| Everest Industries Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has reaffirmed its 'CRISIL A+/Stable/CRISIL A1+' ratings on the bank facilities and commercial paper programme of Everest Industries Limited (Everest). CRISIL has also withdrawn on part of the proposed long term bank loan facilities of Rs.65 crore based on the request from the client. This is in line with CRISIL's withdrawal policy. |
| Analytical Approach |
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For arriving at its rating, CRISIL has considered the standalone business and financial risk profiles of Everest. |
| Key Rating Drivers & Detailed Description |
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Strengths * Established position in the domestic AC roofing segment: With wide pan India presence and industry experience of around 75 years, Everest is among the largest manufacturer of AC roofing sheets in India. It has a well-established brand in the rural market, supported by a strong distribution network of about 6000 retail outlets and more than 32 sales depot. Strategically located plants across the country help increase market penetration and compete effectively with regional players. * Diversified revenue mix With healthy growth in the AC roofing and sustained performance in PEB business, revenue dependence on the AC roofing business has reduced over the years; the share of building products contributed 100% to the total revenue in fiscal 2008, compared with 65% in fiscal 2019. However, AC roofing is likely to remain the mainstay of the business over the medium term. * Healthy financial risk profile Financial risk profile remains healthy with networth of Rs 450 as of March, 2019, comfortable gearing, and adequate debt protection indicators, supported by steady cash accrual and prudent capex. Debt protection metrics continued to remain healthy with Interest coverage ratio of 14.32 and comfortable NCATD of 0.78 time for the fiscal 2019. Its key credit metrics should improve gradually, supported by better business performance, continued modest capex, and control over working capital. Weaknesses * Exposure to intense competition in the AC roofing market and volatile operating margin The domestic market for AC roofing is fragmented with 18 players in the fray. Players also face stiff competition from manufacturers of galvanised iron roofing sheets as these are easily transportable and accessible. This is compounded by limited ability to pass on input price increases to end users because of intense competition. Key raw materials for AC roofing and PEBs, asbestos fibre and steel, respectively, account for over half of total input cost. Hence, any significant increase in input prices adversely impacts the operating margin. Input prices movements in the PEB business are passed on only when permitted by contracts. * Exposure to regulatory threat of ban on manufacture or use of asbestos More than 50% of revenue is from the sale of all roofing products, which exposes the company to risk of ban on the use of asbestos in India or on mining of asbestos in Russia, Canada, Kazakhstan, or Brazil (largest exporters of asbestos). In India, only white asbestos (known as crysotile) fibre is used as blue and brown asbestos have been banned. Furthermore, all forms of asbestos mining are banned in the country. Liquidity: Adequate Liquidity is adequate, with cash accrual likely to be sufficient to cover obligations of about Rs 6.9 crore in fiscals 2020 and to fund capex. Cash surplus was about Rs 24 crore as of March 31, 2019, and average bank limit utilisation was less than 10% in the twelve months through February, 2019. Furthermore, working capital management has been efficient, and dependence on short-term borrowings reduced in fiscal 2019. |
| Outlook: Stable |
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CRISIL believes Everest's business growth and operating margin will remain steady over the medium term, supported by improving rural demand and better operating efficiency. Financial risk profile is expected to remain strong because of steady cash generation, prudent working capital management, and moderate capex. |
| About the Company |
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Incorporated in 1934, Everest is one of India's largest manufacturers of AC roofing. The company has also diversified into non-asbestos building products (roofing sheets, flooring, cladding, and other boards); and design, manufacture, and erection of PEBs. It has eight plants across India. |
| Key Financial Indicators* | ||||||||||||||||||||||||
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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) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 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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