Bianco Ceramics Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.80.00 Crs. of Bianco Ceramics Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (12 Feb 2021)	Present
Fund Based	49.34	80.00	Long Term	BWR BB /Stable Assignment	BWR BB /Stable Reaffirmation
Grand Total	49.34	80.00	(Rupees Eighty Crores 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
Note: BWR notes the change in the proposed lender from earlier Union Bank of India as a sole banker to now proposed consortium arrangement of Canara Bank and Bank of India.

RATING ACTION / OUTLOOK

The reaffirmation of the bank loan rating of Bianco Ceramics Pvt. Ltd. ('BCPL' or the 'company') reflects the business experience of the promoters in the ceramic manufacturing industry, locational advantage in terms of easy availability of raw material and other infrastructure and demand prospects for the products due to the positive industry outlook. However, the rating is constrained by the nascent stage of the project with yet to be achieved financial closure, exposure to risks arising from project implementation and execution, its presence in highly competitive ceramic industry along with fortunes linked to real estate sector and susceptibility of profitability margins to volatility in fuel and raw material prices.

BWR notes the marginal change in the scope of the project along with revision in timelines and costs which have primarily been on account of 2nd wave of Covid-19 related disruptions, procedural delays and change in the proposed banking arrangement.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. Brickwork Ratings believes that BCPL’s business and financial risk profile will be maintained over the medium term. The outlook may be revised to positive if the company achieves financial closure, implements the project well before the envisaged timelines without further revisions and ensures stabilization of operations. The outlook may be revised to negative if there is further delay in the project execution with time and cost overrun and any sustained adverse impact of COVID-19 on the business profile.

KEY RATING DRIVERS

Credit Strengths:

Adequate experience of the promoters in ceramic industry. :
The key management personnel of the company have experience of more than two decades in the ceramics industry in both domestic and international markets. They possess requisite technical qualification and experience in running ceramic tile business which is expected to support the project implementation and stabilisation.
Location-specific advantage :
The proposed project of manufacturing of glazed “Vitrified” ceramic tiles is being set up in East Godavari District, Andhra Pradesh. The location enjoys easy availability of raw material, labours, accessibility of water, power, gas and the proximity to road/ rail/ sea transport facilitating multiple delivery modes.

Credit Risks:

Project execution risks :
Although the promoters have experience in ceramic industry, the setting up of a greenfield project and commencement of operations has its own technological challenges. The company plans to set up a 10,000 Sqm capacity plant by January 2023. BCPL has projected a total cost of Rs.94.83 Crs for the project which will be funded from term loan of Rs.64.37 Crs, promoter’s capital of Rs.30.46 Crs with a debt equity of 2.11 times. The company's project is yet to achieve financial closure which is expected shortly. As of November 2021, the promoters have infused a total of Rs.9.50 Cr as capital and Rs.1.50 Crs as unsecured loan which has been utilised for the land acquisition. BWR notes the revision in the cost (earlier Rs.67.68 crs) and timelines due to increase in capacity from 9,200 sqmt/day to 10,000 sqmt/day, change in proposed banking arrangement from sole banking to consortium arrangement. The procedural delays along with covid-19 related disruptions have resulted in such revisions. BWR notes the possibility of time and cost overruns in case of any other disruptions typically associated with any greenfield project especially inview of the subsequent variants of Covid-19. Achievement of DCCO and stabilization and scaling up of operations as per the project plan are key monitorable.
Intense industry competition and vulnerability to cyclicity associated with end user industry :
The company envisages to operates in a highly competitive and fragmented ceramic industry with the presence of numerous organized as well as unorganized players operating in the domestic market. The industry has low entry barriers, easy availability of raw material and limited initial capital investment requirement which results in increased players thereby putting pressure on profitability. BWR also notes that the majority of the demand is from the real estate industry, which has its own inherent industry risks viz, highly fragmented, cyclical and dependent overall sentiment of the economy.
Vulnerability of profitability and revenues to fluctuations in prices of raw material and other factors :
The profitability of the firm remains vulnerable to fluctuations in raw material and gas prices. Any adverse movement in the price of raw materials and fuel could impact margins adversely, given its limited ability to pass on the price hike owing to intense competition in the ceramic industry

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has adopted a standalone approach and applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale). The company does not have any subsidiaries.

RATING SENSITIVITIES

The ability of the company to achieve financial closure, ensure timely promoter contribution and implement the project as envisaged without further revisions would be a key rating sensitivity.

Positive:

Achievement of financial closure, within the expected timeline
Timely commencement of operations without significant cost overruns.
After commencement of commercial operations, sustained improvement in scale and profitability leading to healthy cash accruals.

Negative:

Delay in funding tie up and other pending approvals with various regulatory authorities.
Delay in project execution with significant time and cost overruns.
More than the envisaged delay in stabilisation of operations.

LIQUIDITY INDICATORS - Stretched

The company has undertaken a greenfield project which is at the nascent stage. The company is yet to receive the final approval from its bank for the bank loan facilities of Rs.80.00 Crs. While the interest costs on the term loan would be capitalized during the construction period, the working capital facility would be availed upon commencement of operations. Hence, currently the company has nil debt servicing obligation. The acquisition of land and some preliminary expenses amounting to Rs.9.96 crs as on Nov'21 have been funded through the infusion of capital and unsecured loans from promoters. The ability of the promoters to support the project and achieve early financial closure will be crucial for ensuring liquidity and implementation of the project. Timely implementation and stabilization of the project leading to estimated projections of revenue, profitability and cash accruals would support liquidity, going forward.

ABOUT THE ENTITY

Bianco Ceramics Pvt Ltd (“BCPL” or the “Company”) was incorporated in March 2019 at East Godavari, Andhra Pradesh. The Company, originally incorporated as 'Surya Balaji Ceramics Pvt Ltd', has changed its name to 'Bianco Ceramics Pvt Ltd' in Dec 2020. It is in the process of setting up a manufacturing unit with an installed capacity of 10,000 Sq. Mtr./Day at Jegurupadu Village, Kadiyam Mandal, East Godavari District, Andhra Pradesh for the manufacturing of glazed “Vitrified” ceramic tiles.

The Company plans to manufacture “Vitrified” GVT Grades of Polished Tiles out of Ceramic Clay. The total cost of the project estimated at Rs.94.83 Cr is to be funded through equity contribution of Rs.30.46 Cr and term loan from Bank of Rs.64.37 Cr. As of November 2021, the promoters have infused a total of Rs.9.50 Cr as capital and Rs.1.50 Crs as unsecured loan. The Company has projected to commence its commercial operations by January 2023 from the earlier envisaged July 2022 on account of the change in the proposed bankers and banking arrangement along with covid-19 related disruptions.

Mrs. A Sridevi, Mr. M V Visalakshi, Mr. M Rama Raju, Mr. A S A Prasad, Mr. Ajay Datla and Mr. N Narasimha Rao are the promoters of the Company.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	Not Available	Not Available
EBITDA	Rs.Crs.	-0.31	Not Available
PAT	Rs.Crs.	-0.32	Not Available
Tangible Net Worth	Rs.Crs.	9.05	Not Available
Total Debt/Tangible Net Worth	Times	0.01	Not Available
Current Ratio	Times	4.03	Not Available

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	80.00	BWR BB/Stable (Reaffirmation)	12Feb2021	BWR BB Stable (Assignment)	NA	NA	NA	NA
Grand Total		80.00	(Rupees Eighty Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Priyanka RS Rating Analyst Board : +91 044 24663326 priyanka.rs@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Bianco Ceramics Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank of India	Term Loan - Proposed	28.16	_	28.16
2	Bank of India	Cash Credit - Proposed	6.84	_	6.84
3	Canara Bank	Cash Credit - Proposed	8.79	_	8.79
4	Canara Bank	Term Loan - Proposed	36.21	_	36.21
5	Union Bank of India	Term Loan - Proposed	_	_	0.00
6	Union Bank of India	Cash Credit - Proposed	_	_	0.00
Total			80.00	0.00	80.00
TOTAL (Rupees Eighty Crores Only)

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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], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

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