Detailed Rationale

Crisil Ratings has placed its ratings on the bank facilities of Tega Industries Limited (TIL; part of the Tega group) on 'Rating Watch with Developing Implications'.

 

On September 10, 2025, TIL announced a strategic partnership with Apollo Funds to acquire AIP MC Holdings LLC (Molycop group), an affiliate of American Industrial Partners, valued at total enterprise value of $1.48 billion including a debt of close to ~ 1 billion having no recourse to ultimate beneficiary

 

Pursuant to the agreement, TIL will be the controlling shareholder, holding 77% stake in the special purpose vehicle (SPV) established for the purpose of acquisition, while Apollo Funds will hold the remaining 23%. TIL's share of the acquisition price, corresponding to its 77% stake in the SPV, is valued at $361 million (~Rs 3,179 crore). This amount is expected to be funded through equity raising of $248 million (~Rs 2,179 crore) and corporate loan of $113 million (~Rs 1000 crore).

 

Apollo Funds will invest $110 million towards its 23% stake in the SPV. Apollo Funds will also infuse ~$270 million in perpetual preference shares, which will be utilised to reduce the existing debt in Molycop, thereby optimising the company's capital structure.

 

The proposed acquisition will propel TIL to be among the world’s leading designers and manufacturers of ‘critical-to-operate’ consumables for certain production steps in the mining, mineral processing and material handling industries with an innovative and differentiated product portfolio. The complementary product profile and customer base of TIL and Molycop are expected to generate significant synergies along with economies of scale, which will drive revenue growth and improvement in operating profitability over the medium term. The revenue of combined entity will be $1.7 billion (~Rs 15,207 crore) and earnings before interest, taxes, depreciation and amortisation (Ebitda) of $217 million (~Rs 1,906 core) fiscal 2025, before adjustment of minority interest.

 

The financial risk profile will moderate in the interim owing to incremental debt to be availed for funding the acquisition and existing debt at Molycop level. However, it is expected to improve over time, driven by the refinancing of existing Molycop debt at low costs and enhanced cash flow, resulting from operational synergies. That said, the overall quantum of debt at TIL consolidated level, along with terms and conditions of perpetual preference shares to be infused by Apollo Funds, will be key monitorable.

 

Crisil Ratings will continue to monitor progress on the transaction and will resolve the Rating watch on receipt of regulatory approvals and successful completion of transaction. Crisil Ratings will engage with TIL’s management to better understand the terms of funding for the transaction as well as the synergy benefits that may emerge post completion of the transaction.

 

The ratings continue to reflect the Tega group's established market position in the wear-resistant products and components (WRP and WRC) segments, geographically diversified revenue profile, healthy capital structure, improved operating performance and underlying acquisition is expected to further strengthen TIL position with complementary product profile and other cost synergies. These strengths are partially offset by large working capital requirement and exposure to risks relating to aggressive growth through acquisitions and capital expenditure (capex). Ability of TIL to integrate operations post acquisition of Molycop and meaningfully realise operational synergies resulting in enhanced scale and profitability, will remain a key 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.

 

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 in mining consumables segment

The group is one of the world’s leading and experienced players in the WRP and WRC segments. The product profile is wide and 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 position itself as an integrated player offering equipment as well as consumables to its customers. However steady ramp up of equipment business continues to be a key monitorable.

 

Post acquisition of Molycop, the business risk profile is expected to further strengthen as Molycop is the  leading player globally in Grinding Media in core mining regions of gold and copper. TILwill become leading provider in comminution circuit, leveraging global relationships of Molycop.

 

Geographically diversified revenue with strong customer base

TIL has strong customer base with highly stable demand. Around 75% of its total orders are repeat orders. Income is geographically diversified with foreign exchange-denominated revenue accounting for 80-85% of sales. Its latest product, Dynaprime, in the mill liner segment has been a success globally, including geographies like South America Africa, North America, Asia Pacific, EMEA and Europe.

 

Post Molycop acquisition, TIL will be able to benefit from complementary sales of its consumables business to Molycop’s customers. Further, it will benefit from Molycop’s strong presence in geographies such as US and Australia. At a combined level, Tega will have a presence of 23 global manufacturing sites closer to its customer base in all geographies.

 

Weaknesses:

Large working capital-intensive operations

Gross current assets (GCAs; net off cash) increased to 219 days as on March 31, 2025, and may remain at similar level owing to the export-oriented nature of operations. Around 85% of sales from India are exports, which has an inherent transit period of 60-90 days and additional 30-60 days of credit period. Hence, on an overall basis, receivables amount to 3-4 months from time of dispatch. Post Molycop acquisition, the working capital cycle for the combined entity will be monitorable.

 

Exposure to risks relating to aggressive growth through acquisitions and capex

The group has grown inorganically in the past through acquisitions outside India. Overseas subsidiaries play a significant part in its performance and contribute 35-40% to total sales.

 

The acquisition of Molycorp will lead to substantial increase in leverage of the consolidate entity with expected Debt/Ebitda over 4 times. Ability of TIL to integrate operations and meaningfully realise operational synergies, thereby improving cash flow and bringing down leverage, will remain a key monitorable.

 

However, TIL has demonstrated its ability to turn around acquired companies in the past though they were much smaller in scale.

Liquidity: Strong

Liquidity was strong with cash equivalent and marketable securities increasing to ~Rs 400 crore as on 30th June, 2025. Net cash accrual improved to Rs 284 crore in fiscal 2025 and is projected at more than Rs 280 crore over the medium term against yearly loan repayment of Rs 50-60 crore. The bank limit of Rs 186 crore was utilised at 37% on average for the 12 months through March 2025.

 

Post completion of Molycop acquisition, TIL is expected to maintain liquidity of ~50 million (~Rs 450 crore) at a consolidated level.

 

ESG profile of the Tega group

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

 

Key ESG highlights

• TIL aims to improve emission management by switching to liquefied petroleum gas instead of solid and liquid fuel for boilers and furnaces. In fiscal 2024, TIL achieved 7.5% reduction in carbon dioxide emissions.
• TIL has also made investments in solar and wind power to drive towards clean and renewable energy sources. TIL has undertaken several community engagement initiatives focusing on health, education, rural transformation and environmental parameters.
• TIL has expanded contractor safety through a formal contractor safety management system. The governance structure is characterised by more than 50% of independent directors on the boards of key committees, the presence of investor grievance redressal mechanism and extensive financial disclosures.
• TIL rolled out an ESG/compliance dashboard and roadmap to address global frameworks such as CSRD, CSDDD and CBAM in fiscal 2024.

 

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

Rating Sensitivity Factors

Upward Factors

• Significant increase in scale of operations with sustained healthy profitability, resulting in operating Ebitda at a consolidated level of over Rs 450 crore.
• Improvement in working capital cycle, resulting in better financial risk profile

 

Downward Factors

• Weakening of business risk profile with decline in sales or profitability, with consolidated Ebitda margin lower than 16%.
• Stretched working capital cycle.
• Higher-than-expected debt for capex or any large, debt-funded acquisition

About the Tega Group

Established in 1976 by Madan Mohan Mohanka and his family members, the Tega group manufactures wear-resistant rubber products and components for mineral-processing applications and polyurethane lining. Facilities are at Kalyani and Samali in West Bengal, and at Dahej. In 2001 and 2002, the company set up two wholly owned subsidiaries in the US and Australia for increasing exports to these countries. In 2006, it established a wholly owned subsidiary in the Bahamas as a holding company that owns Tega Industries South Africa Pty Ltd, a manufacturing unit in South Africa. In March 2008, it established wholly owned subsidiaries in Canada and Brazil for enhancing its presence in these regions. In February 2011, it 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. Tega Industries (SEZ) Ltd, a wholly owned subsidiary of TIL, was merged with the latter with effect October 1, 2016, to improve financial strength and flexibility, management control and operational efficiency. TMML was taken over by TIL under the resolution plan approved by the National Company Law Tribunal through an order dated February 24, 2023, and is 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.

Any other information: Not Applicable