| Exxaro Tiles Limited | ||||||
| Suspension revoked; 'CRISIL BBB+/Stable/CRISIL A2' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revoked the suspension of its ratings on the bank facilities of Exxaro Tiles Limited (ETL; formerly known as Ricasil Ceramic Industries Private Limited) and has assigned its ‘CRISIL BBB+/Stable/CRISIL A2’ ratings to them. CRISIL Ratings had suspended its rating on September 29, 2016 on account of non-availability of information from ETL with CRISIL Ratings’ efforts to undertake a review of the rating. ETL has now shared the requisite information enabling CRISIL Ratings to assign its rating.
The rating reflects ETL's improved financial profile following initial public offering and established market presence and sound operating efficiency. These strengths are partially offset by its average scale and working capital intensive operations and susceptibility of its profitability to volatile raw material costs, fuel costs. |
Key Rating Drivers & Detailed Description Strengths: Improved financial profile: In current fiscal, company has come out with initial public offering (IPO), raising Rs. 161 cr with fresh equity capital of Rs. 135 cr and balance being “offer for sale” from existing shareholders. Consequently, the net worth of company has improved sharply to Rs. 262 cr with gearing being less than 0.2 times as on September 30, 2021 and are expected to further consolidate by end of this fiscal. ETL had a gearing of 1.32 times as on March 31, 2021.
The debt protection measures are also expected to be much improved backed by full repayment of the outstanding term loans and reduction in working capital borrowings, from the IPO proceeds. The interest coverage is estimated around 4 times for fiscal 2022. The interest coverage and net cash accrual to total debt (NCATD) ratio were average at 2.44 times and 0.18 times for fiscal 2021. CRISIL Ratings believes that in absence of any large debt funded capex plans, company’s financial profile shall continue to improve.
Established market presence and sound operating efficiency: ETL has established market presence benefiting from the promoters' extensive experience, their strong understanding of market dynamics, and healthy distribution network. The key promoters have experience of over 2 decades which has enabled the company to grow over the years. ETL has a network of over 800 dealers and 2000+ touch points where its products are sold under “Exxaro” brand.
ETL’s sound operating efficiency is reflected in the healthy operating margin (18-20%) maintained by company. ETL benefits from its production being almost totally in house and sales in its own brand with presence in large sized tiles. Further, the lower gas prices at one of its two units supports the margin.
Weaknesses Average scale and working capital intensive operations: ETL had clocked a revenue of Rs. 260 cr, in fiscal 2021, reflecting an average scale of operations. Further, its intensive working capital management is reflected in its gross current assets (GCA) of 290 days as on March 31, 2021. Over the last three GCA has ranged between 258 days and 318 days. This is driven primarily by high inventory of around 6 months on account of wide range of designs, continuous changes in same with production being largely in-house. Also, company had debtors around 4 months driven by extension of large credit to its dealers. The working capital requirements are partially supported by extended credit received from suppliers. While ETL is undertaking measures to control the working capital cycle, the extent and sustenance of improvement remains a key monitorable. ETL had marginally improved receivables of 3 months with steady inventory levels as on September 30, 2021.
Susceptibility of its profitability to volatile raw material costs: Raw materials such as different types of clays, feldspar, silica, kaolin, and carbonates account for 50 to 60 per cent of the total cost of sales of ceramic tiles, while gas and power cost consist of 20 to 25 per cent of the total cost of sales. Therefore, operating margins to be susceptible to volatility in their prices. The risk has currently pronounced due to much increase volatility in the gas prices. |
Liquidity: Adequate ETL’s liquidity profile has improved sharply following the fresh equity capital of Rs. 135 cr in August 2021. These funds have been deployed in repaying the term debt and reducing the working capital borrowings. Consequently, the company no longer has any term debt obligations and its bank limit utilization is expected to be moderate around 50% of the sanctioned Rs. 70 cr limit. ETL’s Rs.75 cr limits were almost fully drawn earlier before the fund infusion on account of high working capital intensity. Company has Rs. 15cr cash bank balance as on September 30, 2021. Company is expected to generate annual accruals of Rs. 30-35 cr which should suffice for incremental capex and opex requirements. |
Outlook: Stable CRISIL Ratings believes that ETL’s will continue to benefit from its improved capital structure and established business presence. |
Rating Sensitivity Factors Upward factor
Downward factor
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About the Company ETL is engaged in the manufacturing and marketing of vitrified tiles that primarily used as flooring solutions. It was established 2007-08 as a partnership firm that manufactured frit, a raw material used in tile manufacturing and have over the years, diversified, expanded and evolved into a manufacturer for vitrified tiles. It has 2 manufacturing units in Gujarat (Unit 1 -Padra in Vadodara and Unit 2- Talod in Sabarkantha) and has total installed capacity of 13200000 sq.m. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 Bank Lenders & Facilities | ||||||||||||
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This Annexure has been updated on 12-Nov-2021 in line with the lender-wise facility details as on 12-Nov-2021 received from the rated entity.
Criteria Details
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