Rating Rationale
April 29, 2025 | Mumbai
Maccaferri Environmental Solutions Private Limited
Ratings upgraded to 'Crisil BBB/Stable/Crisil A3+'
 
Rating Action
Total Bank Loan Facilities RatedRs.100 Crore
Long Term RatingCrisil BBB/Stable (Upgraded from 'Crisil BBB-/Stable')
Short Term RatingCrisil A3+ (Upgraded from 'Crisil A3')
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 ratings on the bank facilities of Maccaferri Environmental Solutions Private Limited (MESPL) to ‘Crisil BBB/Stable/Crisil A3+’ from ‘Crisil BBB-/Stable/Crisil A3’.

 

The upgrade reflects the improvement in the business risk profile majorly driven by improving operating margins and revenue in line with Crisil’s expectations. The margins improved to 6.2-6.5% in fiscal 2025 from 5.78% in fiscal 2024 and the same shall sustain in fiscal 2026 as well driven by improved operating efficiencies. Further, the revenue also improved to around Rs. 500 crores in fiscal 2025 from Rs. 430 crores in fiscal 2024 driven by increased demand for the company’s products and addition of new customers over the years. Resultantly, the revenue is expected to grow by 10-15% in fiscal 2026 as well. Improvement in the operating margin amid growing scale of operations shall remain monitorable.

 

The upgrade also reflects healthy financial risk profile driven by low dependence on external debt leading to low gearing and comfortable debt protection metrics. Liquidity is adequate too reflected by low bank limit utilisation and free reserve of Rs. 37 crores as of December-2024.

 

The ratings reflect the extensive experience of the management in the environmental solutions industry along with the company’s established market position and healthy financial risk profile. These strengths are partially offset by moderate operating profitability and large working capital requirement.

Analytical Approach

Crisil Ratings has revised its analytical approach and de-consolidated the business and financial risk profiles of MESPL and Maccaferri Infrastructure Private Limited (MIPL). This is because the management has decided to sell off 51% of its share in MIPL to another company. Hence, there is no operational or financial fungibility and transactions are now managed at arm’s length basis.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position and extensive experience of the management: The management of the Maccaferri India group has more than a decade of experience in the environmental solutions industry; their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business. Further, it is a subsidiary of Officine Maccaferri S.P.A. (OMS) from which it gains operational synergies that have helped the business risk profile. OMS operates in over 70 countries and has a diverse product portfolio. MESPL has recorded a turnover of around Rs 500 crore in fiscal 2025 which is expected to grow by 10-15% in fiscal 2026. Revenue shall further grow with continuous orders from existing customers. Sustained improvement in revenue over the medium term shall remain a key monitorable.

 

  • Healthy financial risk profile: The financial risk profile should remain supported by steady accretion to reserve and the absence of any sizeable debt over the medium term. Total outside liabilities to tangible networth ratio is expected at 1.0-1.1 times for fiscals 2025 and 2026. Networth is estimated at Rs 160-170 crore as on March 31, 2025, as compared to Rs 193 crore a year ago. The decline is networth was on account of share buy-back by the company; however, networth is expected to improve going forward, backed by steady accretion to reserve. Debt protection metrics shall continue to be strong, with interest coverage ratio at 18-19 times for fiscals 2025 and 2026. The company is undertaking a capital expenditure (capex) of Rs 45-50 crore for consolidating its manufacturing capacities; this is to be incurred by internal cash accrual and hence, it shall not impact the financial risk profile.

 

Weaknesses:

  • Moderate operating profitability: Operating margin of MESPL has been modest at 1.0- 3.5% for the three fiscals through 2023. It improved to 5.77% in fiscal 2024, backed by efficiently managed debtors and absence of any major bad debts. The margin is impacted by intense competition and estimated at 6.0-6.5% in fiscal 2025 (~6.6% recorded till December 2024). Sustained improvement in the operating margin to 8-9% over the upcoming fiscals supported by increasing revenue from the manufacturing segment and improved efficiencies shall remain a key monitorable.

 

  • Large working capital requirement: Gross current assets (GCAs) are estimated at 200-240 days over the three fiscals through March 2025, driven by high debtors of 100-120 days and inventory holding of 50-60 days. GCAs are expected at 180-200 days in the upcoming fiscals as well. Despite the working capital-intensive operations, the company’s dependence on the working capital debt remains low because of ample free reserve available in the business, which are used to fund the working capital cycle. Going forward, with ramp up in the scale of operations and higher credit period offered to customers, the working capital requirement is expected to increase, hence, its efficient management along with continued low reliance on debt will remain monitorable.

Liquidity: Adequate

Expected cash accrual of Rs 16-17 crore post dividend payout in the upcoming fiscals as against nil repayment obligations will aid liquidity. Bank limit of Rs 30 crore was utilised at about 30% over the 12 months through February 2025. Unencumbered cash and cash equivalents stood sizeable at Rs 37 crore as on December 31, 2024 further supporting the liquidity. However, the company is currently undertaking a large capex towards consolidating its manufacturing capacities for which it may utilize the unencumbered cash and cash equivalents.

Outlook: Stable

MESPL will continue to benefit from the extensive experience of its management and established relationship with clients.

Rating sensitivity factors

Upward factors:

  • Sustained improvement in revenue and operating margin at 8-9%, leading to higher-than-expected net cash accrual
  • Improvement in the working capital cycle, resulting in continued low reliance on external debt

 

Downward factors:

  • Decline in revenue or operating margin dropping below 3-4%, leading to lower-than-expected net cash accrual
  • Further stretch in the working capital cycle or any large, debt-funded capex impacting the liquidity and financial risk profile

About the Company

MESPL, incorporated in 1998, is involved in the manufacture, supply, erection and installation and trading of gabions, reno-mattresses wire, geosynthetics and natural fibre products. OMS had 84.56% shareholding in the company as on March 31, 2024.

Key Financial Indicators

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

430.29

403.66

Reported profit after tax (PAT)

Rs crore

21.07

4.32

PAT margin

%

4.90

1.07

Adjusted debt/adjusted networth

Times

0.00

0.06

Interest coverage

Times

15.86

2.88

Any other information: Not applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 30.00 NA Crisil BBB/Stable
NA Non-Fund Based Limit NA NA NA 49.75 NA Crisil A3+
NA Proposed Working Capital Facility NA NA NA 20.25 NA Crisil BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 50.25 Crisil BBB/Stable   -- 30-01-24 Crisil BBB-/Stable   --   -- --
Non-Fund Based Facilities ST 49.75 Crisil A3+   -- 30-01-24 Crisil A3   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 5 YES Bank Limited Crisil BBB/Stable
Cash Credit 25 Axis Bank Limited Crisil BBB/Stable
Non-Fund Based Limit 49.75 Axis Bank Limited Crisil A3+
Proposed Working Capital Facility 20.25 Not Applicable Crisil BBB/Stable
Criteria Details
Links to related criteria
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)
Basics of Ratings (including default recognition, assessing information adequacy)

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