The agency has, however, reaffirmed the short-term rating on the said facilities at ‘Crisil A1’.

Crisil Ratings stated that the rating downgrade reflects the longer than expected recovery in the business risk profile marked by lower-than-expected profitability in fiscal 2024 which is likely to stay low in fiscal 2025 as well.

As against Crisil’s earlier expectations of nearly 4-5% operating profitability in FY25, the company has reported 1.6% EBITDA margins in 9M FY25 on account of lower-than expected ramp up in boards and panel (B&P) segment which led to lower fixed cost absorption and execution of low margin pre-engineered building (PEB) contracts.

Although the topline is expected to improve in line with Crisil’s expectations, net cash accruals will get impacted on account of lower operating profitability.

Further, the company has added new suppliers for asbestos which has reduced its dependence on Russian suppliers and de-risked the supply chain. It has also focused on increasing its footprint in the Boards and Panels segment, which is relatively higher margin fetching business.

Healthy double digit revenue growth and improvement in profitability will remain key monitorable going forward.

Owing to subdued operating profitability, interest coverage is expected to moderate to nearly 3.3 times in fiscal 2025 (5.7 times in fiscal 2024 and 12.3 times in fiscal 2023). Net cash accruals estimated at Rs 36-40 crore in fiscal 2025 should be adequate to meet capital expenditure and working capital requirements partially in the absence of any term debt repayment.

The ratings continue to reflect EIL's established position in the domestic Asbestos Cement (AC) roofing and boards & panel market and increasing diversity in revenue mix.

These strengths are partially offset by exposure to intense competition in the AC roofing and PEB businesses in India, and volatility in operating margin.

Besides, the AC roofing business is subject to regulatory risks pertaining to the manufacture/use of asbestos in India, and key asbestos-producing nations (as the raw material is fully imported) and the same remains a monitorable.

Everest Industries is one of India's largest manufacturers of AC roofing. The company has also diversified into non asbestos building products (roofing sheets, flooring, cladding, and other boards); and design, manufacture, and erection of PEBs. It has eight plants across India.

For the nine months ended December 31, 2024, revenue was Rs 1,270 crore and PAT loss of Rs 11 crore, against Rs 1,143 crore and net profit of Rs 13 crore, respectively, for the corresponding period of the previous fiscal.