Detailed Rationale

Crisil Ratings has removed its ratings on the bank facilities of Tega Industries Ltd (TIL; part of the Tega group) from ‘Rating Watch with Developing Implications’ and downgraded the ratings to ‘Crisil A+/Crisil A1’ from 'Crisil AA-/Crisil A1+’ while assigned a ‘Stable' outlook to the long-term rating. 

The rating action reflects expected moderation in the financial risk profile of TIL owing to increase in leverage levels post-acquisition of Molycop group (Molycop) from AIP MC Holdings LLC. That said, the consolidated entity’s business risk profile is expected to strengthen as it will become the world’s largest player in critical-to-operate consumable segment in mining and mineral processing industry, with a significantly larger product basket. The ratings also factor in the improvement in geographical diversification of the consolidated entity, expected stability in operating performance and management experience in the mining consumable segment. These strengths are partially offset by large working capital requirement, high debt levels in interim and exposure to risks related to aggressive growth through acquisitions and capital expenditure (capex).

 

TIL is in the final stage of completing the acquisition of Molycop at a total enterprise value of approx. $1.455 billion (~Rs.13,325 crore; equity value of ~Rs 3,809 crore payable upfront; debt & other payables in Molycop: Rs 9,103 crore and balance in the form of cash of Rs.412 crores, calculated based on Locked box approach). The above-mentioned Enterprise value is subject to minor modifications based on completion of final acquisition. TIL has received anti-trust approval from 12 jurisdictions and only one approval from Mexico is currently pending. The transaction is expected to be completed by June 2026. Post acquisition, TIL along with its step-down subsidiaries will hold 84.18% stake in Tega MC SG Investments III Pte (HoldCo SPV) while balance 15.82% will be held by Apollo Funds. For funding its 84.18% stake valued at $394 million (~Rs .3612 crore), TIL has raised equity of Rs 1,713 crore and long-term debt of Rs 1,500 crore. Balance is being funded through internal accrual. Apollo Funds will bring in $74 million of equity and additionally it will bring in preferential equity of $270 million (Rs 2,473 crore), which will be utilised to reduce the existing term loan debt in Molycop to ~Rs 6,630 crore.

 

Consolidated debt/Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio is expected to peak at 4.0–4.5 times in fiscal 2027 and progressively improve over the medium term, with improvement in cash generation driven by realisation of synergies between TIL and Molycop and debt reduction. TIL has articulated its intention to focus on reducing debt at a consolidated level over the next 18–20 months including through raising additional equity and monetisation of non-core assets.

 

Business risk profile of the consolidated entity is expected to strengthen with this acquisition. Molycop is currently the leading global supplier in grinding media industry (copper + gold mine is 84% of volume). The product portfolio, with digital technology of Molycop, is complementary to TIL’s product profile thereby enabling the consolidated entity to offer the complete basket of products and solution to mining industry. Furthermore, geographical diversification of TIL will be further enhanced with access to markets where it currently has less presence, like the US and Australia. Operating margin of TIL at consolidated level including Molycop is expected to remain healthy at 13–15% over the medium term driven by realisation of synergies from the acquisition and cost optimisation measures undertaken. Ability of the consolidated entity to realise the synergies over the next 12–18 months and maintain margin at this level will remain monitorable.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of TIL and its subsidiaries − Losugen Pty Ltd, Tega Industries Chile SpA, Tega McNally Minerals Ltd (TMML), Tega Industries Inc, Tega Industries Canada Inc, Tega Do Brasil Servicos Tecnicos Ltd, Tega Holdings Pte Ltd, Tega Holdings Pty Ltd, Tega Industries Australia Pty Ltd, Edoctum SA, Tega Industries Peru SAC, Tega Investment South Africa Proprietary Ltd, Tega Industries Africa Proprietary Ltd and Tega Industries Ghana Ltd. This is because all these entities, collectively referred to as the Tega group, have strong operational links and fungible funds. Business and financial risk profile of the Molycop group has also been consolidated considering post completion it will become subsidiary of TIL.

 

Crisil Ratings has treated preferential equity to be subscribed by Apollo Funds as intermediate equity component (50% equity, 50% debt) given the perpetual nature of instrument with no call option and flexible repayments offset by cumulative dividend and coupon rate being higher than market rate.

 

Crisil Ratings has adjusted TIL’s networth for amortisation of goodwill on account of acquisition.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Leading global player in the mining consumable segment

The Tega group is one of the world’s leading and experienced players in the WRP and WRC segments. The company has had longstanding relationships with customers for more than 10 years and ~75% of sales are from repeat customers. It has a wide product profile, which includes both mill and non-mill products such as grinding mills, wear components, screens, trommels, conveyors, chute liners, pump liners and hydro cyclones. The equipment business has enabled TIL to become an integrated player offering equipment as well as consumables to its customers.

 

The market position will be strengthened with acquisition of Molycop as it is a leading global grinding media player in core gold andopper mining regions. The company has 14 production facilities for grinding media located in all major mining regions globally. The scale of combined entity will be ~8 times from earlier levels as combined revenue is expected to be over Rs 17,000 crore this fiscal. TIL will become one of the leading manufacturers of ‘critical-to-operate’ consumables in certain mining and mineral processing and handling industries. The product portfolio of Molycop is complementary to TIL, as a result it will be able to offer complete basket of products and solutions to the mining industry in the areas of crushing, grinding, concentrating and refining, trying to cover the entire value chain in the areas of primary beneficiation, concentration and extractive metallurgy.

 

Geographically diversified revenue with strong clientele

TIL has a strong clientele with stable demand. Around 75% of its orders are repeat orders. Income is geographically diversified with foreign exchange-denominated revenue accounting for 80–85% of sales. The integration will enable TIL to have a huge ready-made market due to complimentary products increasing cross selling opportunities and is expected to leverage from multiple geographies like the US, Peru, Indonesia and Australasia markets where its current market penetration is low. The Tega group will have 24 global manufacturing sites close to its clientele enabling strong geographical presence.

Key Rating Drivers - Weaknesses

Moderation in financial risk profile

The financial risk profile of the combined entity is expected to moderate in the interim owing to increase in debt to Rs 9,700–Rs 9,800 crore in fiscal 2027 on account of incremental debt availed by TIL, of Rs 1,500 crore, for funding the acquisition and existing debt at Molycop. The existing debt at Molycop is expected to decline from Rs 9,103 crore to ~Rs 6,630 crore through utilising preferential equity which will be funded by Apollo; the balance debt will be refinanced at a lower rate of interest. The preferential equity is treated 50% as debt and 50% as equity as per Crisil Ratings criteria due to perpetual nature with no call option and flexible repayments which provide comfort. The company has annual capex plan of Rs 500–Rs 650 crore at consolidated level towards maintenance capex and expanding hi-chrome facilities in Molycop. Further, the company has deferred contingent payment of $120 million payable in fiscal 2028 subject to fulfilment of certain conditions and the same is expected to be funded mainly by internal accrual and liquid surplus.

 

Debt/Ebitda is expected to peak at 4.0–4.5 times in fiscal 2027 and expected to improve to 3.0–3.5 times in fiscal 2028. TIL’s networth is expected to remain healthy at ~Rs.4,529 crores in fiscal 2027 after amortisation of goodwill on account of acquisition as per Crisil calculation. However, the goodwill amount will be finalized post completion of acquisition. The reduction in debt over the medium term through repayments, monetisation of non-core assets and raising fresh equity will drive improvement in the credit risk profile.

 

Large working capital requirement

Gross current assets (GCAs; net of cash) at TIL were at 219 days and at Molycop were 182 days as on March 31, 2025, and are expected at similar levels owing to the export-oriented business and global operations. At consolidated level the receivable days are expected to remain in the range of 2-3 months. Working capital management at Molycop will remain monitorable.

Liquidity Strong

Liquidity remains healthy backed by cash and equivalents including marketable securities of ~Rs 282 crore as on March 31, 2026, for TIL and ~Rs 431 crore at Molycop levels. Net cash accrual is expected to be over Rs 900 crore for combined entity over the medium term against yearly debt obligation of Rs 200–300 crore. The company is expected to maintain liquidity of $45–50 million at Molycop level. The bank limit utilisation for TIL remained 26% on average against sanction of Rs 221 crore for the 10 months through March 2026 and has remained 49% for Molycop against sanction of $220 million in the 12 months through March 2026.

ESG Profile

The environment, social and governance (ESG) profile of the Tega group supports its credit risk profile. The sector has a moderate environmental and social impact, The sector has a moderate environmental and social impact, primarily driven by its raw material sourcing strategies and energy-intensive manufacturing processes. The impact on social factors is indicated by labour-intensive operations and inherent safety aspect on account of manufacturing-related activities. The company’s increasing focus on addressing ESG risks supports overall sustenance.

 

ESG highlights:

• TIL has done investment to establish renewable energy portfolio through roof top solar power units in few of its manufacturing facilities to reduce indirect emission associated with electricity purchased from the grid.
• The Company has established appropriate processes for disposal of waste generated from its business operations and focused on material circularity, thereby reducing carbon footprint.
• TIL has undertaken several community engagement initiatives focusing on health, education, rural transformation and environmental sustainability.
• The governance structure is characterised by more than 50% independent directors on the boards of key committees, the presence of investor grievance redressal mechanism, stakeholder engagement mechanism and extensive financial & non-financial disclosures.
• Company is in the process of framing a structured decarbonization road map for overall reduction of the carbon footprint thereby improving overall sustainability.

 

ESG is gaining importance among investors lenders and overall stakeholders. The commitment of Tega to ESG will play a key role in enhancing stakeholder confidence, given shareholding by foreign portfolio investors and access to both domestic and foreign capital markets.

Outlook Stable

Crisil Ratings believes that the credit risk profile of Tega group will be supported by the strong business risk profile of the combined entity.

Rating sensitivity factors

Upward factors

• Sustained revenue growth and healthy operating profitability leading to high cash generation
• Improvement in the debt protection metrics, with debt/Ebitda improving to below 3 times (net debt to Ebitda ratio below 2.5 times on a sustained basis).

 

Downward factors

• Lower-than-expected revenue growth and decline in operating margin on a sustained basis, thereby impacting cash generation
• Weakening of business risk profile or further debt-funded capex/acquisitions leading to debt to Ebitda ratio remaining above 4.25 times (net debt to Ebitda ratio above 4 times)

About the Tega group

Established in 1976 by Madan Mohan Mohanka and his family members, the Tega group manufactures rubber WRP and WRC for mineral-processing applications and polyurethane lining. Its facilities are in Kalyani and Samali in West Bengal, and in Dahej in Gujarat.

 

TEL’s product portfolio comprises more than 93 mineral processing and material handling products. This includes consumables required in the mines and mineral processing industry such as chutes and its liners, grinding mill liners, trommels and screens, hydrocyclones, pumps and flotation parts and conveyor.

 

The company has strong global presence through its subsidiaries in the US, Africa, Latin America and Australia. In February 2011, the group acquired Australia-based Losugen Pty Ltd and Chile-based Tega Industries Chile SPA (formerly, Tega Acotec SA). Losugen Pty Ltd manufactures and distributes wear-resistant mining equipment products. Tega Industries Chile SPA manufactures fluid transportation products (pipe-lining products) and has an established position in Chile, Peru, Argentina and Bolivia.

 

TMML was taken over by TIL under the resolution plan approved by the National Company Law Tribunal through an order dated February 24, 2023. The entity was engaged in manufacturing crushing, screening, grinding, material handling and mineral processing equipment, serving industries such as iron ore, coal, steel, zinc and copper, and other minerals.

 

TIL is in process of acquiring Molycop from AIP MC Holdings LLC for a total enterprise value of Rs 13,313 crore, with equity value of Rs 4,313 crore and debt in Molycop of Rs 9,011 crore. TIL will hold 84.12% in Molycop through HoldCo and the transaction is expected to be completed by June 2026. Molycop is a global leader in mining consumables and process optimisation, with a strong legacy,

extensive geographic footprint. The group has 14 production facilities for grinding media located in all major mining regions globally.

Key Financial Indicators

As on / for the period ended March 31		2025	2024
Operating income	Rs crore	1,639	1,493
Profit after tax (PAT)	Rs crore	200	194
PAT margin	%	12.2	12.9
Adjusted debt/adjusted networth	Times	0.18	0.22
Interest coverage	Times	14.23	11.42

Crisil Ratings-adjusted numbers

Any other information: Not applicable