| Asian Fine Cements Private Limited | ||||
| Rating upgraded to 'CRISIL A / Stable' | ||||
| Rating Action | ||||
| ||||
| 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 upgraded its rating on the long-term bank facilities of Asian Fine Cements Private Limited (AFCPL; a part of the Asian group) to 'CRISIL A/Stable' from 'CRISIL A-/Stable.
The upgrade reflects improving business risk profile supported by improving year-on-year scale of operations which is expected to improve to over Rs 270 Cr in FY22 (against Rs 248 Cr a year ago) driven by improving presence of brand ‘Duraton’ in the market leading to higher business demand. Operating margins have remains at moderate level of around 15% and is expected to improve going forward with further ramp-up of scale of operations. Improving scale and stable profitability has also resulted in improvement in RoCE levels which is expected to improve at over 25% as on 31st Mar, 2022 (against 21% a year ago).
The rating also factors improvement in financial and liquidity profile driven by improving net cash accruals expected at over Rs 30 Cr comfortable against debt obligations of around Rs 10 Cr per annum over the medium term. Capital structure has also improved with prepayment of term debt resulting in expected total outside liabilities to tangible networth ratio expected of around 1.5 times as on 31st Mar, 2022. Debt protection metrics has also improved, supported by moderate profitability and reduction in debt resulting in interest coverage and net cash accrual to debt ratios are expected at over 15 times and 0.8 times, respectively, for fiscal 2022
The rating reflects strong operational, management and financial support from the parent, and improving financial risk profile. These strengths are partially offset by moderate scale of operations and moderate profitability of AFCPL. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the extent of support available to AFCPL from its parent, ACCPL. |
Key Rating Drivers & Detailed Description Strengths:
AFCPL is a subsidiary of ACCPL, and the parent has control over strategic and operational decisions and strong oversight over financial matters. AFCPL benefits from the established market position of ACCPL in the cement industry. The established position of the parent has supported revenue growth which is expected to improve to around Rs 275 Cr in FY22 (against Rs 248 Cr a year ago). ACCPL has provided necessary funding support to its subsidiary towards commencement of operations and towards stabilization of operations as well. Need-based support from the parent will continue to aid financial flexibility and support overall credit profile of the company.
The company’s financial risk profile has been improving supported by improving capital structure with total outside liabilities to tangible networth ratio expected to operate at around 1.5 times as on 31st Mar, 2022 (against 2.5 times a year ago). The same has been supported by pre-payment of term debt and healthy accretion to reserves resulting in improving networth which is expected at around Rs 60 Cr as on 31st Mar, 2022. Debt protection metrics has also improved, supported by moderate profitability and reduction in debt and hence in interest cost. Interest coverage and net cash accrual to debt ratios are expected at over 15 times and 0.8 times, respectively, for fiscal 2022.
Weaknesses:
Though the company’s scale of operations has been improving on an year-on-year basis as indicated by expected revenue of Rs 275 Cr (against Rs 247 Cr a year ago), the same continues to operate at moderate level. The company’s scale of operations is expected to improve as the company has been adding new customers and improving its brand presence in the market. The company’s ability to further improve scale of operations will remain a key monitorable.
The company has moderate operating profitability (in comparison to other players in the cement industry) which is expected to operate at around 14% in FY22 (against 15.1% a year ago). Slight dip has been on account of one-time marketing expenses incurred by the company during the year. Going forward, improvement in operating profitability supported by improvement in scale of operations will remain a key rating sensitivity factor. |
Liquidity: Strong Liquidity should remain supported by absence of any large, debt-funded capex. Cash accrual – expected at over Rs 30 crore per annum is expected to be comfortable against debt obligations of around 10 Cr per annum and would provide to support fund incremental working capital and capex requirements for capacity expansion. The sanctioned bank limit worth Rs 15 crore was utilised at just 34% on average over the 12 months through December 2021 supported by prudently managed working capital cycle. Current ratio is expected at around 1 time as on March 31, 2022; unencumbered and liquid investments were around Rs 10 crore as on December 31, 2021. |
Outlook: Stable AFCPL should continue to benefit from the extensive experience of its promoter, and healthy financial risk profile over the medium term. |
Rating Sensitivity factors Upward factors:
Downward factors:
|
About the Company Incorporated in June 2009 and promoted by Mr Harish Agarwal, ACCPL undertakes jobwork for exclusively manufacturing and grinding cement for ACC. Its two units in Solan (Himachal Pradesh) have monthly capacities of 30,000 tonne and 100,000 tonne.
AFCPL is 75% owned by ACCPL. Its plant in Rajpura, Punjab, began operations on February 27, 2018, and manufactures advanced cement with capacity of 1.5 million tonne per annum. |
Key Financial Indicators
|
Any other Information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
* - Issuer did not cooperate; based on best-available information
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 15 | ICICI Bank Limited | CRISIL A/Stable |
| Proposed Long Term Bank Loan Facility | 2 | Not Applicable | CRISIL A/Stable |
| Term Loan | 73 | ICICI Bank Limited | CRISIL A/Stable |
This Annexure has been updated on 13-Mar-23 in line with the lender-wise facility details as on 21-Feb-23 received from the rated entity
Criteria Details
|