| Sustained equity infusions supported by reputed investors and strong resource mobilisation ability of Hella Group
The group is backed by reputed investors like Tiger Global, Accel India, Evolvence India, Sacap Capital, etc who have been with the group since 2019 and extended support in the form of equity infusions in each of the fund raising rounds. On an overall basis, group has raised Rs 2,073 Cr. from FY20 to FY23 and Rs 1,975 Cr. in FY25 (including Rs 900 Cr. against swap acquisition of tile companies in FY25). Further, the group has refinanced total debt of Rs 1,700 Cr. in FY25, against which Rs. 756 Cr. has been received till May 2025 and balance Rs. 944 Cr. to be received in FY26. The group also received ~Rs 300 Cr. through 17% stake sale in RDC Concrete (India) Ltd during the period December 2023 to May 2024. Subsequently, these shares sold were replaced with shares of HIML. HIML also enhanced its working capital limits by Rs. 242.5 Cr. in FY25 and has sanctions to enhance by another Rs. 192.5 Cr. in FY26.
Diversified revenue streams with strong market position in key segments
The Hella group is engaged in all sorts of construction materials with key focus on products which have a fragmented market, drive macroeconomic shifts and high export potential. The key focus is to establish a robust distribution system expanding at B2B levels and develop a strong brand. The group has secured strong domestic market positions with being the largest manufacturer of ACC blocks and second highest ranking in categories like Concrete and Tiles. Majority of the product portfolio expansion is on account of acquisitions including Equiphunt in 2020, RDC Concrete in 2021 and Shalimar Paints in 2022. The group has also ventured into new segments such as Bath & Fittings in 2020, Walling Manufacturing in 2023 and Wood Panel & Modular Kitchen in 2024. The extensive product range offers an edge over the competitors and allows to capture larger share of customers wallet through cross selling opportunities.
Further, RDC is a leading player in the RMC business and has over the years diversified its geographic reach from predominantly being a Southern India player to a Pan India player having a significant presence in south. In FY25, southern region accounted for 40% of sales (FY21: 53%; FY17: 65%), western region 30% (21%; 13%) while the northern and eastern region accounted for the balance 30% with nearly equal share. The diversification has resulted in RDC enjoying a healthy market share. The company has established relationships with marquee clients such as Tata Projects Ltd, Kalpataru Group, Larsen & Toubro Ltd, and ITD Cementation India Ltd, etc. Notably, its top 10 clients contributed only 20% of revenue in FY2025, highlighting a well-diversified and extensive customer base. The company has densified its RMC business by further penetrating its existing locations and adding more RMC plants and leveraging on its parentage diverse geographical mix. The company has 130 operating plants as of March 2025 (FY24: 106 plants; FY23: 81 plants).
Strong growth in operating performance
The operating revenues of the group has been growing at a strong pace with Rs. 11,846.55 Cr. in FY23 to Rs. 14,527.23 Cr. in FY24. In FY25, the revenues are estimated to have grown by ~20-25%. The group recorded a revenue of Rs 13,444 Cr. for 9MFY25. This growth in revenues is majorly attributable to the concrete segment (28% of FY24 revenue) which has grown at 48% in FY24, steel segment (20.4%) and chemical segments (19%). With increasing share of private labels in the revenue mix, the operating margins have also improved significantly from 6.4% in FY23 to 7.22% in FY24. Further, the margins are estimated to have improved to 7.60-7.80% in FY25 and with increasing economies of scale, margins are expected to improve further over the medium term. Currently, majority of revenue is driven from B2B channel mix (83.7% of FY24 revenue), however, the group has a constant focus on expanding its retail network as well through development of extensive distribution network.
On a consolidated basis, RDC’s revenue from operations grew by 23% from Rs 2,030.54 Cr. in FY24 to Rs 2,503.87 Cr. in FY25 driven by company’s focus on acquiring new clients in the industrial segment and successful expansions across various cities with a geographically diversified plant network contributing to increased production and increasing sales volume from 4,618 kilo cubic meters in FY24 to 5,289 kilo cubic meters in FY25. The expansion in scale and footprint led to improved fleet utilisation and a significant reduction in logistics costs, resulting in an improvement in operating profit margins from 8.50% in FY23 to 8.87% in FY25. Acuité believes this volume-led growth is likely to continue through FY26–FY27, supported by the commissioning of additional plants and the ramp-up of recently operationalised facilities, which is expected to further improve margins over the medium term.
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| Dependence on external debt to support acquisitions, capex and working capital significantly impacted financial risk profile, expected to improve through equity infusions and debt refinancing
While the tangible net worth of the group stood improving at healthy levels to Rs 2,009.15 Cr. in FY24 as against Rs 1,857.42 Cr. in FY23, the significant dependence on external debt to support acquisitions, capex and working capital led to an increase in the gearing (including lease liabilities) from 1.52 times in FY23 to 2.17 times in FY24. Further, the debt protection metrics also stood low with debt service coverage ratios remaining below unity in FY23 & FY24. Moreover, the recent debt refinancing of Rs 1,700 Cr. and equity raise of Rs 1,975 Cr. in FY25 is expected to improve the financial risk profile significantly over the medium term. Further, the group has capex plans of ~Rs 1,600-1,700 Cr. over FY26-FY27 which is expected to be funded through mix of equity, internal accruals and debt. Moreover going forward, the group plans to reduce the high cost long term debt and enhance its working capital limits, which shall be a key rating sensitivity. Additionally, the management also proposes for raising funds through initial public offer. This being at a preliminary stage has not been factored in the rating, however, successful fund raising shall further improve the capital structure.
Further, the financial risk profile of RDC at a consolidated level also stood moderate with growing networth from Rs 152.17 Cr. in FY24 to Rs 229.29 Cr. in FY25 owing to profit accretions and moderate credit metrics with Debt/EBITDA of 3.16 times as on FY25 (3.18 times in FY24) due to increasing debt levels towards the capex funding and low debt service coverage ratios, repayments managed through unsecured loan infusions by group companies. RDC's capex intensity is likely to increase in the near term with the company incurring a total capex and acquisitions of around ~Rs 160 Cr. in FY25 with around 24 plants added. The company proposes to add another 25 plants, each year, over FY26-FY28, in addition to capex at its subsidiary Ultrafine Minerals & Admixtures, resulting in average capex spends of around Rs 140-150 Cr. each year. These capex spends are expected to fund through a mix of debt and equity. Therefore, while the company’s ongoing expansion plans are expected to increase net debt levels over FY26–FY28, a gradual ramp-up of the newly added capacities to sustain credit metrics shall be a key rating sensitivity.
Intensive working capital requirements
The working capital operations of the group is intensive marked by high gross current asset days of 163 days in FY24 (151 days in FY23). This is mainly attributable to elevated debtor levels which stood at 132 days in FY24 as against 121 days in FY23. The receivable days is expected to remain in the range of 120 days over the medium term. Moreover, the creditor days have increased over the years which has provided marginal ease to working capital. The group sources materials from leading players like Ultratech, JSW Steel, etc. Further, since the group is majorly supplying materials directly from manufacturer and key materials such as concrete is perishable in nature, inventory maintenance is low at 10-15 days.
The debtors levels of RDC also stood stable at 108 days in FY25 (105 days in FY24), however, creditor days improved from 150 days in FY25 as against 137 days in FY24 providing moderate ease to working capital. The receivable days is expected to remain in the range of 90-120 days over the medium term. Therefore, given the inherent risks associated with collections, RDC’s ability to efficiently manage its working capital remains a key determinant of its overall credit profile.
Limited track record and inherent challenges of construction business
The group has a relatively short operating track record as operations started in 2016. Also, the construction sector is fragmented with low entry barriers and numerous small players, hence exposes the group to intense competition risks. Further, growth in construction industry is vulnerable to the developments in infrastructure and real estate sector.
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