| RCCPL Private Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL A1+' rating on the commercial paper programme of RCCPL Private Limited (RCCPL).
For fiscal 2022, the operating income grew around 11%, driven by higher sales volume (up by 15%). However, as expected, the earnings before interest, tax, depreciation, and amortisation (Ebitda) margin moderated to 19.7% due to steep rise in cost of power, fuel and freight, which is also reflected in the lower EBITDA per tonne of Rs 1,047 vs Rs 1,453 in FY21. CRISIL Ratings expect the company’s sales volume to grow at a healthy double-digit rate in FY23 with the increased capacity coming from the newly commissioned 3.9 MTPA Mukutban plant. However, the Ebitda margins are likely to remain subdued as input cost headwinds persists.
Net leverage (net debt to EBITDA ratio) moderated, as expected, to 4.9 times owing to higher debt and the lower-than-expected Ebitda levels. The financial risk profile was expected to moderate in fiscal 2022 owing to drawdown of the debt to fund the Mukutban project capex. The project has now commissioned and would contribute to revenue and cash accruals from fiscal 2023 that shall improve the leverage ratios and financial risk profile.
The rating centrally factors in strategic importance of RCCPL to Birla Corporation Ltd (BCL; ‘CRISIL A1+') and the strong support it receives from BCL. The rating also reflects RCCPL's healthy operating efficiency. These strengths are partially offset by leveraged capital structure, average debt protection metrics, debt-funded capex and susceptibility to input costs and cyclicality in the cement industry. |
Analytical Approach For arriving at the rating, CRISIL Ratings has applied its criteria for notch-up of rating based on parent support. |
Key Rating Drivers & Detailed Description Strengths:
BCL has high operational, managerial and financial integration with its wholly owned subsidiary, RCCPL. The parent has consolidated its position in its key market of central India with the addition of RCCPL's assets, as the latter forms ~50% of the combined capacity of 19.5 million tonne per annum (mtpa). Both companies sell under the common brand, MP Birla, thereby further strengthening the market position.
RCCPL has sizeable mineral reserves with captive limestone mines, coal mine and assured supply of fly ash. The company also has significant tax incentives in all the plants, which also supports healthy operating margin. Post-acquisition by BCL, capacity utilisation of RCCPL improved to 106% in fiscal 2022 from 64% in fiscal 2017. Operating performance is expected to benefit further with the recent commissioning of the integrated Mukutban plant.
Financial flexibility is comfortable for RCCPL being a wholly owned subsidiary of BCL which is a part of the MP Birla group. Liquidity is also backed by improving cash accrual and moderate utilization of fund-based limits.
BCL, on a consolidated basis, has cash and liquid surplus of Rs 809.61 crore as on March 31, 2022, undrawn working capital limits and a large freehold land bank.
Weaknesses:
Overall net debt to EBITDA ratio remained high at 4.9 times, while interest coverage ratio was moderate at 4.2 times for fiscal 2022. Gearing was high at around 2.0 times as on March 31, 2022. Furthermore, the group's ability to avail of tax incentives will be a key monitorable.
The debt protection metrics are expected to improve over the medium term as the recently commissioned Mukutban plant has started contributing to cash accruals, though, the time taken for stabilization and extent of ramp-up has to be seen in the coming months.
Profitability is susceptible to volatility in the costs of inputs such as material, power, fuel and freight. Also, any change in government policies could impact the operating margin. For instance, the operating margin in fiscal 2022 was impacted by higher cost of coal/pet coke and diesel. |
Liquidity: Strong Liquidity has been healthy, driven by cash accrual estimated above Rs 400 crore in fiscal 2023 as against Rs 116 crore of long-term debt repayment obligation. The fund-based working capital facility of Rs 200 crore was moderately utilised. Bank lines are expected to comfortably meet the incremental working capital requirement. |
Rating Sensitivity factors Downward factors
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About the Company RCCPL was incorporated in 2007 as a wholly owned subsidiary of Reliance Infrastructure Ltd. On August 22, 2016, BCL acquired 100% stake of RCCPL for an enterprise valuation of Rs 4,800 crore (including debt of Rs 2,400 crore). The name has been changed to RCCPL from Reliance Cement Company Pvt Ltd on August 01, 2018. |
Key Financial Indicators*
^as per CRISIL Ratings’ analytical adjustment *Based on abridged audited financials |
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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
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