Sunfame Ceramic Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 42.38 Crs. of Sunfame Ceramic Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	38.48	Long Term	BWR B + /Stable Assignment
	(3.00)
Non Fund Based	3.90	Short Term	BWR A4 Assignment
Grand Total	42.38	(Rupees Forty Two Crores and Thirty Eight lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

The ratings are influenced by the strategic location of the manufacturing facility in Morbi, Gujarat, the expertise of the management team, and a diverse customer base that minimizes risks associated with customer concentration. However, these ratings face limitations due to the industry's cyclical characteristics, the susceptibility of the company's profit margins to fluctuations in input prices, and the overall financial risk profile in FY 24 that is not optimal.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR believes 'Sunfame Ceramic Pvt. Ltd' business risk profile will be maintained over the medium term. The outlook may be revised to Positive if a sustained increase in the scale of operations and higher than envisaged profitability result in an improved financial risk profile and better gearing and debt protection metrics. The outlook may be revised to Negative if lower than expected revenue or profitability, a stretch in the working capital cycle, unanticipated capex or weakening gearing impact the financial risk profile.

KEY RATING DRIVERS

Credit Strengths:

• Manufacturing facility positioned for optimal strategic advantage :

  Located in Morbi, Gujarat, the company's manufacturing facility is part of the largest ceramic cluster in India and the second largest in the world. Furthermore, the nearby major ports, including Kandla and Mundra, help to minimize transportation expenses and support prompt export activities.

• Overseen by knowledgeable professionals :

  Since being appointed director in 2011, Mr. Kirtikumar Ughreja has accumulated 25 years of experience in the ceramic sector. His strategic guidance has enabled the company to broaden its client base.

• Minimal risk associated with customer concentration :

  The risk associated with customer concentration is minimal, as the top five customers account for approximately 29% of the total operating income for FY24. Notably, the top three customers are international clients, while the domestic clients are spread across various geographical regions.

Credit Risks:

• Active in a highly competitive ceramics sector, where financial outcomes are significantly influenced by the cyclical trends of the real estate industry :

  The ceramic tiles market is marked by a high level of competition and fragmentation, featuring a wide array of organized and unorganized players in the domestic landscape. This scenario intensifies market competition, which may exert pressure on the profitability of both current and prospective participants. A significant portion of tile demand is generated by the real estate sector, which in India is highly fragmented and cyclical in nature. This industry is particularly sensitive to fluctuations in interest rates and overall market liquidity. Therefore, any downturn in the real estate sector could have detrimental effects on the ceramic tiles industry and its stakeholders. Additionally, this industry is also characterized by low entry barriers and a large number of both organized and unorganized competitors, along with planned capital investments from existing players and new entrants.

• Profit margins are vulnerable to variations in the prices of raw materials, fuel expenses, and risks associated with fluctuations in foreign exchange rates. :

  The pricing of raw materials, such as clay, is influenced by market dynamics, which exerts pressure on the profit margins of tile manufacturers. Additionally, fuel costs, primarily from propane or natural gas, are subject to fluctuations based on global supply and demand conditions. The company's capacity to procure natural gas at favorable rates and manage its cost structure is vital, particularly in a competitive landscape. Furthermore, the organization exports its products to multiple countries, which subjects its profit margins to risks associated with foreign exchange fluctuations, especially in the absence of a proactive foreign exchange hedging strategy.

• Suboptimal Financial risk profile :

  The company's operational scale contracted during FY 24 due to a one-year shutdown of the manufacturing facility for renovations. As a result, revenue for FY 24 was recorded at Rs 17.45 Crs, a significant decline from Rs 46.16 Crs in FY 23. Despite this decrease in revenue, the company's operating expenses have remained consistently high, leading to a low PAT of Rs 0.11 Crs in FY 24. Profitability margins are also underwhelming, with an operating profit margin of -1.67% and a net profit margin of 0.61% for the same period. The current ratio is reported at 1.14x in FY 24, while the debt protection metrics are concerning, with an ISCR of -1.65x and a debt service coverage ratio DSCR of 1.92x respectively in FY 24, indicating a significant liquidity risk for the company.

ANALYTICAL APPROACH - Standalone

To arrive at its ratings, BWR has considered a standalone approach. Reference may be made to the Rating Criteria hyperlinked below.

RATING SENSITIVITIES

Going forward the company's ability to expand its operational scale, boost profitability, enhance liquidity and credit profile, and effectively manage the working capital will be critical factors influencing its ratings.

Positive:-

• Sustained growth in the total operating income by at least 40%.

• An enhancement in profitability margins resulting in net cash accruals of Rs 5.00 Crores or above.

• Consistent and effective maintenance of the company's conversion cycle, achieving a shorter duration for receivables and payables.

Negative:- 

• Decrease in the total operating income of the company by 40%.

• Deterioration of the profitability margins by 3% leading to low net cash accruals for the company.

• Large debt-funded capital expenditure, weakening the financial risk profile

LIQUIDITY INDICATORS - Stretched

The liquidity position of the company is constrained, highlighted by an average cash credit facility utilization of 90%. Over the last two years, the company has generated only a small PAT, resulting in persistently low net cash accruals. In FY 24, the cash and bank balance amounted to Rs 2.47 Crores, which is sufficient enough to cover the company's debt obligations. Nevertheless, any unforeseen costs could severely impact the company's financial health. The ability of the partners to provide capital when needed serves as a safety net in such situations.

ABOUT THE ENTITY

Sunfame Ceramic Private Limited is a private company that was incorporated on March 5, 2011, in Morbi, Gujarat. The company focuses on manufacturing ceramic wall tiles, particularly 'Glazed Vitrified Tiles (GVT)', which come in various sizes like 600x600mm, 600x1200mm, and 1200x2800mm. It has successfully increased its production capacity to 12,000 square meters of tiles per day. In addition, Sunfame Ceramic exports its products to 15 key clients across 12 major countries, including Spain, the UAE, the USA, and Canada.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21 - 22 (Audited)	FY 22 - 23 (Audited)	FY 23 - 24 (Audited)
Operating Revenue	Rs.Crs.	35.93	46.16	17.45
EBITDA	Rs.Crs.	-0.44	0.11	-0.29
PAT	Rs.Crs.	0.20	0.20	0.11
Tangible Net Worth	Rs.Crs.	4.33	4.53	11.48
Total Debt / Tangible Net Worth	Times	1.07	1.06	3.18
Current Ratio	Times	1.18	1.17	1.14

KEY COVENANTS OF THE FACILITY RATED

The key covenants are the standard terms as stipulated in the sanction letters of the rated facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

ANY OTHER INFORMATION

NIL

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	38.48	BWR B+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
FB SubLimit	LT	(3.00)	BWR B+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	3.90	BWR A4 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		42.38	(Rupees Forty Two Crores and Thirty Eight lakhs Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Approach to Financial Ratios
• Short Term Debt
• Manufacturing Company

Analytical Contacts
Varsha Jasmin Rating Analyst varsha.j@brickworkratings.com	Nagaraj K Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Union Bank of India	Term Loan - Sanctioned	19.73	_	19.73	Simple##
2	Union Bank of India	Term Loan - Sanctioned	7.25	_	7.25	Simple##
3	Union Bank of India	Term Loan - Sanctioned	2.00	_	2.00	Simple##
4	Union Bank of India	Bank Guarantee - Sanctioned	_	3.90	3.90	Simple##
5	Union Bank of India	Working Capital (CC) - Sanctioned	9.50	_	9.50	Simple##
	Sub-Limit (Cash Credit) - Sanctioned	(3.00)
Total			38.48	3.90	42.38
TOTAL (Rupees Forty Two Crores and Thirty Eight lakhs Only)

## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.