| Ambuja Cements Limited | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities and short-term debt programme of Ambuja Cements Limited (Ambuja Cements).
The ratings continue to reflect the company’s healthy market position in north and west India, robust operating efficiency and strong financial risk profile because of healthy cash flows. These strengths are partially offset by susceptibility to the commoditised and cyclical nature of the cement industry. Any substantial debt-funded capex or acquisition, which may weaken the financial risk profile, will be a key rating sensitivity factor.
For the three months ending March 2021, the standalone sales volume increased around 26% (year-on-year) driven by healthy demand and low base, which was impacted because of the lockdown in the last two weeks of March 2020. During first quarter of 2021 (January to March), EBITDA margin improved to 27.3% from 21.9% in the corresponding quarter of previous year driven by strong growth in volumes and efficiency gains. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Ambuja Cements and ACC Ltd (ACC; 'CRISIL AAA/Stable/CRISIL A1+'). This is because, post the restructuring between ACC and Ambuja Cements, ACC became a subsidiary of Ambuja Cements. Moreover, both companies have a common line of business, and have entered into master supply agreement, which helps them operate symbiotically, optimising each other's plant capacities and spare inventories, and thus, benefit from operational and financial synergies.
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Key Rating Drivers & Detailed Description Strengths: * Healthy market position Ambuja Cements had installed capacity of 29.65 million tonne per annum (MTPA) as on March 31, 2021, spread across north and central (around 40%), west (around 37%) and east (around 23%) India. It has large marketing infrastructure, pan-India presence and strong operational linkages with ACC (34.5 MTPA as on March 31, 2021). The companies together have 12-13% capacity share in the Indian cement market. Their nationwide presence shields operations from regional price volatility and demand-supply imbalances.
Consolidated gearing remained healthy. Also, strong cash flow and low debt levels translate into robust debt protection metrics. Supported by healthy cash accrual and minimal reliance on debt, the debt protection metrics will remain strong over the medium term.
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Liquidity: Superior Debt primarily consists of interest-free loan from the state government. The company has announced capex of around Rs 2,500 crore to be spent over a period of 2-3 years towards capacity addition, captive power plant, plant maintenance and other infrastructure developments. Cash and cash equivalent stood at Rs 2,717 crore as on December 31, 2020. Unutilised bank lines and healthy cash accrual will sufficiently cover capex and working capital requirement.
Under ACC, liquidity will remain robust in the absence of external debt. Expected capex of around Rs 3,500 crore over the medium term, towards capacity addition and efficiency capex, will be entirely funded through internal accrual. Cash and cash equivalent stood at Rs 5,849 crore as on December 31, 2020. Cash accrual is estimated over Rs 1,900 crore in 2021. Unutilised bank limits and healthy cash accrual will be sufficient to meet capex and working capital requirement. |
Outlook: Stable CRISIL Ratings believes Ambuja Cements will maintain its strong financial risk profile over the medium term supported by healthy cash accrual and low debt. |
Rating Sensitivity Factors Downward Factors
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About the Company Ambuja Cements is one of India's leading cement manufacturers. In January 2006, Holcim Ltd (Holcim) acquired 14.8% stake in Ambuja Cements. Following an open offer in April 2006, Holcim assumed management control of the company. Globally, Holcim and Lafarge SA announced their merger in April 2014. Completed in July 2015, the merged entity was named LafargeHolcim. Post the proposed restructuring between ACC and Ambuja Cements, effective from August 12, 2016, ACC became a subsidiary of Ambuja Cements.
For the three months ended March 31, 2021, Ambuja Cement’s consolidated profit after tax (PAT) was Rs 1,228 crore on operating income of Rs 7,715 crore, compared with PAT of Rs 743 crore on operating income of Rs 6,250 crore for the corresponding period last year.
For the three months through March 2021, Ambuja Cement reported standalone PAT of Rs 665 crore on operating income of Rs 3,621 crore, compared with PAT of Rs 399 crore on operating income of Rs 2,828 crore for the corresponding period last year. |
Key Financial Indicators* (Consolidated^)
*as per CRISIL analytical adjustment ^Financials for the year ended December 31; includes consolidated numbers of ACC Ltd |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
*Interchangeable with bank guarantee / letter of credit #Fully interchangeable with bank guarantee ^Upto Rs 80 crore interchangeable with bank guarantee. |
Annexure - List of Entities Consolidated
*Subsidiaries of ACC Ltd| ^Associates of ACC Ltd #ceased to be a subsidiary w.e.f. 18th November 2020. |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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*Interchangeable with bank guarantee/letter of credit
#Fully interchangeable with bank guarantee
^Upto Rs 80 crore interchangeable with bank guarantee
%Interchangeable with bank guarantee/letter of credit to the extent of Rs 25 crore
$Fully interchangeable with bank guarantee to the extent of Rs 425 crore
Criteria Details
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