Key Rating Drivers & Detailed Description

Strengths:

Established position in the granite and engineered stones business, supported by extensive experience of the promoters and established client relationships:

The Pokarna group is the largest exporter of quartz surfaces in India, and a leading exporter of granite slabs and blocks. PESL benefits from its established relationship with Breton S.p.A and access to its patented technology for manufacturing quartz surface products. Nearly three-decade-long experience of the promoters in the stone industry, long track record of operations and healthy relationships with customers have enabled the group to establish a strong market position.

Healthy operating margin

Sales of high-margin premium quartz surfaces and granite slabs have helped the group sustain a healthy operating margin of about 30% and above, over the five fiscals through March, 2021.

Weakness:

Exposure to moderate demand risk: Capacity utilisation at granite processing units has been low over the past few years, amidst heightened competition from countries such as Brazil and China. Further, as the quartz surfaces manufacturing unit has commenced commercial operations only recently, the group remains exposed to moderate demand risk. Pick up in capacity utilisation will be a key monitorable. 

Susceptibility to demand from key markets and fluctuation in forex rates: Exports accounted for over 85% of revenue of the group. Hence, growth remains highly dependent on demand from key markets, such as USA and China, which together formed almost 80% of total revenue in fiscal 2021. The operating margin also remains susceptible to volatility in forex rates.

Key Financial Indicators - - Consolidated

Annexure - Details of Instrument(s)

Annexure - List of Entities Consolidated

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