Rating Rationale
September 05, 2024 | Mumbai
Goa Carbon Limited
Ratings reaffirmed at 'CRISIL A-/Stable/CRISIL A2+'
 
Rating Action
Total Bank Loan Facilities RatedRs.424 Crore
Long Term RatingCRISIL A-/Stable (Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable/CRISIL A2+’ ratings on the bank facilities of Goa Carbon Limited (GCL).

 

The ratings continues to reflect the company’s established position in the manufacture of calcined petroleum coke (CPC), location advantage, efficient working capital management and its comfortable financial risk profile.. These rating strengths are partially offset by susceptibility to inherent cyclicality in the end-user industries, volatile operating margins and susceptibility to government regulations.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position in CPC industry: GCL is an established player in the manufacture of CPC has a long track record of more than four decades in this business. The long track record backed by extensive experience of the promoter has helped establish strong relationships with customers and suppliers. GCL’s customer base includes all major aluminum manufacturing companies. Repeat orders from customers and healthy capacity utilization, has resulted in healthy growth in revenues to Rs 1057 crores in fiscal 2024 as compared to Rs 416 crores in fiscal 2020.

 

  • Comfortable financial risk profile: Networth remains strong at around Rs 248 crore as on March 31, 2024, as against Rs 186 crore, a year earlier, and is expected to grow further, backed by steady accretion to reserve. Capital structure is comfortable, as reflected by gearing and total outside liabilities to adjusted networth (TOL/ANW) ratios of 1.35 times and 1.46 times, respectively, as on March 31, 2024, reduced from 2.27 times and 3.11 times, respectively, a year ago. Debt protection metrics were healthy with interest coverage ratio of 5.87 times and net cash accrual to total debt (NCA/TD) ratio of around 0.19 time for fiscal 2024. The financial risk profile is expected to improve over the medium term with increased networth and repayment of term loans.

 

  • Locational advantage, leading to easy transportation: The current manufacturing facilities are in Goa, Bilaspur (Chhattisgarh) and Paradeep (Orissa). All of these facilities are strategically located close to the port or near to the customer. This helps in savings on transportation cost.

 

Weaknesses:

  • Volatile operating margins and cyclicality in end-user industries: Green petroleum coke (GPC) is a by-product of oil refineries, and its prices are highly volatile. The company is able to pass on the increase in raw material prices to the customers, with a lag. Also, prices of CPC are volatile and linked to market demand and supply. Hence, margins have remained volatile in range of 7-12% in the last four fiscals. The margins dipped to 5.22% in Q1 fiscal 2025 due to lower realisations. Further, CPC is majorly used in aluminum industry, which is inherently cyclical. Hence, the realizations and profits of the company continue to be linked to the demand from the sector.

 

  • Raw material adequacy risk and susceptibility to government regulations: CPC usage in aluminum industry and imports of CPC and GPC are highly regulated by the government. The government allocates quota to each player basis the requirements in the country. GCL continues to be the third largest in terms of the quota allocated by the DGFT. However, any changes in these regulations will continue to remain a crucial factor.

Liquidity: Strong

Liquidity is supported by expected healthy net cash accrual of Rs 40-60 crores, which should be more than adequate to meet its low term debt obligation of Rs 3 Crores in fiscal 2025 and 2026. Healthy cash and cash equivalent balance including FDs of Rs 237 crores as on March 31, 2023 out of which around Rs 161 Crores was unencumbered and moderate bank limit utilisation of 62% for the past nine months ending June 2024 also support liquidity. Current ratio was healthy at 1.57 times as on March 31, 2024.

Outlook: Stable

CRISIL Ratings believes GCL will continue to benefit from its strong market position and comfortable financial profile.

Rating sensitivity factors

Upward factors

  • Significant growth in revenue along with sustained healthy operating margin resulting in healthy net cash accrual of over Rs 90 crore.
  • Improvement in financial profile

 

Downward factors

  • Significant decline in revenue with operating margin below 8%, primarily due to fall in realisations or change in regulations
  • Any large, debt-funded capex, weakening the financial risk profile

About the Company

GCL, part of Dempo Group of Companies, was incorporated in 1967. The company is into manufacturing of calcinated petroleum coke (CPC). Its manufacturing facilities are located in Goa, Bilaspur (Chattisgarh) and Paradeep (Orissa). It is headed by Mr. Shrinivas V Dempo (Promoter & Chairman). GCL is listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Key Financial Indicators

As on/for the period ended March 31

Unit

Apr- June 2024

2024

2023

Operating income

Rs crore

127.61

1057

1364

Reported profit after tax (PAT)

Rs crore

2.98

85.5

80.75

PAT margin

%

2.34

8.1

5.9

Adjusted debt/adjusted networth

Times

Not Available

1.35

2.27

Interest coverage

Times

1.92

5.87

3.39

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 83.50 NA CRISIL A-/Stable
NA Letter of Credit NA NA NA 226.50 NA CRISIL A2+
NA Non-Fund Based Limit NA NA NA 90.00 NA CRISIL A2+
NA Proposed Working Capital Facility NA NA NA 15.00 NA CRISIL A-/Stable
NA Working Capital Term Loan NA NA 31-Mar-26 5.00 NA CRISIL A-/Stable
NA Working Capital Term Loan NA NA 31-Mar-26 4.00 NA CRISIL A-/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 107.5 CRISIL A-/Stable   -- 03-11-23 CRISIL A-/Stable   --   -- --
      --   -- 14-08-23 CRISIL A-/Stable   --   -- --
      --   -- 31-07-23 CRISIL A-/Stable   --   -- --
Non-Fund Based Facilities ST 316.5 CRISIL A2+   -- 03-11-23 CRISIL A2+   --   -- --
      --   -- 14-08-23 CRISIL A2+   --   -- --
      --   -- 31-07-23 CRISIL A2+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 5 Canara Bank CRISIL A-/Stable
Cash Credit 5 IndusInd Bank Limited CRISIL A-/Stable
Cash Credit 5 Nkgsb Co-Operative Bank Limited CRISIL A-/Stable
Cash Credit 55 State Bank of India CRISIL A-/Stable
Cash Credit 13.5 Bank of India CRISIL A-/Stable
Letter of Credit 55 IndusInd Bank Limited CRISIL A2+
Letter of Credit 171.5 Bank of India CRISIL A2+
Non-Fund Based Limit 45 Canara Bank CRISIL A2+
Non-Fund Based Limit 45 State Bank of India CRISIL A2+
Proposed Working Capital Facility 15 Not Applicable CRISIL A-/Stable
Working Capital Term Loan 5 State Bank of India CRISIL A-/Stable
Working Capital Term Loan 4 Bank of India CRISIL A-/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies

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