Experienced management
The management of the company has more than three decades of experience in the ceramic industry. The Managing Director of the company, Mr. Sunil Malesha, has worked for over a decade with R.A.K. Ceramics India. The senior management team is ably supported by a strong line of mid-level managers. The company has developed long-standing relationships with its reputed customers, which include Marriott, Hyatt, Star Group of Hotels, Radisson Hotels, Taj Hotels, Oberoi Hotels, and Holiday Inn, to name a few. Acuité believes that UCIPL will sustain its existing business profile on the back of experienced management and a reputed clientele.

Improved Operating Performance
The operating income of UCIPL has registered a growth of 60 percent to Rs. 141.99 crore in FY2023 (prov.) against Rs. 88.83 crore in FY2022. The growth in revenues is on account of both improved realisations and volumes. The operating margins stood at 22.85 percent in FY2023 (prov.) against 29 percent in FY2022. The decline is primarily on account of the one-time write-off of scrap inventory and long-standing outstanding debts of Rs. 8.74 crore. The adjusted operating margin would otherwise be 28.83 percent. The company is also introducing a trading segment by the second half of FY2024, wherein it will introduce glassware, cutlery items, and stoneware products under the brand name ‘Ariane’. It is also undertaking capacity expansion, which would increase its capacity by approximately 48 percent. The production capacity would increase to 1.88 crore pieces per year from 1.27 crore pieces per year. The cost of capex is approximately Rs. 16 crore, and the same would be funded partly by debt and partly by internal accruals. The capacity addition is expected to become operational by early FY2025. The funding tie-up is pending as of this date. Acuite believes the commencement of trading segment and capacity addition is expected to positively augment the growth in revenues and margins in the near to medium term.

Healthy Financial Risk Profile
The financial risk profile of the company improved with healthy gearing levels, a healthy net worth, and comfortable debt-protection metrics. The net-worth of the company stood at Rs. 80.35 crore in FY2023 (prov.) against Rs. 60.56 crore in FY2022. The improvement in net worth is on account of the accretion of profits to the reserves. The net worth also includes quasi equity of Rs. 21.00 crore subordinated to bank loans.
The total debt of Rs. 29.91 crore as of March 2023 (Prov.) consists of Rs. 8.93 crore of long-term debt, Rs. 12.96 crore of short-term debt, and a USL of Rs. 8.02 crore. The gearing levels improved to 0.37 times in FY2023 (prov.) against 0.88 times in FY2022. The adjusted gearing stood at 0.27 times for FY2023 (prov.) and 0.78 times in FY2022. The TOL/TNW improved to 0.59 times in FY2023 (prov.) against 1.18 times in FY2022. The coverage ratios remained comfortable, with ICR at 7.30 times for FY2023 (prov.) against 5.41 times for FY2022 and DSCR at 2.77 times for FY2023 (prov.) against 3.86 times for FY2022. During the year, UCIPL part-prepaid its term loans, amounting to an additional Rs. 9.79 crore against a maturing debt obligation of Rs. 7.51 crore during FY 2023, through internal sources. The NCA/TD stood at 0.96 times in FY2023 (prov.) against 0.41 times in FY2022.
Acuite believes, that the financial risk profile will remain healthy over the medium term on account of continued accretion to reserves and surplus and the sustenance of margins, ensuring healthy debt protection metrics.

Working Capital Management
The working capital operations of the company eased in FY2023 (Prov.), though they remained intensive, with GCA days of 170 days in FY2023 (prov.) against 278 days in FY2022. The inventory days stood at 150 days in FY2023 (prov.) against 276 days in FY2022. The company has to maintain an inventory of finished, semi-finished, and raw materials at all times. The improvement in inventory days is led by better churning during the year on account of healthy sales traction. The debtor days stood at 46 days in FY2023 (prov.) against 66 days in FY2022. The credit provided by the company ranges between 7 and 60 days from the date of billing, with partial advance receipts from a few customers. UCIPL makes advance payments to some suppliers; however, it generally gets a credit period of 30–90 days from others. The creditor days in FY2023 (Prov.) stood at 19 days against 8 days in FY2022.
Acuite believes that the ability of the company to improve its scale of operations without any significant elongations in the working capital cycle will be a key monitorable.

­Presence in a highly competitive tableware industry
UCIPL is a growing manufacturer of fine porcelain tableware that is strengthening its ground in India but also faces intense competition from imported products from the European and American markets. However, UCIPL is able to overcome the competition as it is one of the major domestic manufacturers of fine porcelain tableware. and the strict quality and consistency controls over the output ensure an edge over the imported tableware.