| Indian Explosives Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 AA-/Stable/Crisil A1+' ratings on the bank facilities of Indian Explosives Private Limited (IEPL).
The company’s revenue declined marginally by ~6% in fiscal 2024 driven by lower realisation on account of decline in raw material cost. Operating margins increased after moderating in fiscal 2023 and is expected to sustain going forward. The financial risk profile remains strong on account of nil debt and healthy liquidity in the form of cash and equivalents.
The ratings continue to reflect the support IEPL receives from its parent Orica Ltd (Orica; rated ‘BBB/Stable/A2’ by S&P Global Ratings), and its strong financial risk profile driven by debt-free status and strong liquidity. These strengths are partially offset by subdued operating performance and intense competitive pressure. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of IEPL. Crisil Ratings has applied its parent notch-up framework to factor in support from Orica to IEPL due to 100% ownership. |
Key Rating Drivers & Detailed Description Strengths: Orica, a global leader in commercial explosives and explosives-related services, provides operational, financial, and technological support to IEPL. Owing to its worldwide presence, Orica helps IEPL procure part of its raw material requirement from other group companies. IEPL also receives technological support from Orica for developing new products, such as electronic detonators, underground bulk formulations, and seismic prospecting products. IEPL will continue to receive need-based operational, financial and technological support from its parent. IEPL has also received equity funding from Orica in fiscal 2023.
Strong financial risk profile IEPL has been debt-free since September 2009. Networth is at Rs 346 crore and total outside liabilities to tangible networth comfortable at 0.33 time as on March 31, 2024. Utilisation of fund based bank limit over the 12 months through October 2024 was negligible. With capital expenditure (capex) planned over the medium term with no debt, the financial risk profile is expected to remain strong. The capex is expected to be incurred via equity funding and internal accruals.
Weaknesses: IEPL’s operating performance has been modest over the past few years. Revenue growth has been modest over the years. However, the company is currently in expansion phase, and this is expected to support increasing scale. Over the past few years, operating margin had remained low at 2-3% owing to high raw material prices and intense competition. Last fiscal with contract renewals and easing raw material prices, margins have seen an increase. Also, IEPL has limited potential in the overseas markets on account of its no-compete clause with Orica. In addition, due to Orica’s philosophy of not supplying to the defence sector, IEPL has limited scope for sectoral diversification. IEPL is now looking at expansion plan to increase scale as well as to make operations more efficient. The capex plans and its impact on scale and operating profitability will be a key monitorable.
The explosives industry has a high entry barrier as players require industrial licenses and various clearances from government, Chief Controller of Explosives and Directorate General of Mines Safety. Sale of explosives is regulated by the Petroleum and Explosives Safety Organisation and the Joint Chief Controller of Explosives to prevent misuse. Though the company takes precautions at all stages from manufacturing to delivering, it remains susceptible to regulatory risks and intervention. |
Liquidity: Strong Liquidity will be supported by expected cash accrual of Rs 35-45 crore per annum over the medium annum against nil debt obligation. While the company will undertake capex over the medium term, it is expected to be funded by equity infusion and internal accruals. As per management, no debt is expected to be availed. IEPL is also expected to maintain liquid investments (including cash and equivalents) of over Rs 50 crore over the medium term. In addition, negligible utilisation of fund based bank limit enhances financial flexibility. |
Outlook: Stable IEPL will continue to benefit from the support extended by Orica; it should also remain supported by comfortable financial and liquidity risk profiles, backed by its debt-free status. The business risk profile will, however, be constrained by modest operating performance amid intense competition. |
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About the Company IEPL manufactures small- and large-diameter cartridges, bulk explosives, and electric and non-electric detonators. It has manufacturing facilities in Gomia (Jharkhand), Rourkela (Odisha), and Chandrapur (Maharashtra). IEPL is a 100% owned subsidiary of Orica. |
About Orica Orica is the world's largest supplier of commercial explosives and explosives-related mining services and employs 14,000+ people. It supplies general chemicals to a diverse range of industries, including agriculture, building and construction, food and beverage, pharmaceutical and personal care, plastics, pulp and paper, and water treatment. For the year through September 2024, Orica reported sales of AUD 7.7 billion and EBITDA of AUD 1.24 billion. |
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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 - 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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