| Orient Bell Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 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 of Orient Bell Ltd (OBL).
The ratings continue to reflect the established market position of OBL in the tiles industry, its diversified geographical reach and clientele, and comfortable financial risk profile. These strengths are partially offset by exposure to risks posed by intense competition, cyclicality in the end-user real estate industry and fluctuations in prices of raw materials and gas. |
Key Rating Drivers & Detailed Description Strengths: Established market position in the domestic tiles industry, backed by a strong pan-India distribution network: With capacity of 33.6 million square meters (including associated entities), OBL is one of the leading organised tile manufacturers in India. Further, the company is likely to add another 3.3 million square meters to its capacity in the current fiscal. After acquisition of Bell Ceramic Ltd in 2010, the company has become a pan-India player, with plants across northern, southern and western regions. The diversified client base comprises 356 tile boutiques, institutional buyers and over 3,000 dealers, across the country with market leadership in the north. The company derives around 55% of revenue from the northern market, followed by the southern and eastern parts, which contributed around 20% each, during fiscal 2023. Thus, revenue and profitability remain insulated from any sharp changes in preferences of buyers in any particular region. Given its focus on improving its brand presence across India, the company has increased its budget for marketing and branding activities. Sustained improvement in operating performance and timely ramp-up of capital expenditure (capex) are key monitorables.
Improving financial risk profile and robust debt protection metrics: Steady reduction in debt and absence of any large, debt-funded capex will continue to support the capital structure. As on March 31, 2023, gearing was healthy at 0.01 time, driven by low (adjusted) debt of Rs 1.87 crore. Debt protection metrics were robust, marked by comfortable interest coverage and net cash accrual to total debt ratios of 20.5 times and 22.1 time, respectively, in fiscal 2023. The financial risk profile should remain adequate, supported by prudent working capital management and low debt.
Moderate working capital cycle: Gross current assets (GCAs) stood at 107 days as on March 31, 2023, led by receivables and inventory of 57 days and 47 days, respectively. The company maintains sizeable inventory, given the large product portfolio, comprising multiple sizes and designs. Operations are partly supported by payables of 131 days as on March 31, 2023.
Weaknesses: Vulnerability to intense competition and cyclicality in the end-user industry: OBL caters to the real estate, construction and infrastructure industries, whose performance is strongly correlated with economic cycles. Due to economic recessions in the past, the construction sector faced a slowdown, with several projects getting delayed or cancelled, restraining the performance of ceramic tiles manufacturers. Besides, the industry is intensely competitive and dominated by unorganised entities. However, with changes such as closure of ceramic units running on coal gasifiers, and implementation of the Goods and Services Tax (GST) and Real Estate (Regulation and Development) Act, 2016 (RERA), organised players have gained market share in value terms.
Despite being a leading player in the ceramic tiles industry, the company faces intense competition from unorganised entities and reputed brands. Ability to pass on the increase in raw material cost, amidst the competitive scenario, remains a key rating sensitivity factor. Any moderation in demand from the real estate sector and its impact on pricing and offtake will be closely monitored.
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Liquidity: Strong Liquidity is supported by healthy cash accrual, minimal bank limit utilisation and adequate financial flexibility. Expected cash accrual of over Rs 37 crore should suffice to meet the debt obligation of Rs 1.9 crore in fiscal 2024. Utilisation of the bank limit of Rs 165 crore only averaged 14% in the 12 months through May 2023. Current ratio was healthy at 1.56 times as on March 31, 2023. |
Outlook: Stable CRISIL Ratings believes OBL will continue to benefit from its established market position in the ceramic tile industry and its comfortable financial risk profile. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company OBL (formerly, Orient Ceramics and Industries Ltd) is a public limited company, listed on the Bombay Stock Exchange and National Stock Exchange. Mr. Daga and his family members are the promoters. It manufactures glazed ceramic wall, floor and vitrified tiles under the Orient Bell brand. Facilities are at Sikandarabad in Uttar Pradesh, Dora in Gujarat, and Hoskote in Karnataka. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
&100% fungibility in between fund based limit and non fund based limit ^100% fungibility between fund-based limit and non fund based limit %One way 100% interchangeability from Fund based limit to Non-fund based limit |
| 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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&100% fungibility in between fund based limit and non fund based limit
^100% fungibility between fund-based limit and non fund based limit
%One way 100% interchangeability from Fund based limit to Non-fund based limit
Criteria Details
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