Press Release

Narayani Coke Private Limited

December 04, 2024

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

Long-term / Short-term bank

9.00 CARE BBB+; Stable / CARE A2 Reaffirmed
Facilities

Short-term bank facilities 80.60 CARE A2 Reaffirmed

Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

Reaffirmation of ratings assigned to bank facilities of Narayani Coke Private Limited (NCPL) considers improvement in scale of
operations of the group with improved profitability margins. The rating also takes into consideration the expansion in installed
capacity of the group majorly funded through internal accruals. Ratings further derive strength from the experience of promoters
with long track record of operations, strategic location of the plant, satisfactory capital structure and debt coverage indicators
despite moderation in FY24 and reputed client base and healthy order book position. However, ratings are partially offset by
profitability susceptible to raw material price volatility, risk associated with forex exchange fluctuations and cyclical nature of end-
user industry.

Rating sensitivities: Factors likely to lead to rating actions

Positive Factors
• Increasing scale of operations marked by total operating income (TOI) of above ₹700 crore and improving profit before
interest, lease rentals, depreciation and taxation (PBILDT) margin above 6% on a sustained basis.
• Improving overall gearing and total debt to gross cash accruals (TD/GCA) below 0.25x and 2.5x respectively on a sustained
basis.
Negative Factors
• Declining total operating income (TOI) below ₹400 crore and moderating PBILDT margin below 2% on a sustained basis.
• Debt-funded capex leading to deterioration in overall gearing and debt coverage indicators.

Analytical approach: CARE Ratings Limited (CARE Limited) has combined the financials of NCPL, Harsh Fuels Private Limited
(HFPL) and Pawanputra Ecoke Private Limited (PEPL) referred to as “Narayani Group” or “group” since all three entities belong
to the same promoter group, operate under common management team, exhibit cash flow fungibility in the form of loans and
advances and equity investment and are engaged in manufacturing the same product.

Outlook: Stable
Stable outlook reflects the group’s ability to derive benefits from its promoters’ experience and long track record of operations to
sustain its business and financial risk profiles amid fluctuating raw material cost.

Detailed description of key rating drivers:

Key strengths
Experienced promoters with long track record of operations
The Narayani group is promoted by Pawan More. He has wide experience of over three decades in coal and coke industry. He
started coal and coke trading since 1979. To avail fiscal benefits to promote industries in Gujarat, Pawan More set up a LAM coke
manufacturing plant with an installed capacity of 100,000 MTPA at Kutch, Gujarat in the name of NCPL. In 2018, Pawan More
acquired another Coke manufacturing unit in the name of M/s. Sadguru Fuels Private Limited, which was merged with M/s. Harsh
Fuels Private Limited (HFPL). In 2019, when the Government of India announced new corporate policy with corporate income tax
@ 15% for new domestic manufacturing company incorporated on or after October 01, 2019 with fresh investments and
commencing their production on or before March 31, 2024, Pawan More incorporated new Company namely M/s. Pawanputra
Ecoke Private Limited (PEPL) for manufacturing LAM Coke to avail the tax benefits. The day-to-day operations of the group are
looked after by Pawan More and an active support of his son Harsh More and daughter in law Sanjana More (Chartered
Accountant) with a team of experienced professionals.

Strategic location of the plant

The group majorly imports coking coal from Australia and Russia, among others, through traders based in Switzerland, Singapore
and India. Its coke manufacturing facility is in proximity to Kandla Port (~40 Km), which facilitates the group to readily transport
coal to its plant location, enabling it to save on inward freight cost. Majority customers of the group are in Gujarat.

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Complete definition of ratings assigned are available at www.careedge.in and other CARE Ratings Limited’s publications.

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Reputed client base and healthy order book

The group has reputed client base including Nirma Limited, RSPL Limited, Hindustan Zinc Limited, among others which includes
entities in the chemical and metals industry. The group has long-established relationship with most of its clients and has been
getting repeat orders from its client which indicates satisfactory product delivery by the company. As on September 30, 2024, the
group has order book position for supply of ~37,900 MT of LAM coke from its customers which amounts to ₹111.24 crore
(excluding GST). Apart from the regular order from the large players, the group also have orders from small players.
Going forward, the group’s healthy relationship with its clients is expected to help in achieving continuous volume growth.

Increase in scale of operations and improved profitability margins

The TOI of the group has witnessed y-o-y growth of ~5% to ₹535.68 crore in FY24 from ₹508.90 crore in FY23 considering
increase in sales volume by ~19%. The sales realisation moderated from ₹38,193 per MT in FY23 to ₹34,686 per MT in FY24.
Further, the group reported PBILDT of ₹35.16 crore in FY24 (PY: ₹22.17 crore). PBILDT margin improved from 4.36% in FY23 to
6.56% in FY24.
In H1FY25, the group reported PBILDT of ₹24.09 crore on TOI of ₹301 crore.
On standalone basis, the total operating income of NCPL remained stable at ₹287.21 crore in FY24 (PY: ₹299 crore).
The revenues are expected to improve gradually going ahead with similar levels of margins amid highly volatile raw material
prices.

Satisfactory capital structure and debt coverage indicators; despite moderation in FY24
The group’s financial risk profile continued to remain satisfactory despite moderating in FY24, marked by overall gearing and
TD/GCA of 0.85x and 5.29x as on March 31, 2024 against 0.53x and 4.27x respectively as on March 31, 2023, due to higher LC
backed acceptances. The group’s debt profile majorly comprises LC backed acceptances with moderate dependence on term debt
and fund based working capital limits.
On a combined basis, despite increase in installed capacity from 1,40,000 MT in FY23 to 1,60,000 MT in FY24 and further to
1,84,000 MT in current fiscal, the term loan of the group has reduced from ₹17.61 crore as on March 31, 2023 to ₹13.38 crore
as on March 31, 2024, and further reduced to ₹10.77 crore as on September 30, 2024 since the capacity additions has mostly
been funded from internal accruals.
On standalone basis, the capital structure is comfortable marked by overall gearing of 0.49x as on March 31, 2024, which
moderated from 0.01x as on March 31, 2023.
Going forward, the company’s capital structure is expected to remain at satisfactory levels in the near-to-midterm in absence of
debt funded capital expansion plans.

Key weaknesses
Profitability susceptible to raw material price volatility
The raw material cost formed ~90% of the total cost of sales in FY24 (90% in FY23). Since raw material is the major cost driver,
prices of which are volatile, the company’s profitability is susceptible to raw material price fluctuation. Coking coal prices in
international market are highly volatile and directly impacts domestic steel players and coke manufacturers as they import close
to 70% of the total requirement. The operating margin is susceptible to input price (coal) fluctuations and realisation of finished
goods. Sharp delta in input prices, in the absence of an almost similar delta in realisations, can significantly dent profitability.

Risk associated with foreign exchange fluctuations

The group imported 67% of its raw material in FY24, while it sells finished product in domestic market, exposing the company to
foreign exchange risk. The company purchases coking coal-based on usance LC of 180 days. The company hedges its open
exposure at an opportune time considering movement in currency rate.

Cyclical nature of the steel industry

The group manufactures LAM coke, which apart from other industries, is majorly required in manufacturing steel products such
as pig iron, and ferro alloys metals, among others, so there is a high degree of dependence on steel industry fortunes, which is
cyclical, as it largely depends on the economy, supply and demand, and infrastructure of the country.
The steel industry is sensitive to the business cycles, including changes in the general economy, interest rates, and seasonal
changes in the demand and supply conditions in the market.

Liquidity: Adequate
The group’s liquidity position is adequate marked by GCA of ₹24.60 crore against the term debt repayment obligation of ₹5.17
crore in FY24. Going forward, the group has term debt repayment obligations of ₹5.13 crore in FY25, which is expected to be
funded through expected cash accruals. On standalone basis, there is no term loan in NCPL, except negligible vehicle loans of
₹0.94 crore as on March 31, 2024. The group’s average fund based utilisation has been low at ~30% and average non fund
based limits utilisation stood at ~75-80% for 12-months ended September 30, 2024. On a standalone basis, average utilisation
of fund-based and non-fund based limit for NCPL stood at 25% and 69%, respectively, for 12-months ended September 30, 2024.

Environment, social, and governance (ESG) risks- Not applicable

Applicable criteria

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Definition of Default
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Rating Watch
Manufacturing Companies
Financial Ratios – Non financial Sector
Short Term Instruments
Consolidation

About the company and industry

Industry classification
Macroeconomic indicator Sector Industry Basic industry
Energy Oil, Gas & Consumable Fuels Consumable Fuels Coal

NCPL was incorporated in 2003 by Pawan More, who is into coal and coke trading since 1979, and later in 1991, he set up an
ancillary unit for manufacturing coke. In 2001, he moved to Gandhidham, Gujarat, and set up a LAM coke manufacturing plant
with an installed capacity of 100,000 MTPA. The company’s day-to-day operations are looked after by Pawan More with the
support of his wife, Santosh More, and a team of experienced professionals.
HFPL was incorporated in 1991 with an installed capacity of 36,000 MTPA for manufacturing LAM coke at Kutch, Gujarat. The
installed capacity of HFPL has increased to 60,000 MTPA in current year.
Incorporated in 2013, PEPL installed capacity of 24,000 MTPA for manufacturing LAM coke at Kutch, Gujarat. PEPL’s commercial
production started from February 2023.

Combined financials of NCPL, HFPL and PEPL

Brief Financials (₹ crore) March 31, 2023 (UA, C) March 31, 2024 (UA, C) H1FY25 (UA, C)
Total operating income 508.90 535.68 300.99
PBILDT 22.17 35.16 24.09
PAT 14.11 18.26 NA
Overall gearing (times) 0.53 0.85 NA
Interest coverage (times) 7.10 4.08 NA
UA: Unaudited, C: Combined, NA: Not Available; Note: these are latest available financial results

Standalone financials of NCPL

Brief Financials (₹ crore) March 31, 2023 (A) March 31, 2024 (A) H1FY25 (UA)
Total operating income 298.69 287.21 146.35
PBILDT 9.27 8.74 6.50
PAT 6.29 4.30 NA
Overall gearing (times) 0.01 0.49 NA
Interest coverage (times) 9.85 2.60 NA
A: Audited, UA: Unaudited, NA: Not Available; Note: these are latest available financial results

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

Rating history for last three years: Annexure-2

Detailed explanation of covenants of rated instrument / facility: Annexure-3

Complexity level of instruments rated: Annexure-4

Lender details: Annexure-5

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Annexure-1: Details of instruments/facilities

Coupon Maturity Size of the Rating Assigned
Name of the Date of Issuance
ISIN Rate Date (DD- Issue and Rating
Instrument (DD-MM-YYYY)
(%) MM-YYYY) (₹ crore) Outlook
Fund-based/Non- CARE BBB+; Stable
- - - 9.00
fund-based-LT/ST / CARE A2

Non-fund-based -
- - - 79.00 CARE A2
ST-BG/LC

Non-fund-based -
- - - 1.60 CARE A2
ST-Forward Contract

Annexure-2: Rating History for last three years

Current Ratings Rating History

Date(s) Date(s) Date(s) Date(s)

Name of the
and and and and
Sr. No. Instrument/Bank Amount
Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹ crore)
in 2024- in 2023- in 2022- in 2021-
2025 2024 2023 2022
1)CARE 1)CARE 1)CARE
CARE BBB+; BBB; BBB;
Fund-based/Non- BBB+; Stable / Stable / Stable /
1 LT/ST 9.00 -
fund-based-LT/ST Stable / CARE A2 CARE A3+ CARE A3+
CARE A2 (06-Oct- (05-Jan- (04-Feb-
23) 23) 22)
1)CARE 1)CARE 1)CARE
Non-fund-based - A2 A3+ A3+
2 ST 79.00 CARE A2 -
ST-BG/LC (06-Oct- (05-Jan- (04-Feb-
23) 23) 22)
1)CARE 1)CARE 1)CARE
Non-fund-based -
A2 A3+ A3+
3 ST-Forward ST 1.60 CARE A2 -
(06-Oct- (05-Jan- (04-Feb-
Contract
23) 23) 22)
LT/ST: Long term/Short term; ST: Short term

Annexure-3: Detailed explanation of covenants of rated instrument/facilities- Not applicable

Annexure 4: Complexity level of instruments rated

Sr. No. Name of the Instrument Complexity Level
1 Fund-based/Non-fund-based-LT/ST Simple
2 Non-fund-based - ST-BG/LC Simple
3 Non-fund-based - ST-Forward Contract Simple

Annexure 5: Lender details

To view lender-wise details of bank facilities please click here

Note on complexity levels of rated instruments: CARE Ratings has classified instruments rated by it based on complexity.
Investors/market intermediaries/regulators or others are welcome to write to [email protected] for clarifications.

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Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
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in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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