Key Rating Drivers & Detailed Description

Strengths

Established regional presence and diverse customer base, and long-standing industry presence

TKMML's business risk profile benefits from its established regional presence. TKMML's operations comprise mining, mineral separation and manufacturing titanium dioxide (TiO2) and titanium sponge (TSP). The company has been awarded four blocks of beach sand in Kollam for mining thus enabling the company to have assured raw material availability. Apart from producing rutile-grade TiO2 pigment for various types of industries, it also produces other products like ilmenite, rutile, zircon, sillimanite, and synthetic rutile. The different grades are produced by TKMML under the brand name Kemox for uses in various industries like paints, paper, cosmetics, rubber, plastics, and ceramics.

Healthy financial risk profile:

The financial risk profile of the company is healthy marked by estimated net worth of over Rs.882 crore as on March 31, 2021. Non utilisation of the working capital facilities and absence of any major debt funded capital expenditure, has resulted in strong capital structure as on the same date. The company's earlier plans to add new capacities have been currently stalled. Therefore, it is not expected to contract any additional debt over the medium term and capital structure to remain strong. Further, strong operating profitability has aided in robust debt protection metrics. Any debt funded significant capacity expansion and funding of the same shall remain key monitorable over the medium term.

Weakness

Influence of socio-political factors and regulatory risks in the mining industry

Production may be hampered by delays in obtaining approvals for the brownfield project like environmental clearances. Flexibility is also restricted by socio-political factors, which mandate development activities and labour unrest in mining areas, thereby impacting cost structure. These factors resulted in a sharp decline in operating profitability in fiscal 2020 to around 5.5 percent from around 18 percent for fiscal 2019 KMML has a near monopoly in rutile grade titanium dioxide production due to restrictions in entry of private players in the highly concentrated ore mining areas. Any change in the regulatory regime or socio-political factors will impact the business.

Key Financial Indicators

Annexure - Details of Instrument(s)

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