Rating Rationale
July 04, 2023 | Mumbai
NCL Industries Limited
Ratings reaffirmed at 'CRISIL A / Stable / CRISIL A1 '; Rated amount enhanced for Fixed Deposits
 
Rating Action
Total Bank Loan Facilities RatedRs.561 Crore
Long Term RatingCRISIL A/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
 
Rs.100 Crore (Enhanced from Rs.75 Crore) Fixed DepositsCRISIL A/Stable (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 A1’ ratings on the bank facilities and fixed deposits programme of NCL Industries Limited (NCL).

 

The ratings reflect NCL's established market position in South India, long track record of operations and healthy financial risk profile. These rating strengths are, however, partially offset by risks relating to volatile input costs, cyclicality in cement industry, and commodity nature of the product.

Analytical Approach

For arriving at the ratings CRISIL Ratings has considered the consolidated financials of NCL and its subsidiaries Tern Distilleries Pvt Ltd (TDPL). Also, NCL has started a Joint Venture ‘NCL Buildtek & NCL Industries JV’ along with its group company NCL Buildtek Ltd.  However, there are no major business activities in the JV. On April 2023, company acquired Vishwamber Cements Ltd (VCL) and it will become wholly owned subsidiary of NCL Industries Limited (NCL) in fiscal 2024.

 

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 South India: NCL is an established player in the cement industry with a long track record of more than 4 decades and has installed clinker and cement capacities of 2.6 million tonnes per annum (MTPA) and 3 MTPA respectively. Abundant availability of limestone in its captive mines along with availability of captive power of 23.5 MW (Solar – 8 MW, Hydel – 7.5 MW and waste heat recovery – 8 MW) adequate to meet 30-35% of its requirement and advantageous location results in moderate operating efficiency. Further the company has diversified its product profile by venturing into other building material such as ready-mix concrete, cement bonded particle boards and doors. The products are marketed under the brands “Nagarjuna Cement”, “Nagarjuna RMC”, “Bison Panels” and “NCL doors”.

 

Healthy financial risk profile: Net worth and gearing were healthy at around Rs 769.86 crore and 0.38 time, respectively as of March 31, 2023. Debt protection metrics were also comfortable with interest coverage and net cash accrual to total debt ratios of 5.64 times and 0.27 time, respectively, for fiscal 2023. The company is expected to undertake additional debt funded capital expenditure of over Rs 150 crore to increase its cement capacity by 0.7 MTPA which is expected to take about 18 months’ time after receiving the required approvals. Despite the planned debt funded capital expenditure, financial risk profile is expected to remain comfortable with gearing expected to remain below 0.5 time over the medium term.

 

Weaknesses:

Exposure to intense competition and to risks related to volatility in raw material prices: Cement players, including NCL, are susceptible to fluctuations in the prices of coal/petcoke, various raw material (other than limestone which is captively available), packing material and diesel. Against this, exposure to intense competition and limited product differentiation limits the pricing flexibility of players.

 

Susceptibility to risks related to the commoditised nature of products and cyclicality in the cement industry: Capacity additions in the commoditised cement industry tend to be sporadic because of long gestation periods associated with setting up of new facilities and numerous players adding capacities during the peak of a cycle. This has led to unfavorable price cycles for the sector in the past. Cyclical downturns in the industry result in slow offtake, constraining the operating rate and the ability of players to pass on any rise in input costs.

Liquidity: Adequate

Liquidity is expected to be adequate because of healthy net cash accruals which are expected to be over Rs 134-170 which are sufficient against term debt obligation of Rs 55-65 crore over the medium term.  Average Bank limit utilisation was moderate at around 47% percent for the twelve months ended May 2023

Outlook: Stable

CRISIL Ratings believes that NCL will continue to be benefit from its established market position and extensive experience of its promoter.

Rating Sensitivity factors

Upward Factors:

* Higher price realisations along with sustained healthy operating rates of over 95-97% and an improvement in operating margin to around 13.5-14% resulting in healthy net cash accrual of over Rs 160 crore.

* Further strengthening of financial risk profile along with improvement in return on capital employed to over 15%

 

Downward Factors:

* Sharp decline in realisations or operating rates impacting the revenue and profitability margins with operating margin dropping to below 9%

* Higher than expected debt funding for the future capex or any large debt funded acquisition or any large cash outflow in the form of dividends/share buy-back weakening the financial risk profile & liquidity

About the Group

NCL, incorporated in 1979 by Late Sri K Ramachandra Raju, manufactures different varieties of cement, cement bonded particle boards, Ready-mix concrete and Doors. Mr K Gautam (Managing Director) currently overlooks the operations. NCL acquired TDPL in fiscal 2021 and it intends to set-up a greenfield cement unit in the land owned by that company in Visakhapatnam, Andhra Pradesh. Currently there are no operations in the subsidiary. On April 2023, company acquired Vishwamber Cements Ltd (VCL) for a total consideration of Rs. 16.23 crores . VCL will become wholly owned subsidiary of NCL Industries Limited (NCL) in fiscal 2024. VCL is not currently operational and has not established any cement plants. VCL was acquired with an objective to convert the limestone mines covering an area of 322 acres under its lease into captive mines of NCL for captive consumption of limestones.

Key Financial Indicators

As on / for the period ended March 31   2023 2022
Operating income Rs crore 1,610 1,633
Reported profit after tax Rs crore 44 94
PAT margins % 2.75 5.77
Adjusted Debt/Adjusted Net worth Times 0.38 0.45
Interest coverage Times 5.64 8.35

Status of non cooperation with previous CRA:

NCL has not cooperated with CARE Ratings which has classified it as issuer not cooperative vide release dated June 04, 2018. The reason provided by CARE Ratings is non-furnishing of information by NCL for monitoring of ratings.

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 assigned
with outlook
NA Cash Credit NA NA NA 180 NA CRISIL A/Stable
NA Fixed Deposits NA NA NA 100 Simple CRISIL A/Stable
NA Letter of Credit & Bank Guarantee NA NA NA 45 NA CRISIL A1
NA Proposed Term Loan  NA NA NA 108.5 NA CRISIL A/Stable
NA Term Loan NA NA Jun-27 54.4 NA CRISIL A/Stable
NA Term Loan NA NA Oct-24 9.7 NA CRISIL A/Stable
NA Term Loan NA NA Oct-24 10.6 NA CRISIL A/Stable
NA Term Loan NA NA Mar-28 30.9 NA CRISIL A/Stable
NA Term Loan NA NA Mar-26 31.7 NA CRISIL A/Stable
NA Term Loan NA NA Mar-26 15.2 NA CRISIL A/Stable
NA Term Loan NA NA Mar-28 75 NA CRISIL A/Stable

Annexure – List of entities consolidated

Names of entities consolidated Extent of consolidation  Rationale for consolidation 
NCL Industries Limited Full Parent
Tern Distilleries Pvt Ltd Full 100% subsidiary of NCL
NCL Buildtek and NCL Industries JV Proportionate Same line of business with operational linkages
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 516.0 CRISIL A/Stable 21-04-23 CRISIL A/Stable 20-09-22 CRISIL A/Stable 24-09-21 CRISIL A/Stable 19-03-20 CRISIL A-/Stable CRISIL A-/Stable
      --   -- 12-09-22 CRISIL A/Stable 13-09-21 CRISIL A/Stable   -- --
      --   -- 22-06-22 CRISIL A/Stable 03-06-21 CRISIL A-/Positive   -- --
      --   --   -- 06-01-21 CRISIL A-/Positive   -- --
Non-Fund Based Facilities ST 45.0 CRISIL A1 21-04-23 CRISIL A1 20-09-22 CRISIL A1 24-09-21 CRISIL A1 19-03-20 CRISIL A2+ CRISIL A2+
      --   -- 12-09-22 CRISIL A1 13-09-21 CRISIL A1   -- --
      --   -- 22-06-22 CRISIL A1 03-06-21 CRISIL A2+   -- --
      --   --   -- 06-01-21 CRISIL A2+   -- --
Fixed Deposits LT 100.0 CRISIL A/Stable 21-04-23 CRISIL A/Stable 20-09-22 CRISIL A/Stable 24-09-21 F A+/Stable 19-03-20 F A/Stable F A/Stable
      --   -- 12-09-22 CRISIL A/Stable 13-09-21 F A+/Stable   -- --
      --   -- 22-06-22 CRISIL A/Stable 03-06-21 F A/Positive   -- --
      --   --   -- 06-01-21 F A/Positive   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 25 HDFC Bank Limited CRISIL A/Stable
Cash Credit 20 Kotak Mahindra Bank Limited CRISIL A/Stable
Cash Credit 50 Axis Bank Limited CRISIL A/Stable
Cash Credit 20 State Bank of India CRISIL A/Stable
Cash Credit 65 Bank of Baroda CRISIL A/Stable
Letter of credit & Bank Guarantee 10 Bank of Baroda CRISIL A1
Letter of credit & Bank Guarantee 25 State Bank of India CRISIL A1
Letter of credit & Bank Guarantee 10 Axis Bank Limited CRISIL A1
Proposed Term Loan 108.5 Not Applicable CRISIL A/Stable
Term Loan 9.7 HDFC Bank Limited CRISIL A/Stable
Term Loan 31.7 Axis Bank Limited CRISIL A/Stable
Term Loan 15.2 HDFC Bank Limited CRISIL A/Stable
Term Loan 10.6 Axis Bank Limited CRISIL A/Stable
Term Loan 54.4 Axis Bank Limited CRISIL A/Stable
Term Loan 30.9 Axis Bank Limited CRISIL A/Stable
Term Loan 75 Kotak Mahindra Bank Limited CRISIL A/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Rating Criteria for Cement Industry
CRISILs criteria for rating fixed deposit programmes
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for Consolidation

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Himank Sharma
Director
CRISIL Ratings Limited
B:+91 124 672 2000
himank.sharma@crisil.com

Nagarjun Alaparthi
Associate Director
CRISIL Ratings Limited
B:+91 40 4032 8200
nagarjun.alaparthi@crisil.com

Kavya Puthussery
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 40 4032 8200
Kavya.Puthussery@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html