Rating Rationale

Brickwork Ratings (BWR) has assigned a Long-Term Rating of BWR BB+ with a Positive outlook and Short-Term Rating of BWR A4+ for the Bank Loan Facilities of Rs. 57.22 Crores of Megacity Vitrified LLP. 

The rating reflects the promoters' extensive hands-on experience in the ceramic tile industry, strategic location in the Morbi ceramic hub, and efficient operations running near peak capacity. The rating is further supported by a steady expansion in operating margins (EBITDA margin of 12.00% in FY26) backed by cost-saving solar power generation, and comfortable debt coverage metrics. However, the rating remains constrained by high working capital intensity with Cash Credit (CC) limit utilization averaging around 90%, exposure to raw material and fuel price volatility, and an elongated receivables cycle.

The rating outlook is assigned as “Positive” reflecting BWR’s expectation of structural cost efficiencies resulting from the commissioning of the 6 MW captive solar power plant. Furthermore, the outlook factors in the firm's active operational efficiency measures and strategic initiatives to explore new product lines, which will help protect margins against input cost pressures and support a potential rating upgrade over the medium term.

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

• Experienced partners with established track record in ceramic industry :

  Megacity Vitrified LLP is managed by partners having extensive experience of over a decade in the ceramic tile industry. Their operational domain expertise has supported the firm in establishing a reliable B2C dealer network across Tier-2 and Tier-3 domestic markets. Broad distribution reach ensures low customer concentration, with the top 10 customers accounting for under 28% of total revenues in FY26.

• Strategic location in Morbi ceramic cluster :

  The manufacturing facility is situated in the Morbi cluster of Gujarat, the nation's dominant ceramic production hub. This provides convenient access to essential raw materials like clay and minerals from nearby reserves in Gujarat and Rajasthan. Proximity to Kandla and Mundra ports minimizes outbound transport expenses, while the cluster offers continuous natural gas pipeline infrastructure and skilled labor.

• Operational cost savings from captive solar power plant :

  The firm commissioned an on-site 6 MW captive solar power plant in December 2024 to lower energy overheads. The renewable installation reduces grid electricity reliance, generating annual power bill savings of approximately Rs. 0.60 Crore to Rs. 1.00 Crore.

• Volatility in fuel and raw material prices impacting profitability :

  The cost structure is heavily exposed to price fluctuations in piped natural gas (PNG), LPG, and raw materials like clay and frit. Continuous kiln firing makes energy costs a primary driver of manufacturing overheads. Highly fragmented market competition in Morbi restricts the firm's ability to fully pass on sudden fuel price hikes to dealers, exposing operating margins to volatility.

• Working capital-intensive operations with stretched receivables :

  Operations require high working capital support for raw material stocking, finished tile inventory, and dealer credit terms. Working capital intensity is further accentuated by stretched collection timelines, with ~20.78% of total trade receivables remaining overdue beyond 180 days. Consequently, reliance on bank Cash Credit limits remains high, with average monthly limit utilization ranging near 90%

• Intense competition, real estate exposure, and pending litigation :

  The firm operates in a fragmented tile market alongside major national brands and unorganized regional producers. Revenue growth is linked to residential and commercial real estate demand, exposing performance to sector cyclicality. Additionally, credit profile is constrained by an active patent infringement lawsuit claiming damages of Rs. 3.00 Crore plus interest, currently under High Court stay order.

Positive factors
• Sustained growth in Total Operating Income (TOI) beyond Rs. 175 Cr while maintaining an operating margin above 13% and net profit margin above 3%
• Improvement in Return on capital employed (ROCE) to around 15%.
• Improvement in Overall gearing below 1.20x on a sustained basis.

Negative factors
• Decline in Total Operating Income below Rs. 130 Cr or contraction in operating margin below 7%
• Deterioration in overall gearing beyond 2.0x.
• Increase in working capital intensity resulting in elongation of the working capital cycle to more than 120 days.

The liquidity profile of the firm remains adequate, supported by healthy short-term solvency coverage, steady internal cash accruals, and essential financial support from partners. Gross Cash Accruals of Rs. 13.51 Crore in FY26 provide tight coverage against annual Current Portion of Long-Term Debt (CPLTD) obligations of Rs. 10.30 Crore, supporting a modest Debt Service Coverage Ratio (DSCR) of 1.56x. Liquidity is further strained by high reliance on bank working capital limits, with Cash Credit (CC) limit utilization averaging close to 90% over the past 12 months. Additionally, the entity operates with an elongated net working capital cycle of 106 days, with the entire cash receivables cycle below 180 days.

Despite working capital intensity, the liquidity profile derives some comfort from healthy current ratio of 1.49x in FY26 demonstrating adequate short term asset coverage. Liquidity is further supported by the steady generation of gross cash accrual of Rs. 13.51 Crore in FY26, unencumbered cash reserves of Rs. 1.86 Crore, undrawn working capital cushions during non-peak operational periods, and crucial financial support provided by the designated partners through subordinate unsecured loans totalling Rs. 8.74 Crore.

The company demonstrates a Adequate ESG profile based on its environmental, social, and governance practices.

Environmental: The firm maintains standard operational practices in full adherence with applicable pollution control norms and environmental laws. To enhance energy sustainability and lower operating expenses, the firm has set up 2 solar power plants with an overall capacity of 6 MW. This initiative reduces grid power dependency and yields annual power cost savings of approximately Rs. 60 Lakhs.

Social: Social performance is anchored by adherence to statutory labor welfare regulations, robust safety measures, and ongoing employee training programs. The firm prioritizes workplace safety, accident prevention, and fair employee practices across its manufacturing operations.

Governance: As an LLP concern, the firm is not statutorily required to appoint independent directors or constitute formal board committees. Governance strength is supported by full compliance with applicable accounting standards and legal audit frameworks, backed by transparent financial reporting and executive oversight by the designated partners.

Established in May 2017, Megacity Vitrified LLP is a Morbi-based (Gujarat) limited liability partnership firm engaged in the manufacturing and export of high-quality glazed vitrified tiles (GVT). Operating out of its manufacturing facility on the Morbi-Halvad Road (At-Unchi Mandal), the firm specializes in large-format digital vitrified tiles (600 x 1200 mm) across various finishes, including carving, glossy, high-glossy, matt, metallic, and wooden textures.
The firm serves both domestic retail/project markets and international destinations through a direct dealership distribution network. It is managed by experienced designated partners—Dhrumilkumar Prakashbhai Kanetiya, Vijaykumar Kalyanbhai Haripara, Rajnishbhaji Savjibhai Gambhava, Sureshbhai Hansrajbhai Boda, and Ghanshyambhai Kanjibhai Kanetiya—who possess extensive operational experience in the ceramic industry.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Credit Rating Agency	Status and Reason for Non-Cooperation	Date of Press Release
CARE	'ISSUER NOT COOPERATING' as the rating is arrived at without any management interaction and is based on best available or limited or dated information on the company.	24Aug2026

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Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI]. BWR is the 5th agency to get a credit rating registration in India in 2009 and its corporate office in Bengaluru. It has a country-wide presence with representatives in 150+ locations. Canara Bank is an institutional investor in Brickwork.

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