­Long track record of operation and experienced management

The directors of the company Mr. Vinod Kumar Jain, Mr. Vishal Kumar Jain, Mr. Arvind Kumar Jain and Mr. Pramod Jain have experience of more than a decade in the business of coal washeries through other group companies. The long-standing experience of the directors has helped the company to establish comfortable relationship with their customers such as Tirupati Minerals Private Limited, Maharashtra State Mining Corporation, JK Lakshmi Cement Ltd, Hindalco Industries Limited among others as well as suppliers such as South Eastern Coalfields Limited, MP Power Generating Company Limited, Sonadih Cement Plant and among others.

Revenue and Profitability  

The revenue of the company has significantly stood  at Rs. 381.03 Cr. in FY2024 as against Rs.469.75 Cr. in FY2023. The revenue in FY2024 declined due to lower price realizations. The company has utilized ~85% of its total installed capacity during FY2024 as against of ~84% capacity utilization in FY2023, mainly due to high demand from the power sector during the period. The company has orders of Rs.149.48 Cr. in hand as of September 2024 which is to be executed in next 3 months which improves the revenue visibility in the near medium term. The orders received by the company are rotating in nature with new orders being added and delivered on a continuous basis. This demand will also lead the company to improve its price realisation, which further resultant to strengthen the overall business risk profile of the company. 
 
The company has also booked Rs.227.88 Cr. till September 2024. Further, the company is targeting revenue of ~ Rs.500 Cr. for FY2024 with the coal prices being stable. The company majorly has geographical presence in Chhattisgarh, Orissa.

Going forward, Acuite believes that the revenue of the company will remain healthy on account of steady demand from the domestic market and better price realization.

Healthy Financial Risk Profile

The financial risk profile of the company stood healthy marked by healthy net worth, low gearing and moderate debt protection metrics.  The tangible net worth stood at Rs.232.86 Cr. as on 31 March 2024 as against Rs.177.79 Cr. as on 31 March, 2023.  The total debt of the company for FY2024 stood at Rs.54.35 Cr. includes Rs.17.58 Cr. of long-term debt, Rs.30.68 Cr. of short term debt, and Rs.6.09 Cr. of CPLTD as on 31 March, 2024. The gearing (debt-equity) stood low at 0.23 times as on 31 March, 2024 as against 0.06 times as on 31 March, 2023. DSCR and ICR moderated, however, remained healthy at 7.44 times and 13.96 times in FY2024 as compared to 10.58 times and 34.19  times in FY2023. The decline in DSCR and ICR is on account of increase in finance cost from 2.40 Cr. in FY2023 to 6.24 Cr. in FY2024 due to increase in debt levels. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 0.72 times as on 31 March, 2024 as against 0.68 times as on 31 March, 2023. Net Cash Accruals to Total Debt (NCA/TD) stood at 1.15 times for FY2024 as against 5.90 times for FY2023.

Logistical advantage  

Cost and efficiency of logistical expenses play a key role in the coal beneficiation business. MCWPL has continuously invested and built their own logistical infrastructure for optimum utilization of available capacity. The company had 1 private railway siding in Baloda used to transport coal. Now, the company has one more coal washery unit and a private railway siding in Kanhaiband which is also based out of Chhattisgarh, having capacity of 2.50 million tonnes per annum. Having railway siding is beneficial to the company as it provides an opportunity for delivery of coal in a time bound manner and save major cost of logistics thereby improving its operating margins. Further, the company also owns a large fleet of 150 trucks and has around 200-300 trucks on hire for coal transportation throughout the country.

Working Capital Intensive Nature of Operations
 
The operations of the company are of a working capital-intensive nature, marked by gross current asset (GCA) days of 214 days for FY2024 as against 110 days for FY2023. The elevated GCA days is primarily on account of high other current assets. The inventory holding period of the company stood at 27 days in FY2024 as against 07 days in FY2023. However, the average utilization of the fund-based limits stood high at 88%, and non-fund-based facilities of the company remained moderate at 66% in the last six months ending in September 2024.
Acuité believes that the ability of the company to manage its working capital operations efficiently will remain a key rating sensitivity.

End user sector challenges and high entry barriers

Coal washed, transported and traded by MCWPL find their end use by companies involved in power generation, cement manufacturing and steel and metal plants. The consumers that MCWPL caters to are also under high regulation from the government. Increasing cost of supply as against environmentally friendly and economically attractive options of solar and wind power has led to significant reduction in energy consumption from power plants, putting the power plants under financial distress. Loss of supply linkages between the cement industry and coal availability has been a developing challenge in India over lack of infrastructure. Further, capital intensive steel and metal plants have been under low potential utilization and have been experiencing reduced productivity amidst a global competition and slowdown in domestic economic conditions. Any policy changes affecting the highly regulated coal industry or its end users will impact the financial risk profile of MCWPL. The ability of MCWPL to grow in such conditions and maintain its profitability will be key monitorable in the future. The coal beneficiation business in India is highly regulated and falls under the purview of Ministry of Coal, Government of India as well as Ministry of Environment, Forest and Climate Change, Government of India. Such high level of regulation from multiple government authorities creates entry barriers for new players. This provides an advantage to the existing players by keeping the competition low. With limited number of companies present in the coal washeries business, Acuité believes the existing players in the market will benefit from its established presence.