India Ratings and Research (Ind-Ra) has downgraded the rating of Sanghi Industries Ltd’s (SIL) term loan (₹ 794.50 crore), non-convertible debentures (₹305 crore) and fund-based limits (₹285 crore) to ‘A-’ from ‘A’. The Outlook is Negative.
Ind-Ra also downgraded SIL’s non-fund based limits (₹40 crore) from ‘A1’ to ‘A2+’.
The downgrade reflects a slower-than-expected ramp up in SIL’s sales resulting in reduced EBITDA (earnings before interest, taxes, depreciation, and amortization), a delay in deleveraging and a stretched liquidity position, the rating agency said in a statement.
“The Negative Outlook reflects the challenges around cash flow generation starting mid-FY23, coinciding with the seasonally weak monsoon quarters, which could get exacerbated in the context of near-term input cost inflation.
“Timely infusion of funds by the management by 1QFY23 and a ramp-up of EBITDA will remain a key monitorable,” it added.
The agency noted that SIL has a grinding capacity of 6.1 mmtpa (million metric tonnes per annum) and a clinker capacity of 6.6 mmtpa. It also has a 130MW captive thermal power plant, captive mines, a water de-salination facility, and a captive port in Kutch which can handle 1 mmtpa of cargo.
SIL sells ordinary portland cement, portland pozzolana cement and portland slag cement in Gujarat, Rajasthan, Maharashtra and Kerala and international markets of the Middle East, Africa and the Indian sub-continent.