Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 86.19 Crs. of Color Granito Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous () |
Present | ||
| Fund Based | 0.00 | 79.69 | Long Term |
|
BWR BBB -
/Stable Assignment |
| Non Fund Based | 0.00 | 6.50 | Short Term |
|
BWR A3
Assignment |
| Grand Total | 86.19 | (Rupees Eighty Six Crores and Nineteen lakhs Only) | |||
Brickwork Ratings has assigned BWR BBB-/ Stable/ A3 ratings to the bank facilities of Color Granito Pvt. Ltd. (CGPL).
BWR has relied on the company’s audited financial statements till FY22, financial projections till FY24 and various other developments to arrive at the rating.
The ratings reflect the adequate experience of CGPL’s promoters in the ceramic industry, locational advantage and steady improvement in financial risk profile. These strengths are partly offset by the improving yet average scale of operations, susceptibility to volatile raw material costs, vulnerability of profitability and cash flows to cyclicality in real estate industry and Intense competition in ceramic industry.
KEY RATING DRIVERSCredit Strengths:
The promoters have experience of nearly a decade in the ceramic industry through their association with other entities in similar business line. The Company will also benefit from financial support by promoters and their strong relationship with suppliers and customers.
The company/is located in Mobi cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost-effective.
The revenue of the company scaled up over the years from Rs. 97.42 crs in FY19 to Rs.184.75 crsnin FY22 and in 5MFY23 (provisional unaudited financials) the company has reported revenue of Rs.92.38 Crs. Improvement in revenue was on account of recent Capex and improvement in average price realisation. Overall revenue expects to improve substantially in FY23 over the last FY, considering the 5MFY23 performance. The capital structure of the company remained satisfactory in FY22. The overall gearing stood at 2.73x in FY22 with a modest net worth of Rs 32.87 crs. Unsecured loan from promoters are treated as quasi-equity for calculating adjusted gearing which stood at 1.49x for FY22. Total indebtedness of the company TOL/TNW and interest coverage ratio stood at 3.55x at 2.82x in FY22. Gearing is expected to improve as the repayment has started for the debt-funded capacity expansion project (COD June2021)
Raw material and fuel are the two major cost components determining the cost competitiveness of a player in the ceramic industry. The Company has limited control over the prices of its key inputs, such as raw materials and piped natural gas (PNG). Hence, the company's profitability, vulnerable to the movements in raw material and gas prices, relies on its ability to pass on any adverse movement to the customers.
The real estate industry is the key end user of tiles. Hence, Company's profitability and cash flows are likely to remain dependent to the inherent cyclicality of the industry.
The Company faces intense competition from small and unorganised players, limiting its pricing flexibility and bargaining power with the customers. This, further, pressurises its revenues and margins
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Positive: BWR could upgrade entity's ratings if there is an improvement in its revenue performance along with a significant improvement in its profitability margins, leading to an improvement in the credit profile on a consistent basis.
- Improvement in operating income by more than 20% and margin by 200 basis points
- Significant increase in cash accrual generation and efficient working capital management
- Significant improvement in the financial risk profile either through larger-than-expected capital infusion or higher cash generation from operations
Negative: Pressure on the ratings could arise in case there is significant decline in its turnover and/or profitability levels, leading to lower cash accruals, which will result in deterioration in its credit profile.
- Operating income declines by more than 30% over FY22
- Fall in profitability
- Deterioration in the financial risk profile
LIQUIDITY INDICATORS - Adequate
Liquidity profile is adequate marked by expected cash accruals of Rs 20.17 crore against term debt obligations of Rs 7.47 crore for FY23. Current ratio of 1.74x for FY22 is reasonable. Average working capital utilization is around 92% for the last 7 months ending 30 Sep 2022. The liquidity is further supported in form of promoters’ USL.
ABOUT THE ENTITYIncorporated in Sep 2015, Color Granito Private Limited is promoted by Mr. Vipul Patel and Mr. Sandip Patel . It is engaged in manufacturing of vitrified tiles of different sizes. The company is ISO 9001 : 2008 Certified.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 21-22 (Audited) |
FY 20-21 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 187.52 | 136.52 |
| EBITDA | Rs.Crs. | 19.61 | 18.05 |
| PAT | Rs.Crs. | 2.23 | 6.40 |
| Tangible Net Worth | Rs.Crs. | 32.87 | 30.64 |
| Total Debt/TNW | Times | 2.73 | 1.33 |
| Current Ratio | Times | 1.27 | 1.47 |
The terms of sanction include standard covenants normally stipulated for such facilities.
NA
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 | 79.69 |
BWR BBB-/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Non Fund Based | ST | 6.50 |
BWR A3
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Grand Total | 86.19 | (Rupees Eighty Six Crores and Nineteen 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.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Priya Depala Senior Rating Analyst priya.d@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@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.) | |
|---|---|---|---|---|---|---|
| 1 | HDFC Bank | Term LoanSanctioned | 15.88 | _ | 15.88 | |
| 2 | HDFC Bank | Term LoanSanctioned | 6.34 | _ | 6.34 | |
| 3 | HDFC Bank | Term LoanSanctioned | 32.47 | _ | 32.47 | |
| 4 | HDFC Bank | Cash CreditSanctioned | 25.00 | _ | 25.00 | |
| 5 | HDFC Bank | Bank GuaranteeSanctioned | _ | 6.50 | 6.50 | |
| Total | 79.69 | 6.50 | 86.19 | |||
| TOTAL (Rupees Eighty Six Crores and Nineteen lakhs Only) | ||||||
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About Brickwork RatingsBrickwork 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 12,000 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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