| Raghav Productivity Enhancers 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 A-/Stable’ rating on the long-term bank facilities of Raghav Productivity Enhancers Limited (RPEL; part of the Raghav group).
The rating continues to reflect the established market position, high operating efficiency, and healthy financial risk profile. These strengths are partially offset by its modest scale of operations and exposure to intense competition and limited revenue diversity. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of RPEL and its wholly owned subsidiary, Raghav Productivity Solutions Pvt Ltd. This is because both the companies, together referred to as the Raghav group, are under common management with significant business synergies.
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 market position and customer base: Despite intense competition, the group has established its position pan-India as a market leader in the ramming mass manufacturing segment, with superior product quality resulting in higher-than-average realisations. The longstanding presence of the promoters, their strong understanding of market dynamics, and healthy relationships with customers and suppliers will continue to support business risk profile. The group exports to over 30 countries with volume growth of around 90% from the export market in fiscal 2023 and 19% in fiscal 2024. Clientele is also well-diversified, with the top five customers contributing only around 10% to the operating income in fiscal 2023; which was estimated at a similar level in fiscal 2024. The group also expanded its production capacity to 2,88,000 MT per annum from 1,80,000 MT per annum in October 2023. The increase in capacity is likely to result in healthy volumetric growth over fiscal 2025 and 2026, especially in the export market, which should support the business risk profile over the medium term.
Healthy operating efficiency: Return on capital employed was comfortable at 26% in fiscal 2023 and estimated at a similar level in fiscal 2024 on the back of high economies of scale. Operating margin was also steady and is likely above 28-29% in fiscal 2024 (29.5% in the first nine months of fiscal 2024), led by unique, high-quality product offerings. The operating margin was 26.2% in fiscal 2023 led by the high-quality unique product offerings.
Healthy financial risk profile: Networth is likely to be over Rs 155 crore as on March 31, 2024, and this compounded with limited external debt on books is expected to result in strong gearing and total outside liabilities to tangible networth ratio expected below 0.1 time and 0.2 time, respectively. Low leverage and healthy profitability shall also result in robust debt protection metrics, with estimated interest coverage ratio of over 40 times in fiscal 2024. With no major capital expenditure (capex) expected over the medium term and expected growth in the business, financial risk profile should remain steady.
Weaknesses: Modest scale of operations: Despite expectation of volumetric growth of ~5-6% in fiscal 2024, turnover was estimated to be slightly lower at Rs 125-130 crore compared to Rs. 137.4 crore in fiscal 2023 due to lower freight revenue. Volumetric growth was also limited due to capacity constraints faced in the first half of fiscal 2024. However, CRISIL Ratings notes that the group’s enhanced capacities commenced operations in October 2023, which is likely to result in improvement in volumes over the medium term. Nonetheless, the extent of volumetric growth will remain a key monitorable.
Exposure to intense competition and limited revenue diversity: The group is exposed to competition from a large number of unorganized players in the industry. Though its quality of product results in repeat orders from its major customers, the exposure to intense competition has constrained its scale of operations. Further, the group derives the entirety of its revenue from ramming mass. Entry of new organized competitors or increase in competition from local unorganized players could impact its scale of operations. Nonetheless, CRISIL Ratings believes that its healthy market position should mitigate these risks to some extent. |
Liquidity: Strong Fund-based bank limit of Rs 10 crore remained unutilised during the 12 months ended March 31, 2024. Cash accrual is expected to be over Rs 25 crore against negligible term debt over the medium term. Current ratio was also healthy at 4.59 times as on March 31, 2023, and is likely to be at a similar level as on March 31, 2024. Cash and bank balance of around Rs 18 crore also support liquidity. Strong gearing and networth enhance the financial flexibility to contract additional debt in case of any adverse condition or downturn in the business. |
Outlook: Stable The Raghav group will continue to benefit from the extensive experience of its promoters in the ramming mass industry, and established relationships with clients. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group RPEL (erstwhile, Raghav Ramming Mass Ltd) was incorporated in 2009 in Jaipur and promoted by Kabra family. The company manufactures ramming mass for induction furnaces and quartz powder. It was listed on the Bombay Stock Exchange in April 2016. Operations are managed by Mr Rajesh Kabra and Mr Sanjay Kabra. Facility in Newai, Rajasthan, has capacity of 2,88,000 tonne per annum for ramming mass. |
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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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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