ICRA has downgraded the long-term rating of BB+ to BB on the Rs 12.89 Cr term loans and Rs 12.00 cr cash credit facility of Futura Ceramics Pvt Ltd. It has reaffirmed the short-term rating of A4+ on the Rs 4.11 cr fund based/non-fund based facilities of FCPL.
The outlook on the long-term is ‘stable’. The downgrade in the long-term rating takes into account the weakened financial profile of the company as reflected by revenue de-growth, weakening of coverage indicators and increase in working capital intensity.
The company has been unable to scale up its ceramic roller business which coupled with debt funded capex undertaken for its modernisation and increased working capital requirements has lowered the liquidity of the company. The assigned ratings, however, derive comfort from the technical expertise available with the company to develop ceramic glaze frits formulations to suit various specifications of ceramic tile manufacturers; its favourable location with proximity to ceramic clusters of Morbi and North Gujarat; and its strong customer profile. The ratings continue to remain constrained by the intense competition owing to fragmented industry structure in the CGF segment with the demand scenario being dependent on real estate business cycles and the domestic ceramic roller market being dominated by lower priced Chinese rollers. The ratings factor in the vulnerability of profitability to pricing and availability of key raw material inputs and natural gas.
ICRA believes Futura Ceramics Private Limited will continue to benefit from the extensive experience of its promoters in the ceramic glaze frit business. The outlook may be revised to Positive if substantial growth in revenue and profitability, and better working capital management, strengthens the financial risk profile. The outlook may be revised to Negative if cash accrual is lower than expected, or if any major debt-funded capital expenditure, or stretch in the working capital cycle, weakens liquidity.
Incorporated in September 2003, Futura Ceramics Private Limited (FCPL) was set up by technocrats for manufacturing ceramic glaze frit (CGF), a crystal used for coating tile with a layer of glaze. In FY2009, the company diversified into the production of ceramic rollers, which act as a conveyor on which the tiles move gradually in the roller kiln. FCPL has two manufacturing facilities located at Radhu and Jhaghadia in Gujarat with a total ceramic glaze fritz manufacturing capacity of 26,400 MTPA and ceramic rollers manufacturing capacity of 3,60,000 rollers per annum.