| Zirconia Cera Tech Glazes | ||||||
| Ratings Reaffirmed and Withdrawn | ||||||
| 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its ratings on the bank facilities of Zirconia Cera Tech Glazes (ZCTG; part of Astron group) and subsequently withdrawn the ratings at the company's request and on receipt of ‘no-objection certificate’ from the bankers. The withdrawal is in line with CRISIL Ratings’ policy on withdrawal of bank loan ratings. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Astron International Pvt Ltd, Astron Zircon Pvt Ltd, Axolo Ceramic Pvt Ltd, Comfia Industries Pvt Ltd, Quantas Glass and Ceramic Pvt Ltd, Shree Shakti Ceramics - Mehsana, Shreenath Ceramics Industries, Sunfrio Chemicals Pvt Ltd, Spire Cera-Frit Pvt Ltd, Sunrise Glass Industries Pvt Ltd, Sunrise Silichem Industries Pvt Ltd, Superking Glass and Ceramic Pvt Ltd, Welsuit Glass and Ceramics Pvt Ltd and Zirconia Cera Tech Glazes. This is because all these entities, collectively referred to as the Astron group, are in the same business and have common management and significant operational linkages.
Also, CRISIL Ratings has treated unsecured loans from the promoters as 75% equity and 25% debt as these are subordinate to bank debt and are expected to remain in the business in the long term.
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:
Presence of more than two decades has enabled the group to become one of the larger players in the ceramic frit industry in Gujarat. It has diversified product profile by adding capacity for liquid glass bottles, leading to healthy turnover and established relationships with customers and suppliers. Astron Group’s revenue is estimated at around Rs 1228 crore during the first eleven months of fiscal 2023.
Gearing and total outside liabilities to tangible networth ratio are estimated to have remained comfortable at around 0.95 time and 1.16 time, respectively, as on March 31, 2022. Unsecured loans of Rs 177 crore (as on March 31, 2022) from the promoters also aid operations. The promoters will continue to extend need-based funding.
Manufacturing facilities are in Himmatnagar, Surat and Vadodara (all in Gujarat). The Kandla and Mundra ports are also in proximity, which helps reduce transportation cost. Availability of labour from nearby regions aids operating performance. The group manufactures ceramic frits that is a key raw material for producing ceramic tiles. Since Morbi and Himmatnagar are hubs for ceramic tiles manufacturing, it further reduces transportation cost and provides a ready market for the group.
Weaknesses:
Gross current assets have been high at 200-250 days over the three fiscals through 2022 because of receivables of 140-160 days. Working capital cycle is supported by credit from suppliers and short-term loans. Any major deviation in working capital cycle over the medium term will remain a key rating sensitivity factor.
Even after strong integration, operating margin has remained low at around 8% in the past. However, it increased to 11.6% in fiscal 2022 on the back of better operating efficiency and ability to pass on rise in raw material prices to clients. Operating margin is estimated to remain at similar levels during the first eleven months of fiscal 2023. Sustaining the improvement in profitability will be a key monitorable over the medium term.
The group has recently completed capex for manufacturing of boron products, dye and dye intermediates in Sunfrio Chemicals Pvt Ltd (SCPL) at a capital outlay of around Rs 30 crore. The unit became operational in May 2022. Timely stabilisation of the unit and steady offtake remains a key monitorable. Any large debt funded capex, more than 15% of networth, will remain a monitorable. |
Liquidity: Adequate Expected cash accrual of Rs 50-55 crore per annum should suffice to cover the term debt obligation of Rs 20-27 crore over the medium term and the surplus cash will aid financial flexibility. Bank limit utilisation was moderate, averaging 71% for the 12 months through February 2023. Liquidity is supported by unsecured loans from the promoters. Current ratio is estimated to be healthy at 1.9 times as on March 31, 2022. Comfortable networth and healthy gearing provide adequate financial flexibility. |
Outlook: Stable The Astron group will continue to benefit from its established market position and the extensive experience of its promoters. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group The Astron group is promoted by Himmatnagar-based Mr Upesh Thakkar and family. It commenced operations by setting up a manufacturing facility for Hindustan Cera (now merged with Astron Zircon Pvt Ltd) in 1993. The group manufactures ceramic frit (raw material used to make ceramic tiles) and liquid glass bottles. |
Key Financial Indicators
**Provisional |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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This Annexure has been updated on 04-Apr-23 in line with the lender-wise facility details as on 27-Jan-23 received from the rated entity.
Criteria Details
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