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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 85.00 | ACUITE A- | Stable | Downgraded | - |
| Bank Loan Ratings | 340.00 | - | ACUITE A2+ | Downgraded |
| Total Outstanding | 425.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE A-’ (read as ACUITE A minus) from ‘ACUITE A’ (read as ACUITE A) and the short-term rating to ‘ACUITE A2+’ (read as ACUITE A two plus) from ‘ACUITE A1’ (read as ACUITE A one) on the Rs. 425.00 crore bank facilities of Goa Carbon Limited (GCL). The outlook is 'Stable'.
Rationale for rating downgrade The rating downgrade considers the decline in the operating performance of the company with revenue of Rs. 376.28 crore, negative EBITDA of Rs.14.01 crore in 9MFY25 as against Rs. 878.84 crore and Rs. 113.96 crore respectively for the same period previous year. This decline is attributable to the lower sales volume coupled with decline in realizations and increase in raw material cost in 9MFY25. Moreover, with the increasing demand in China leading to rise in the realisation prices and consequent diversion of smelters to domestic calcined pet coke (CPC) manufactures owing to increasing international prices, the revenue and margins of the company are expected to improve in Q4FY25. This along with high-rate procurement challenges in the near term shall remain a key rating sensitivity. However, the rating continues to derive strength from its established track record and the extensive experience of the management. The rating also takes into account the healthy financial risk profile of the company marked by healthy net-worth, healthy gearing and strong debt protection metrics. Further, the rating also takes into consideration the moderate working capital operations of the company consisting majorly of inventory. Further, the rating remains constrained by the company’s susceptibility to fluctuation in raw material prices, which in turn also affects the realizations for the company. Additionally, the company operates in a highly restricted environment wherein import of pet coke by CPC manufacturers as well as smelters are based on the specific quota decided by Directorate General of Foreign Trade (DGFT). The rating also factors in the customer concentration risk as more than 95 percent of the revenue is marked from just three customers. |
| About the Company |
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Incorporated in 1967, GCL is engaged in manufacturing and marketing of Calcined Petroleum Coke (CPC). It has three manufacturing facilities located each at Goa, Bilaspur and Paradeep with combined capacity of 308,000 metric tonnes per annum. Mr. Shrinivas V Dempo is the chairman of the company. GCL is a part of Dempo Group which has an established presence in iron ore mining and exports, construction, publishing, ship building, travel and trade, etc.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of the Goa Carbon Limited (GCL) to arrive at the rating
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| Key Rating Drivers |
| Strengths |
| Established track record of operation with experienced management
GCL has an established track record of operations of over five decades supported by an experienced management team. The company is a part of Dempo group of companies, promoted by Mr. Shrinivas Dempo who has an extensive experience of over three decades in the industry. The company is into the manufacturing of CPC which is majorly used by aluminium smelters for making anodes. The company deals with reputed aluminium players in the country like Hindalco Industries, Vedanta, Bharat Aluminium, Kirloskar Ferrous, etc. On the other side the company procures it raw material i.e Raw Petroleum Coke (RPC) majorly from foreign countries such as UAE, Oman, Kuwait, etc. Acuite believes that the established position in the industry and extensive experience of the management will help the company to maintain a stable business profile in the CPC segment. Healthy Financial risk profile The financial risk profile of the company remained healthy marked by a healthy net worth, low gearing, and healthy debt protection metrics. The net worth of the company stood healthy at Rs. 247.55 crore as on March 31, 2024 as against Rs. 186.03 crore as on March 31, 2023. The increase in net worth is primarily due to the accretion of profits to the reserves. The gearing of the company stood low at 1.35 times as on March 31, 2024 as against 2.27 times as on March 31, 2023 as borrowings are majorly in the form of short term working capital requirements. The debt protection metrics also stood healthy with debt service coverage ratio and interest coverage ratio standing at 4.34 times and 5.96 times respectively as on March 31, 2024. Acuite believes that the while the decline in the operating performance in 9MFY25 has affected the financial risk profile of the company to some extent, however, it is expected to remain comfortable over the medium term supported by recovery in the cashflows. Moderate working capital operations The working capital operations of the company remains moderate marked by gross current asset (GCA) days of 117 days in FY24 as against 140 days in FY23. The GCA days comprise of high inventory levels and moderate debtors. The inventory stood at 86 days in FY24 as against 98 days in FY23. Majority of raw material ~ 95 percent is being imported from foreign countries. So, considering the sailing of the vessel from different locations and conversion of the stock into finished product, the company generally keeps inventory of three months. The debtor days stood at 21 days in FY24 as against 41 days in FY23. However, the creditors days stood at 7 days in FY24 as against 46 days in FY23. Acuite believes that working capital operations of the company may continue to remain moderate on the back of efficient inventory and receivable management. |
| Weaknesses |
| Decline in operating performance
The company experienced a notable reduction on in operating income, which fell to Rs. 376.28 crore in the first nine months of FY25, compared to Rs. 878.84 crore during the same period in FY24. This decline in operating income is primarily due to a decrease in both sales volume and realizations which were adversely affected by downtrend in CPC/RPC prices in international markets in FY25. Furthermore, the company's EBITDA margins decreased to (3.72) percent in 9MFY25, down from 12.97 percent in 9MFY24. The operating margins were majorly influenced by the conversion of relatively high cost RPC inventory into CPC leading to an increase in the raw material cost. Moreover, with the increasing demand in China leading to rise in the realisation prices and consequent diversion of smelters to domestic calcined pet coke (CPC) manufactures owing to increasing international prices, the revenue and margins of the company are expected to improve in Q4FY25. This along with high rate procurement challenges in the near term shall remain a key rating monitorable. Profitability susceptible to price volatility and cyclicality of the industry CPC is produced from “green” petroleum coke, which is a byproduct of oil refining. CPC is extensively used to make anodes for the aluminium, steel and titanium smelting industry. The company’s performance remains vulnerable to cyclicality in the aluminium and steel sector as demand for the same depends on the performance of the end user segments such as electronics, avia on, real estate etc. The RPC and CPC prices are predominantly influenced by China and other global factors. Additionally, the company operates in a highly restricted environment wherein import of pet coke by CPC manufacturers as well as smelters are based on the specific quota decided by DGFT. Thus, the operating performance of the company is exposed to fluctuations in the prices of raw materials, realization from finished goods and allocation of quota by DGFT. Exposure to customer concentration risk GCL's customer base is heavily dominated by Hindalco Industries Limited, Vedanta Aluminium & Power Limited and Bharat Aluminium which together account for more than 95 percent of the total revenues. However, since these are leading aluminium producers in the country, so the risk is mitigated to some extent. Acuité believes that the ability of the company to expand its customer base to further mitigate the risk will be critical. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company had cash and cash equivalents of Rs. 101.07 crore as on September 30, 2024. The company generated sufficient NCA of Rs. 87.98 crore in FY24 as against no major repayment obligations in the same year. The current ratio of the company stood at 1.39 times as on March 31, 2024. The average bank limit utilisation for last 12 months ended September 30, 2024 stood at 56.73 percent.
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| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 1057.31 | 1364.36 |
| PAT | Rs. Cr. | 85.50 | 80.59 |
| PAT Margin | (%) | 8.09 | 5.91 |
| Total Debt/Tangible Net Worth | Times | 1.35 | 2.27 |
| PBDIT/Interest | Times | 5.96 | 3.38 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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