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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 69.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 146.00 | - | ACUITE A2 | Assigned |
| Bank Loan Ratings | 204.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 419.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating at ‘ACUITE BBB+’ (read as ACUITE triple B plus) and the short-term rating to ‘ACUITE A2’ (read as ACUITE A two) on the Rs.273.00 Cr. bank facilities of Goa Carbon Limited (GCL). Further, Acuité has assigned the short-term rating to ‘ACUITE A2’ (read as ACUITE A two) on the Rs.146.00 Cr. bank facilities of Goa Carbon Limited (GCL). The outlook is ‘Stable’. Rationale for reaffirmation
The rating continues to draw comfort from extensive experience of the promoters, long track record of operations and augmentation in business risk profile of the company on the back of structural changes in the end user industry. The revenue from operations witnessed a growth of 85% during 9MFY2023 along with improvement in profitability margin which stood at ~10% against around 7.40% during the earlier year. The significant improvement in scale of operations and profitability is majorly on account of high realisations given the reduction in global supply leading to consequent increase in prices for CPC. However, the production levels of the company remained in the range of 64 percent for FY2021, 59 percent for FY2022 and around 55 percent for 9MFY2023. The rating further takes into account the healthy financial risk profile of the company marked by healthy networth, healthy coverage indicators and improvement in scale of operations. However, the company’s susceptibility to fluctuation in raw material prices and customer concentration risk continue to remain a constraining factors for the rating. |
| About the Company |
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Goa Carbon Limited (GCL) was incorporated in 1967 with its registered office at Dempo House, Campal, Panaji-Goa. GCL is engaged in manufacturing and marketing Calcined Petroleum Coke (CPC). It has manufacturing facilities located in 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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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of the company, for arriving at this rating.
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Key Rating Drivers
| Strengths |
| Extensive experience, reputed clientele and established t rack record of operations in the CPC segment
GCL is a part of Dempo Group, which was established in 1941. The group has diversified operations with a presence in Iron Ore mining and exports, Construction, Publishing, Ship Building, Travel and Trade, among others. GCL has more than five decades of track record in the production of CPC and hence has an established market position amongst the leading producers of CPC in India. The chairman of the company, Mr. Shrinivas Dempo has an extensive experience of over three decades in the industry. GCL caters to reputed companies among the Aluminium Industry, Graphite Industry and Steel Industry which includes Hindalco Industries Limited (HIL), Vedanta Aluminium Limited (VAL), The Kerala Minerals and Metals Limited (KMML), Steel Authority of India Ltd (SAIL) to name a few. GCL has also healthy relations developed over a decade with the various global raw material suppliers such as Kuwait Petroleum Corporation, Oxbow Carbon & Minerals LLC, Mitsubishi Corporation Limited among others. Acuité believes that the established position in the industry and healthy relations with both customers as well as suppliers will help the company to maintain a stable business profile in the CPC segment. Improvement in business risk profile The business risk profile of the company witnessed improvement reflected by growth in revenues during FY22 and 9MFY23. The revenue from operations of GCL improved to Rs. 766.12 Cr. in FY22 against Rs. 352.84 Cr. in FY21. Furthermore, the revenues increased during 9MFY23 and stood at Rs. 1048.33 Cr. The recent surge in the demand of aluminium while tightening of its supply marked by geo-political issues and consequent sanctions on Russia, which contributes almost 6 percent of the global aluminium supply, has resulted in an implicit effect on the pricing of CPC. The average selling price of the CPC during FY20-21 stood at around Rs. 22,000 per metric tonne which grew to Rs. 42,000 per metric tonne in FY21-22, while during current 9MFY23 the average selling price stood as high as Rs.77,000 per metric tonne.
Acuité believes that GCL’s operating performance is susceptible to the changes in pricing of CPC and the same will remain monitorable for the its future growth. Comfortable financial risk profile The financial risk profile stands comfortable marked by healthy net worth, moderate gearing, and adequate debt protection metrics. The net worth of company stood at Rs.114.59 Cr. ended March 31, 2022 against at Rs. 76.17 crores as on March 31, 2021. The ICR during the same period has improved and stood at 3.65 times against 0.71 times as on March 31, 2021. Further, gearing ratio stood at 2.09 times as compared to 0.41 times as on March 31, 2021 owing to additions of fund based facilities to the short term debt which earlier included non-fund based LC and currently substituted by buyer’s credit. Going forward, the gearing is expected to improve with increased accretions to the net worth. The tangible net-worth as on December 31, 2022 stood at Rs. 181 Cr. The gearing for FY2023 is expected to remain at 1.22-1.30 times.
Acuité expects that the company will maintain healthy cash accruals on the back of its improved revenues and improved profitability margins which is expected to remain in the range Rs.83 - 95 Cr. during FY23 & FY24. |
| Weaknesses |
| Profitability susceptible to price volatility and cyclicality of the industry
Calcined Petroleum Coke (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 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, aviation, real estate etc. Although the revenues have increased during FY2022 & 9MFY2023, it is not a result of corresponding increased production levels. The actual capacity has remianed utilised at around 64 percent in FY2021, 59 percent during FY2022 while 55 percent during 9MFY2023. Further, the operating margins stood at 7.40% in FY2022 against 1.78% in FY2021.The operating performance of the company is thus exposed to fluctuations in the prices of raw materials as well as realization from finished goods.
Exposure to customer concentration risk GCL's customer base is heavily dominated by Hindalco Industries Limited (HIL) and Vedanta Aluminium & Power Limited (VAPL) which together account for more than 90 percent of the total revenues. However, HIL and VAPL being leading aluminium producers the risk is mitigated to quite some extent.
Acuité believes that the ability of the company to expand its customer base in order to further mitigate the risk will be critical. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position |
| Adequate |
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GCL’s liquidity is adequate. The net cash accruals (NCA) stood close to Rs.39.88 Cr. against no major debt obligations within the period as the long term loan of Rs. 9 Cr. carries a moratorium of around 2 years and repayment to start from FY2023. The company majorly works on LCs and Buyer’s Credit. Going forward, the cash accruals are expected to remain in the range of Rs.62-80 Cr. owing to increased revenues, against long term obligation of Rs.2-3 Cr, thus marking a comfortable liquidity position. However, GCL keeps major cash balances as margin money with the bank to raise additional LC/BG limits. The fund based working capital limits have remained moderately utilised at around 63 percent showing lesser reliance on the outside debt. Acuité believes that the liquidity of the company will continue to remain adequate on account of adequate net cash accruals against maturing debt obligations over the medium term.
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| Outlook: Stable |
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Acuité believes that GCL is likely to maintain stable financial risk profile over the medium term on back of increased scale of operations, established market presence in CPC segment and strong promoter group. The outlook may be revised to ‘Positive’ if the company is able to demonstrate substantial and sustained improvement in its revenues and profitability margins marked by increased production levels, while managing its working capital cycle effectively. Conversely, the outlook may be revised to ‘Negative’ in case of decline in its profitability margins thereby adversely impacting its liquidity and capital structure.
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| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 766.12 | 352.84 |
| PAT | Rs. Cr. | 37.78 | (4.81) |
| PAT Margin | (%) | 4.93 | (1.36) |
| Total Debt/Tangible Net Worth | Times | 2.09 | 0.41 |
| PBDIT/Interest | Times | 3.65 | 0.71 |
| 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 • Entities In Manufacturing Sector:- 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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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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* SBI CC of Rs. 60 Cr. includes Sub Limits as Fully Interchangeable with Standby Letter of Credit for Rs 60 crore, fully interchangeable with Letter of Credit for Rs 60 crore. and Forward Contract for upto Rs 16.60 crore
*WCTL to the tune of Rs. 5 cr. from SBI has been availed under GECL Scheme *LC from BOI to the tune of Rs. 210 Cr. includes Sub Limits as CC Limits of Rs 13.50 crore, EPC/ PCFC Limits of Rs 6 crore, FBD/FBP/FCBD Limits of Rs 6 crore, Bank Guarantee Limits of Rs 10 crore, TCBG/ BC Limits of Rs 210 crore, and CEL Limits of Rs 5 crore |
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