Trimex Sands Private Limited

Transcription

1 Ratings Trimex Sands Private Limited Facility Amount (Rs. crore) Ratings 1 Remarks Long-term Bank Facilities (reduced from 41.57) CARE BBB+ (Triple B Plus) Reaffirmed Total Facilities Rating Rationale The rating continues to derive strength from the experience of the promoters of Trimex Sands Private Limited (TSPL) in similar line of business, presence of limited players in the heavy minerals mining industry and moderately leveraged capital structure. The rating is, however, constrained by the continued exposure to commodity price risk which has led to moderation in the operational performance of the company during FY14 (refers to the period April 1 to March 31), revenue concentration risk with significant exposure to the Chinese market, exposure to group companies and regulatory risk. The ability of the company to enter into long term contracts at fixed prices, diversify its client base,manage the commodity price volatility, and maintain profit margins would be the key rating sensitivity. Furthermore, the ability of the company to stabilise operations of its recently commissioned solar project will be important. Background TSPL was incorporated in April 2004 initially as East West Mineral Sands Private Limited. The name of the company was later changed to its present name in April The company is part of Trimex Group, which is engaged in trading of heavy minerals comprising Barite, Bentonite, Iron ore, Feldspar, Bauxite, etc for more than two decades.tspl is engaged in the extraction of heavy minerals like ilmenite, rutile, zircon, sillimanite and garnet from the beach sands at its mining site in Srikakulam district in Andhra Pradesh.These minerals are primarily used in the manufacturing of Titanium di-oxide pigments which in turn is used in Paint, Plastic and Paper industries. TSPL owns mining lease for 7.2 sq. km of land situated in Vatsavalasa and Tonangi villages of Gara Mandal in Srikakulam District for a period of 30 years ending in Credit Risk Assessment Experienced promoters Trimex group, through its flagship company TIPL has an established presence in the mining industry and trading of industrial minerals comprising barite, bentonite, iron ore, feldspar, bauxite, coal, etc, for over two decades. Mr Pradeep Koneru, Managing Director of TSPL, is a mechanical engineering graduate and has over 10 years of experience in the mineral trading and mining industry and he is supported by a team of experienced senior management. Though, TSPL has its own marketing team, the experience of the promoters in the related industry has aided in developing relationship with international clients for sale of ilmenite and other minerals. Presence in less competitive heavy mineral mining industry TSPL commenced mining of heavy minerals since January 2010 and has increased its scale of operations over the years aided by stable demand for heavy minerals in global markets. The heavy mineral reserves are concentrated in a few locations globally, with South Africa, China, Australia and USA accounting for major producing countries. In India, the mineral reserves are identified in a few coastal areas of Kerala, Tamil Nadu, Orissa and Andhra Pradesh. The identified reserves in India account for a small portion of estimated global reserves and only a few players are engaged in the mining of heavy minerals in India. The heavy mineral deposits are categorized under First Schedule Minerals and mining requires clearance from the Ministry of Mines, Ministry of Environment and Forest and respective state Governments. TSPL is engaged in mining of all five basic beach sand minerals namely ilmenite, rutile, silliminate, zircon and garnet. It may be noted that TSPL derives majority of its revenues from sale of ilmenite (around 60% of the net sales in the last three years). Exposure to commodity spot market and consequent price volatility Though, the total sales volumes of the company increased from 3.3 lakh MT in FY13 to 3.7 lakh MT in FY14, the total operating income of TSPL declined by 8% on Y-o-Y basis mainly on account of decline in prices of minerals in the spot market. A large part of the production of the company is sold in the spot market, exposing the company to risk of volatility in price movement of the 1 Complete definitions of the ratings assigned are available at and other CARE publications 1

2 minerals. Prices of the major mineral, ilmenite declined by around 25% in FY14 and declined further during 9MFY15. The prices of other key minerals also witnessed decline during the same period. Decline in prices along with increase in mining related expenses (mainly due to increase in fuel cost) resulted in moderation in the PBILDT margin from 46.08% in FY13 to 31.81% in FY14. Going forward, the ability of the company to manage the risk associated with commodity price volatility and protect its margins will be important from a credit perspective. Geographical and client concentration risk The company generates most of its sales through exports and during FY14 over 80% of TSPL s sales was generated from exports. Majority of the company s exports are to China, Europe and Gulf countries.also, the top ten customers of TSPL have contributed over 60% of the total net sales in the last few years, thereby exposing the company to higher client concentration risk. Moderately leverage capital structure The company incurred a capex of Rs.104 crore spread across FY14 and FY15 for setting up of solar plant in Rajasthan with a total capacity of 10MW. The total project cost was funded by debt of Rs.70 crore and the remaining through internal accruals. The project was successfully commissioned in September 2014 andthe company has signed a long term power purchase agreement with the Rajasthan state discom for the same. In addition the company also incurred capex of Rs.142 crore spread across FY13 and FY14 on modernization of its existing unit to improve its operating efficiency. The same was funded by term debt of Rs.98 crore, equity of Rs.10 crore and the remaining through internal accruals. The project was completed by December Despite, the additional term loans availed by the company, owing to the existing repayments and accretion to profits, the capital structure improved with overall gearing at 0.89x as on March 31, 2014 as against 0.96x as on March 31, The company does not have any major capital expenditure plans in the near term. The coverage indicators also remained comfortable with interest coverage of 4.73x and total debt to GCA of 2.72x as on March 31, 2014.The company also had unencumbered cash and bank balance of Rs.23 crore as on March 31, The average working capital utilization of the company was 79% for the twelve months ended February For the nine months ended December 2014, TSPL has registered PAT of Rs.20 crore on a total operating income of Rs.270 crore. Continued exposure to group entities The company has various subsidiary/associate companies namely Trimex Heavy Minerals Private Limited (incorporated for mining activities in new lease area at Bhavanapadu- Andhra Pradesh), Optimus Resources Pte Limited (for mining opportunities abroad), Trimex Aggregates and Binders Private Limited (operating in the specialty cement business) and M&C Rakindo Hospitality Private Limited (M&C). As on March 31, 2014, TSPL s exposure to these entities stood at Rs.92 crore constituting to 31% of the networth as against Rs.69 crore as on March 31, Presently, these subsidiaries (except Trimex Aggregates and Binders Pvt Ltd) do not have any significant operations. Adjusting for the group exposures, the overall gearing of TSPL stood at 1.29x as on March 31, Exposure to regulatory risk Beach sand mining falls under the purview of Indian Bureau of Mines. Any change/modification in regulatory policies or noncompliance of the conditions of the mining contract can have adverse consequences on the mining activities. The prospects of the mining industry are dependent on the regulations and TSPL being part of this industry, remain susceptible to regulatory risk. Prospects With limited players and stable demand for heavy minerals in the global market, TSPL inthe past has been able to reap the benefits of the higher price scenario prevailing in the spot market. However in FY14 and further in 9MFY15 period the prices have declined and the company s operational margins have seen a moderation. Ability of the company to manage this commodity price volatility and protect its margins will be important and is a key rating sensitivity. The company has recently completed its major capital expansions project including its solar power project. Stabilization of the operations is also expected to lead to a relatively stable stream of cash flows with the presence of a long term PPA. Going forward the company does not envisage any major capital expenditure and is moderately geared. The company also has a 2

3 reasonable amount of liquidity with surplus cash. At the same time the company has been increasing its exposure to its group companies and any additional exposure along with generation of returns from the existing exposures will be important from a credit perspective. Financial Performance (Rs. Cr) For the period ended / as at March 31, (12m, A) (12m, A) (12m, A) Working Results Total Operating income PBILDT Interest Depreciation PBT PAT (after deferred tax) Gross Cash Accruals Financial Position Equity Capital Networth Total capital employed Key Ratios Growth Growth in Total income (%) Growth in PAT (after D.Tax) (%) NM Profitability PBILDT/Total Op. income (%) PAT (after deferred tax)/ Total income (%) ROCE (%) Solvency Long Term Debt Equity ratio (times) Overall gearing ratio(times) PBILDT / Interest (times) PBIT / Interest (times) Term debt/gross cash accruals(years) Total debt/gross cash accruals (years) Liquidity Current ratio(times) Quick ratio(times) Turnover Average collection period (days) Average creditors period (days) Average inventory period (days) Operating cycle (days) A-Audited; NM- Not Meaningful 3

4 Details of Rated Facilities 1.Long-term facilities 1.A.Rupee term loans Sr. No. Lender Rated Amount (Rs. Crore) Remarks 1. State Bank Of India 1.71 Outstanding 2. State Bank Of Mysore 2.65 Outstanding 3. UCO Bank 9.70 Outstanding 4. Punjab National Bank 9.48 Outstanding 5. Canara Bank 6.09 Outstanding Total Total long term facilities Rs crore Analyst Contact Name: Harihara Subramanian Tel: (This follows our brief rational for entity published on 22 April 2015) Disclaimer: CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. 4

5 CONTACT Head Office Mumbai Mr. D.R. Dogra Mr. Rajesh Mokashi Managing Director Dy. Managing Director Mobile: Mobile: Ms. Meenal Sikchi Mr. Ankur Sachdeva Vice President - Bank Loan & Instrument Rating Vice President - Bank Loan & Financial Services Mobile: Mobile: meenal.sikchi@carerating.com ankur.sachdeva@careratings.com CREDIT ANALYSIS & RESEARCH LIMITED Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai Tel: Fax: care@careratings.com Other Office: 503, Kaledonia, Sahar Road, Near Andheri Railway Station, Andheri (E), Mumbai Tel: Fax: AHMEDABAD Mr. Mehul Pandya 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad Cell: Tel: mehul.pandya@careratings.com BENGALURU Mr. Dinesh Sharma Unit No , 11th Floor, Prestige Meridian II, No. 30, M.G. Road, Bangalore Cell: Tel: , dinesh.sharma@careratings.com CHANDIGARH Mr. Sajan Goyal 2nd Floor, S.C.O , Sector 34-A, Chandigarh Cell: Tel: / 09 sajan.goyal@careratings.com CHENNAI Mr. V Pradeep Kumar Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai Cell: Tel: / pradeep.kumar@careratings.com HYDERABAD Mr. Saikat Roy 401, Ashoka Scintilla, , Himayat Nagar, Hyderabad Tel: saikat.roy@careratings.com JAIPUR Mr. Harsh Raj Sankhla 304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road, Near Collectorate Circle, Bani Park, Jaipur Cell: Tel: / 14 harshraj.sankhla@careratings.com KOLKATA Ms. Priti Agarwal 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) 10A, Shakespeare Sarani, Kolkata Cell: Tel: priti.agarwal@careratings.com NEW DELHI Ms. Swati Agrawal 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension, New Delhi Cell: Tel: swati.agrawal@careratings.com PUNE Mr. Rahul Patni 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune Cell: Tel: rahul.patni@careratings.com CIN - L67190MH1993PLC