| Pokarna Limited | ||||||
| Rating outlook revised to 'Positive'; 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 revised its outlook on the long-term bank facility of Pokarna Limited (PL; part of the Pokarna group) to ‘Positive’ from ‘Stable’ while reaffirming the rating at 'Crisil A-', The short term rating has been reaffirmed at ‘Crisil A2+'.
The revision in outlook reflects the better-than-expected business performance of the group reflected in significant revenue growth backed by robust increase in sales of quartz surfaces, along with a substantial improvement in the operating margin. The operating income grew 36% on-year to Rs 933 crore in fiscal 2025, while operating profit before depreciation, interest and tax (OPBDIT) rose 57% to Rs 347 crore. The operating margin improved to 37% from 32%. As a result, net cash accrual rose to Rs 230 crore for fiscal 2025 from Rs 128 crore in fiscal 2024 and the return on capital employed improved to 28% from 18%.
The outlook revision also factors in the group’s strengthening financial risk profile with continuous improvement in capital structure due to healthy accretion and repayment of debt. Consequently, the gearing improved to 0.42 time as on March 31, 2025, from 1.15 times as on March 31, 2022. The group is undertaking capital expenditure (capex) of Rs 440 crore funded through a term loan of Rs 300 crore. Despite this, the capital structure is expected to remain robust with gearing likely to remain below 0.5 time over the medium term. The liquidity remains strong marked by healthy accrual which will comfortably cover debt obligation. Cushion available in working capital limits and moderate unencumbered cash and bank balances also support the liquidity profile.
While the group’s revenue is largely from the US, the impact of reciprocal tariffs by the US is currently expected to be negligible. Nevertheless, any changes in the duties/tariffs in the US or any slowdown in order flow could significantly impact the operating performance and remain monitorable.
The ratings continue to reflect the established market position of the group in the granite and engineered stones businesses, supported by the extensive experience of its promoters, established client relationships and healthy operating margin. These strengths are partially offset by exposure to project risks and susceptibility to demand from key markets and fluctuations in foreign exchange (forex) rates. |
Analytical Approach To arrive at the ratings, Crisil Ratings has combined the business and financial risk profiles of PL and Pokarna Engineered Stone Ltd (PESL), together referred to as the Pokarna group.
Unsecured loan extended by the promoters and related parties as well as inter-corporate deposits (totalling Rs 55.34 crore) have been treated as debt as most of the debt is expected to be repaid by March 31, 2026.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established position in the granite and engineered stones business: The Pokarna group is the largest exporter of quartz surfaces from India, and a leading exporter of granite slabs and blocks. The group benefits from its established relationship with Breton S.p.A and access to the latter’s patented technology for manufacturing quartz surface products. The promoters’ experience of around three decades in the stone industry, the group’s strong track record of operations and healthy relationships with customers have helped it establish a strong market position.
Strong financial risk profile: Networth and gearing were healthy at Rs 777 crore and 0.42 time, respectively, as on March 31, 2025. Strong operating performance will keep debt protection metrics robust, with interest coverage ratio expected at 7-8 times over the medium term. The financial risk profile is expected to remain strong even after factoring in the ongoing capex for setting up a manufacturing line at the Hyderabad unit.
Weaknesses: Exposure to project risks: The group is setting up a new line for manufacturing of quartz surfaces at its Hyderabad unit at an estimated cost of Rs 440 crore. Though the funding is already tied up and the management has executed similar sized projects in the past, successful implementation of the project within the budgeted cost and stipulated timeline remains monitorable. Moreover, the group remains exposed to moderate demand risk and successful commercialisation and stabilisation of the project and ramp-up of sales from the new capacity remains to be seen.
Susceptibility to demand from key markets and fluctuation in forex rates: Exports accounted for over 96% of the group’s revenue. Hence, growth depends on demand from key markets, especially the US. The operating margin also remains susceptible to volatility in input costs and forex rates. |
Liquidity: Strong Annual net cash accrual is expected at Rs 170-200 crore between fiscals 2026 and 2028 and should comfortably cover yearly term debt obligation of Rs 50-60 crore. Bank limit utilisation was moderate, averaging 38% over the 12 months through January 2025. Liquidity is further aided by unencumbered cash and bank balance of Rs 40-50 crore maintained in the current and Exchange Earners' Foreign Currency Account (EEFC) accounts over the 12 months through March 2025. |
Outlook: Positive The Pokarna group’s business performance is expected to remain strong over the medium term. |
Rating sensitivity factors Upward factors
Downward factors
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About the Group PL was set up as a partnership firm named Pokarna Granites in 1991 by Mr Gautam Chand Jain and his family members. The company owns granite quarries in Andhra Pradesh (AP), Telangana and Tamil Nadu and mines, processes and sells granite blocks and slabs. The company diversified into the apparel segment in 2004, manufacturing readymade garments under the Stanza brand (this business is now discontinued). PL is currently listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE).
PESL is a wholly owned subsidiary of PL and is the largest manufacturer and exporter of quartz surfaces from India. The company exports quartz surfaces under the Quantra brand. The technological know-how and machinery for this division was obtained from Breton S.p.a (Italy). PL set up an engineered stone (quartz) manufacturing division in 2006, which was later hived off into PESL |
Key Financial Indicators
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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 – List of entities consolidated
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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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