| RCCPL Private Limited | ||
| Rating 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 A1+' rating on the commercial paper programme of RCCPL Private Limited (RCCPL).
For the first nine months of fiscal 2023, the operating income grew around 20%, driven by higher sales volume (up by 15%). However, the earnings before interest, tax, depreciation, and amortisation (Ebitda) margin moderated to 12.28%, as expected, due to negative contribution from newly commissioned Mukutban plant and elevated cost of power, fuel and freight, which is also reflected in the lower EBITDA per tonne of Rs 680 in 9MFY23 vs Rs 1,135 in 9MFY22. CRISIL Ratings expect the company’s sales volume to grow at a healthy double-digit rate in FY24 with the increased capacity coming from the Mukutban plant and the Ebitda margins are also expected to recover from Q4FY23 as input costs (especially coal and petcoke prices) have started to abate of late .
Net leverage (net debt to EBITDA ratio) moderated further in fiscal 2023, owing to higher debt and the lower-than-expected Ebitda levels. The financial risk profile was expected to improve in fiscal 2023 as the Mukutban plant was expected to start contributing to revenue and the cash accruals, however, with the delay in the stabilisation of the plant, the financial risk profile and the leverage ratios are now expected to improve in fiscal 2024.
The rating centrally factors in strategic importance of RCCPL to Birla Corporation Ltd (BCL; ‘CRISIL A1+') and the strong support it receives from BCL. The rating also reflects RCCPL's healthy operating efficiency. These strengths are partially offset by leveraged capital structure, average debt protection metrics, debt-funded capex and susceptibility to input costs and cyclicality in the cement industry. |
Analytical Approach For arriving at the rating, CRISIL Ratings has applied its criteria for notch-up of rating based on parent support. |
Key Rating Drivers & Detailed Description Strengths:
BCL has high operational, managerial and financial integration with its wholly owned subsidiary, RCCPL. The parent has consolidated its position in its key market of central India with the addition of RCCPL's assets, as the latter forms ~50% of the combined capacity of 20 million tonne per annum (mtpa). Both companies sell under the common brand, MP Birla, thereby further strengthening the market position.
RCCPL has sizeable mineral reserves with captive limestone mines, coal mine and assured supply of fly ash. The company also has significant tax incentives in all the plants, which also supports healthy operating margin. Post-acquisition by BCL, capacity utilisation of RCCPL improved to 106% in fiscal 2022 from 64% in fiscal 2017. Operating performance is expected to benefit further with the stabilisation of the integrated Mukutban plant.
Financial flexibility is comfortable for RCCPL being a wholly owned subsidiary of BCL which is a part of the MP Birla group. Liquidity is also backed by improving cash accrual and moderate utilization of fund-based limits.
BCL, on a consolidated basis, has cash and investments of Rs 739 crore as on December 31, 2022, undrawn working capital limits and a large freehold land bank.
Weakness:
Overall net debt to EBITDA ratio is expected to remain high in fiscal 2023, and interest coverage ratio is expected to moderate owing to lower EBITDA. Furthermore, the group's ability to avail of tax incentives will be a key monitorable.
The debt protection metrics are expected to improve over the medium term as the recently commissioned Mukutban plant is expected to start contributing to cash accruals, though, the time taken for stabilization and extent of ramp-up has to be seen in the coming months.
Profitability is susceptible to volatility in the costs of inputs such as material, power, fuel and freight. Also, any change in government policies could impact the operating margin. For instance, the operating margin in fiscal 2022 and 2023 was impacted by higher cost of coal/pet coke and diesel. |
Liquidity: Strong Liquidity has been healthy, driven by cash accrual estimated above Rs 450 crore in fiscal 2024 as against Rs. 345 crore of long-term debt repayment obligation. The fund-based working capital facility of Rs 300 crore was moderately utilised. Bank lines are expected to comfortably meet the incremental working capital requirement. |
Rating Sensitivity Factors Downward Factors
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About the Company RCCPL was incorporated in 2007 as a wholly owned subsidiary of Reliance Infrastructure Ltd. On August 22, 2016, BCL acquired 100% stake of RCCPL for an enterprise valuation of Rs 4,800 crore (including debt of Rs 2,400 crore). The name has been changed to RCCPL from Reliance Cement Company Pvt Ltd on August 01, 2018. |
Key Financial Indicators
^as per CRISIL Ratings’ analytical adjustment |
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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
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