| Maheshwari Mining Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2' | ||||||
| Rating Action | ||||||
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| 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 Maheshwari Mining Private Limited (MMPL) to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB/Stable/CRISIL A3+’.
The upgrade reflects strengthening of the business risk profile of MMPL, indicated by 50% on-year growth in revenue to over Rs 304 crore in fiscal 2022 from Rs 203.50 crore in fiscal 2021 and sustenance of the operating margin at healthy levels of over 35% leading to better-than-expected net cash accrual in fiscal 2022. Growth in revenue is driven by healthy order book for the underground mining, drilling and exploration segment and faster execution. The business risk profile is expected to keep strengthening over the medium term, with revenue visibility coming in from a well-diversified order book of Rs 1,679 crore and robust demand scenario for the end-user metals industry.
The ratings continue to reflect healthy operating efficiency, strong financial risk profile and sizeable order book of MMPL, along with extensive experience of the promoters in the mining industry. These strengths are partially offset by exposure to stringent regulations, customer concentration risk and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: The promoters, Mr Sanjiv Kumar Ganeriwala and his family members, have extensive experience in underground mine development and operations. Based in Burdwan, West Bengal, the promoters have been involved in the design, planning, exploration and development of underground mines for various metals for over one decade and have developed expertise in the mining business. Their strong project execution skills are reflected in the company’s association with renowned entities, such as Tata Steel Ltd, Hindustan Copper Ltd, Odisha Mining Corporation and Hindustan Zinc Ltd. In the drilling and exploration segment, the company provides resource consulting, pre-feasibility and feasibility studies, core drilling, specialised and large diameter drilling and rotary mud drilling services. In the underground mining segment, MMPL has diversified into drilling and exploration of various metals and minerals, including copper, uranium, manganese, zinc, coal, bauxite and iron ore. The diversified revenue and clientele mitigate risks related to change in government policy in a specific segment or in the business policy of any particular customer.
Sound operating efficiency: The sound operating efficiency is reflected in estimated healthy operating margin of 35.6% and comfortable return on capital employed of 31.87% in fiscal 2022, driven by high economies of scale and an experienced management. Operating margin should sustain at a similar level over the medium term, with capital expenditure (capex) undertaken in previous years. The aggressive procurement policy and international partnerships have helped the company procure stores, spares and machinery at competitive rates.
Strong order book providing revenue visibility over the medium term: The strong order book worth Rs 1,679 crore as on March 31, 2022, offers healthy revenue visibility over the medium term. This includes contracts spread across various geographies, including Meghalaya, Tamil Nadu, Odisha, Arunachal Pradesh, Jharkhand, Karnataka, Maharashtra and Rajasthan. Ability of the company to scale up its resources in terms of machinery and manpower for successful execution of the order pipeline remains a key monitorable.
Healthy financial risk profile: The healthy capital structure is reflected in strong adjusted networth and low gearing and total outside liabilities to adjusted networth ratios estimated at Rs 223 crore, 0.38 time and 0.50 time, respectively, as on March 31, 2022, aided by low reliance on external debt. Debt protection metrics were comfortable because of leverage and healthy profitability. Interest coverage and net cash accrual to total debt ratios are estimated at 12.83 times and 1.03 times, respectively, in fiscal 2022.
Weaknesses: Large working capital requirement: Gross current assets (GCAs) were high at 226-251 days over the three fiscals ended March 31, 2022 and are expected at similar levels over the medium term, driven by stretched receivables and large inventory. The company needs to extend a long credit period and, hence, realisation of payments from a few parties takes more time because of joint measurement and other such checks and inspections. MMPL also needs to hold large work-in-process and stores and spares inventory for smooth operations. The higher the number of sites with ongoing work, the higher the inventory levels, and vice versa.
Customer concentration in revenue: MMPL faces significant customer concentration risk, as it derives nearly 90% of its sales from the top five customers. Major clients include Atomic Mineral Directorate, Hindustan Zinc Ltd, Hindustan Copper Ltd, Tata Steels Ltd, Indian Metal & Ferro Alloys Ltd, MOIL, SMS Infrastructure Ltd, Odisha Mining Corporation and The Singareni Collieries Company Ltd. High concentration makes revenue and profitability dependent on the growth plans of these customers. |
Liquidity: Adequate Bank limit was utilised at 31.56% on average over the 12 months through March 2022. Cash accrual, expected at Rs 118 crore per annum, will sufficiently cover yearly debt obligation of around Rs 38 crore over the medium term. Current ratio was healthy at 2.35 times and cash and bank balance was moderate at around Rs 29 crore as on March 31, 2022. Low gearing and moderate networth provide the financial cushion to withstand any adverse conditions or downturns in the business. |
Outlook: Stable MMPL will continue to benefit from the extensive experience of its promoters, healthy relationships with clients, international partnerships and aggressive procurement strategies. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MMPL, based in Burdwan, West Bengal, undertakes drilling and exploration, mine development and underground mining of various metals. The company, which was incorporated as Mecons Consulting Pvt Ltd in 1994, was initially a supplier of fly ash bricks. It was renamed Maheshwari Entrepreneurs Pvt Ltd in 2002 and MMPL in 2003, when it commenced mining activities. |
Key Financial Indicators
*Provisional |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 02-Jun-2022 in line with the lender-wise facility details as on 08-Dec-2021 received from the rated entity
Criteria Details
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