The ratings also factor in the company’s inherent susceptibility to volatility in input costs and realisations, as well as cyclicality in the cement industry.
In its rating action, CRISIL said, "The financial risk profile is expected to improve with heathy cash accrual, deleveraging and no major capital expenditure (CAPEX) plans. ICL has already reduced debt by about Rs 550 crore in fiscal 2021 and further plans to repay a debt of Rs 600-650 crore in fiscal 2022. Debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) ratio is expected to improve to below 3 times in fiscal 2022 from around 4 times in fiscal 2021 and over 6 times in fiscal 2020. ICL has sizeable exposure to related parties, but is not expected to provide any material cash support to them going forward. Any material deviation in capex plans or stance of support towards related parties will be key rating sensitivity factors."
Further, CRISIL added, "Our base case assumes double digit volume growth for ICL in fiscal 2022, mainly driven by low base of fiscal 2021, coupled with demand from housing and infrastructure segments, and waning impact of the second wave of the Covid-19 pandemic over the next few months. The pace of vaccination is expected to pick up significantly with inoculation opened to people aged 18 years and above, with effect from May 1, 2021. However, demand could be lower if localised lockdowns and other restrictions persist."
According to CRISIL, ICL’s volume declined 38% in the first half of fiscal 2021, resulting from disruptions caused by the pandemic and subsequent economic slowdown. However, strong demand rebound in the second half of fiscal 2021 restricted overall volume decline to around 20% for the fiscal. EBITDA per tonne improved to Rs 906 from Rs 530 in fiscal 2020, backed by healthy realisations, benign input prices and cost-reduction initiatives undertaken by ICL. With cement prices expected to hold firm in the current fiscal, performance for fiscal 2022 may improve further with volume growth projected at 20-25% and EBITDA per tonne largely sustaining at fiscal 2021 levels, supported by healthy realisations and operating leverage partially offsetting the rising input cost. Furthermore, various efficiency measures planned are expected to keep the overall cost under check.
On Sensex, India Cements finished at Rs196.85 per piece up by 1.6% on Sensex.