Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities and debt instruments of Carborundum Universal Limited (CUMI).

 

The rating reaffirmation continues to reflect the healthy business risk profile of the company, supported by the strong market position in key products, diversity in revenue profile and integrated operations. The ratings also factor in the strong financial risk profile with comfortable capital structure and robust debt protection metrics, and the financial flexibility emanating from being part of the Murugappa group. These strengths are partially offset by volatility in operating profitability across business segments.

 

CUMI’s revenue grew by ~3.6% to Rs 3808 crore during the first nine months of fiscal 2026 compared with Rs 3,677 crore in the previous corresponding period. Its ceramics division’s revenue registered growth of 6% and abrasives by 2% while the electro minerals remained flat on-year mainly on account of moderation of revenues from its key subsidiary (Volzhsky Abrasive Works (VAW)) in Russia due to the sanctions by US. The standalone India business which accounted for 58% of consolidated revenue also posted a modest revenues growth of 3.6% with volume growth in key product segments offset by pressure in realisations, from imports, especially in the abrasives segment. Over medium term, Crisil Ratings expects CUMI’s revenue to grow by 4-5% driven by healthy volume growth across its divisions, revenue addition from newly commenced projects and improved pricing competitiveness in the abrasive segment due to the removal of value-added tax (VAT) benefits enjoyed by Chinese exports, while the stiff competition at electro minerals segment is expected to continue.

 

CUMI’s operating margin fell to 11.42% during the first nine months of fiscal 2026 from 15.4% during the previous corresponding period impacted by widened losses from subsidiaries and partly due to moderation in standalone profitability. However, operating margins are expected to gradually recover to ~14% over the medium term, due to  improved margins from the domestic business and necessary corrective action at key loss making subsidiaries.

 

Despite moderation in profitability, CUMI’s business risk profile continues to remain healthy as it enjoys a leading market share in its product categories and remains one of the largest producers of abrasives in the domestic market with over 30% market share.

 

CUMI’s financial risk profile is expected to remain healthy over the medium term supported by a strong balance sheet with minimal debt. As on December 31, 2025, the company had total debt of Rs 290 crore which is expected to remain at almost similar level by the end of fiscal 2026. Cash generation is expected at Rs 450-500 crore which is expected to meet the company’s working capital requirement and capital expenditure (capex) plans of ~Rs 350-400 crore for the next fiscal. Over medium term, Crisil Ratings expects that interest coverage and total outside liabilities to tangible networth (TOLTNW) ratios are expected above 25 times and less than 0.5 time, respectively.

Analytical Approach

Crisil Ratings has consolidated the business and financial risk profiles of CUMI and its subsidiaries owing to operational and financial linkages between them.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Strong market position, diversified revenue profile and integrated operations: The business risk profile is supported by its well-diversified revenue streams. The abrasives division accounted for 44% of CUMI’s revenue in nine months of fiscal 2026 supported by robust demand in domestic and overseas markets. The acquired subsidiaries, viz RHODIUS Abrasive GmbH, CUMI AWUKO and Pluss Advanced Technologies, have started contributing to the revenues around Rs 610 crore in the nine months of fiscal 2026. The acquisitions in Germany have strengthened the market position of the company in Europe. Electro minerals accounted for 32% and abrasives accounted for 44% of the revenue in the first nine months of fiscal 2026. Ceramics and refractory segments accounted for the remaining 24%. Besides, another key South-Africa based subsidiary (Foskor Zirconia Ltd FZL) posted healthy revenue growth during the current fiscal contributing to the electro mineral segment. Contribution from the abrasives and electro mineral segment will remain material over the medium term owing to better volumes and high contribution from the newly commenced projects, which will be partly offset by corrective actions planned at Foskor and Awuko in the next fiscal.

 

The company has leading position in the domestic abrasives market and strengthening market position in the global electro minerals market. It also has a diversified customer base in terms of end-user industries with revenue contribution from international markets (50-55% of consolidated turnover) such as Russia, Australia, China, North America and Europe. Also, it caters to a diverse set of end-user industries, including auto original equipment manufacturers (OEMs), auto ancillaries, general engineering, fabrication, foundry, industrial projects, construction and metal work.

 

With a market share of over 30% in the bonded abrasives segment, CUMI is a strong player in the Indian abrasives industry. The acquisition of VAW in 2007 and FZL in 2008 established CUMI among a handful of global players with product offerings across the electro minerals value chain; besides, with these acquisitions, the company emerged as the second-largest producer of silicon carbide and the third-largest producer of zirconia globally. The company has achieved healthy cost advantage through its strategy of backward integration. It has integrated backwards into silicon carbide, zirconia and brown/white fused alumina, which are key inputs for its businesses. Crisil Ratings believes the diversified revenue profile will continue to benefit the business over the medium term. The operating margin is expected to recover to 14-15% supported by better utilisation of capacities, corrective actions at loss making subsidiaries and continued focus on cost reduction through debottlenecking.

 

Strong financial risk profile and financial flexibility as part of the Murugappa group: Gearing was below 0.04 time as on March 31, 2025, and will remain comfortable over the medium term despite high working capital need.

 

Despite volatile operating profitability, reducing debt levels have enabled strengthening of debt protection metrics as reflected in interest coverage and net cash accrual to total debt ratios at ~56 times and ~3.5 times, respectively, in fiscal 2025 compared with 45.63 times and 5.21 times in fiscal 2024. Despite expected moderation of operating profits in the current fiscal, the debt protection metrics are expected to remain healthy backed by strong cash accrual and moderate capital spending. The company is not planning to raise any material debt over the medium term to fund its capex plans. Liquidity remains healthy, as reflected in cash surplus of over Rs 385 crore as of December 31, 2025 (excluding the cash surplus at VAW) and moderately utilized bank lines of Rs 495 crore (standalone) for the past nine months ended December 31, 2025. Besides, CUMI is a leading company of the Murugappa group, which adds to its financial flexibility. The company has also grown through inorganic means over the years. That said, given the current volatile global political climate, any overseas acquisitions are unlikely in the near term. Nevertheless, any sizeable debt-funded acquisition in future will remain a monitorable.

Key Rating Drivers - Weaknesses 

Volatility in profitability across business segments: Profitability across key business segments — abrasives, electro minerals and industrial ceramics, and refractories have been volatile. The abrasives division had been impacted by competitive pressure and losses in the companies in Germany. However, with ramp-up in the other subsidiaries and corrective actions at its loss-making subsidiaries, profitability is expected to recover back to preceding levels. The electro minerals business is impacted owing to weak capacity utilisation in South Africa. Besides the revenue moderation due to sanctions by US & unfavourable currency conversion rates at VAW led to its fall in revenue contribution to ~14% to the consolidated revenue of CUMI in this fiscal from ~20% in the previous fiscals. The division’s profitability is impacted by dumping of Chinese product at lower price in the market and lower utilizations at VAW. China is the biggest producer of electro minerals in the world. The division’s profitability will improve in the medium term with cost cutting measures and various debottlenecking exercises implemented at the South African entity, continuous improvement in demand and rationalization of capacities at VAW. Also, better profitability in the industrial ceramics and refractories businesses will arrest any decline in overall profitability in the medium term.

 

Furthermore, continued improvement in industrial activity will boost profitability across business divisions over the medium term. Crisil Ratings, however, believes that profitability will remain susceptible to economic cycles over the medium term. Besides, trade regulations, sanctions and volatile foreign exchange movements render moderate susceptibility to business performance of its subsidiaries, as recently witnessed in case of VAW.

Liquidity Strong

Cash and equivalent stood at Rs 385 crore (excluding VAW) on consolidated basis as on December 31, 2025). Crisil Ratings expects that annual cash accrual of Rs 450-500 crore will sufficiently cover yearly estimated capex of ~Rs 350-400 crore next fiscal and modest debt obligation till next fiscal. Additionally, the company has access to bank limit of Rs 495 crore, which was moderately utilized at 20% for the past nine months ended December 31, 2025. Besides, given the company’s strong fund-raising abilities and expected healthy cash accrual annually, Crisil Ratings believes CUMI will maintain strong financial flexibility over the medium term.

ESG Profile of CUMI

Crisil Ratings believes that CUMI’s Environment, Social, and Governance (ESG) profile supports its credit risk profile. The manufacturing sector has moderate impact on the environment and social impact, given the nature of its operations and their influence on the surrounding community.

 

Key ESG highlights:

• CUL aims to achieve net zero emissions by 2050. The Company also has set its intermediate targets for 2030 for GHG emission intensity reduction by 25%, Energy intensity reduction by 20%, Water intensity by reduction 20%, Waste intensity reduction by 25% over Fiscal 2025 baseline.
• Cumi also aims to increase the share of renewable energy in its total electricity energy consumption to 50% by the end of fiscal 2030.
• At standalone level, the company’s lost time injury frequency rate (LTIFR) decreased to 0.92x (including both employees and workers) in fiscal 2025, as compared to 1.83x in fiscal 2024.
• CUL governance structure is characterized by ~57% of its board comprising of independent directors, ~14%-woman board directors, high average attendance of independent directors at the Board and committee meetings (100%) and 100% investor complaint redressal.

Outlook Stable

Crisil Ratings believes CUMI will maintain its strong business risk profile over the medium term driven by diversified revenue streams and strong market position. Operating profitability is also expected to benefit from improvement in domestic business and corrective action at loss making overseas subsidiaries. Besides, the company  will maintain its strong financial risk profile driven by healthy cash generating ability and well-managed balance sheet.

Rating sensitivity factors

Upward factors:

• Significant improvement in scale of operations, while maintaining strong market positions in key verticals, and improvement in operating margin to 16-17%, leading to better than expected cash accruals
• Prudent expansion plans and working capital management resulting in continued strong debt metrics
• Substantial increase in cash surplus

 

Downward factors:

• Decline in scale of operations leading to pressure on operating profitability and cash generation
• Increase in gearing beyond 1.2 times owing to acquisitions or larger-than-expected debt-funded capex or working capital requirement.

About the Company

CUMI, part of the Rs 90,178 crore Chennai-based Murugappa group, manufactures abrasives, ceramics, refractories and electro minerals. The company has manufacturing plants in several locations across India, besides having plants in Russia, Germany, South Africa and Australia, and marketing operations in China, the Middle East and North America.

 

CUMI reported net profit of Rs 208 crore on operating income of Rs 3808 crore in first nine months of this fiscal compared with net profit of Rs 269 crore on operating income of Rs 3677 crore in the corresponding period of fiscal 2025.

Key Financial Indicators

As on/for the period ended March 31	Unit	2025	2024
Revenue	Rs crore	4,894	4,702
Profit after tax (PAT)	Rs crore	299	476
PAT margin	%	6.1	10.13
Adjusted debt / adjusted networth	Times	0.04	0.04
Interest coverage	Times	56.11	45.63

Note: Crisil Ratings-adjusted numbers.

Any other information: Not applicable