 CRISIL A1+
Total 800 -- Total 800 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Cement Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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