Rationale

 The reaffirmation of the ratings for Anjalee Granites Private Limited (AGPL) factors in the extensive experience of the promoters in the granite processing industry, leading to established relationships and repeat orders with its customers. The favourable location of the company’s processing units in the Prakasam district of Andhra Pradesh aids it to procure key granite variants of various colours such as steel grey, black galaxy, black absolute and black pearl from nearby quarries, where the granite reserves are found in abundance. The ratings note the drop in its revenue by 6.7% YoY in FY2024 on the back of decline in sales volume due to moderate demand in Middle East and European countries. While the revenues are expected to increase by 4-6% YoY in FY2025 and FY2026, the operating margins are projected to remain in the range of 11.5-12.0% (11.7% in FY2024) in the medium term. The ratings, however, remain constrained by the company’s high working capital-intensive nature of operations with net working capital (NWC)/operating income (OI) increasing to 94% in FY2024 from 74% in FY2023 on account of extended credit period offered to customers due to slowdown in demand and increased stock position owing to geopolitical issues. The NWC/OI is likely to remain elevated in the range of 90-95% in the medium term. This has resulted in an increase in working capital debt and moderation in debt coverage metrics in FY2024. The coverage metrics are expected to remain moderate in FY2025 with DSCR of around 1 times due to high repayment obligations. The ratings factor in AGPL’s moderate scale of operations in the granite processing industry, which is a highly competitive, fragmented and a low value additive industry, thereby restricting its pricing flexibility. The Stable outlook on the long-term rating reflects ICRA’s expectation that the company will benefit from its long track record of operations and established relationships with customers, which results in repeat orders.