Rating Rationale
March 01, 2018 | Mumbai
Murudeshwar Ceramics Limited
Ratings upgraded to 'CRISIL B+/Stable/CRISIL A4'
 
Rating Action
Total Bank Loan Facilities Rated Rs.117.85 Crore
Long Term Rating CRISIL B+/Stable (Upgraded from 'CRISIL D')
Short Term Rating CRISIL A4 (Upgraded from 'CRISIL D')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank facilities of Murudeshwar Ceramics Limited (MCL) to 'CRISIL B+/Stable/CRISIL A4' from 'CRISIL D/CRISIL D'. This follows MCL's sharing of documentation indicating that the particular instance of delay in debt servicing that led to the earlier rating action was an operational issue on the lender's part. CRISIL has also independently confirmed the same with the lender.
 
MCL's business performance is expected to be steady marked by an annual revenue growth of 5-7% and margins of about 25% over the medium term supported by uptick in demand from real estate sector and continued brand presence in parts of Southern India. However, the company continues to maintain high working capital cycle resulting in stretch in liquidity management. The gross current asset days continued to remain high as on 30 September, 2017, with high inventory holding.
 
CRISIL's ratings on the bank facilities reflect large working capital requirements resulting in tight liquidity management and exposure to intense competition in the ceramics & vitrified tiles industry. These weaknesses are partially mitigated by established market position in the industry and revenue diversity.

Key Rating Drivers & Detailed Description
Weakness:
* Large working capital requirement: The company had reported gross current asset of 457 days as on March 31, 2017, on account of large receivables and significant inventory holding days. CRISIL believes MCL's liquidity management will remain constrained due to its large working capital requirement.
 
* Exposure to intense competition in the ceramics and vitrified tiles industry: MCL faces intense competition from other organised players in the ceramics and vitrified tiles industry, such as H&R Johnson (India) Ltd, Somany Ceramics Ltd, and Nitco Tiles Ltd; as well as from unorganised and Chinese manufacturers.
 
Strengths:
* Established market position in the industry and product diversity: MCL manufactures glazed ceramic floor tiles, vitrified porcelain, and natural granite slabs and is one of the leading players in South India. The company markets its products under the Naveen brand with sales directly to real estate entities and through its retail sales channel.
Outlook: Stable

CRISIL believes MCL will benefit from its established market position in South India and support from its promoters. The outlook may be revised to 'Positive' if revenue grows while profitability remains healthy, and if working capital cycle moderates. The outlook may be revised to 'Negative' if there is a stretch in working capital cycle, or if debt-funded capital expenditure weakens the financial risk profile.

About the Company

Incorporated in 1983, MCL is a publicly listed company. It manufactures glazed ceramic floor tiles, vitrified porcelain, and natural granite slabs. The company is promoted by Mr R N Shetty and his family. It markets its products under the Naveen brand.
 
In the first nine months of the current fiscal, the company reported net profit after tax of Rs 1.38 crore on a net sales of Rs 78.5 crore, as compared to Rs 1.3 crore and Rs 75.91 crore, respectively, during the corresponding period of fiscal 2017.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs. Cr. 105.24 115.02
Profit After Tax Rs. Cr. 2.39 1.57
PAT Margins % 2.27 1.36
Adjusted Debt/Adjusted Net worth Times 0.30 0.33
Interest coverage Times 1.56 1.45

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity
Date
Issue Size
(Rs. Cr)
Rating Assigned
with Outlook
NA Term Loan NA NA 31-Mar-2023 2.62 CRISIL B+/Stable
NA Cash Credit NA NA NA 72.58 CRISIL B+/Stable
NA Letter of Credit NA NA NA 37.7 CRISIL A4
NA Bank Guarantee NA NA NA 4.95 CRISIL A4
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  75.2  CRISIL B+/Stable  13-02-18  CRISIL D  16-05-17  CRISIL BB-/Stable    No Rating Change    No Rating Change  CRISIL B+/Stable 
Non Fund-based Bank Facilities  LT/ST  42.65  CRISIL A4  13-02-18  CRISIL D  16-05-17  CRISIL A4+    No Rating Change    No Rating Change  CRISIL A4 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 4.95 CRISIL A4 Bank Guarantee 4.95 CRISIL D
Cash Credit 72.58 CRISIL B+/Stable Cash Credit 72.58 CRISIL D
Letter of Credit 37.7 CRISIL A4 Letter of Credit 37.7 CRISIL D
Term Loan 2.62 CRISIL B+/Stable Term Loan 2.62 CRISIL D
Total 117.85 -- Total 117.85 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Construction Industry
CRISILs Criteria for rating short term debt

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