Press Release

Fortune Stones Limited

March 19, 2021
Rating
Amount
Facilities/Instruments Ratings Rating Action
(Rs. crore)
Long Term / Short Term Bank CARE BBB; Stable / CARE A3+
1.50 Assigned
Facilities (Triple B; Outlook: Stable/ A Three Plus)
Long Term / Short Term Bank CARE BBB; Stable / CARE A3+ Revised from CARE A3+
27.50
Facilities (Triple B; Outlook: Stable/ A Three Plus) (A Three Plus)
Long Term Bank Facilities - - Withdrawn
29.00
Total Bank Facilities (Rs. Twenty-Nine
Crore Only)
Details of instruments/facilities in Annexure-1
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Fortune Stones Limited (FSL) continue to derive strength from extensive
experience of promoters in the stone mining industry, long term mining rights providing revenue visibility and long-standing
relation with clients, self-owned fleet of mining equipment, adequate logistic connectivity of mines and comfortable financial
risk profile marked by low gearing and healthy debt metrics. The ratings are however constrained by export regulation risks
with major portion of exports being made to China, susceptibility of FSL’s margin to foreign exchange fluctuation risk and
regulatory risk related to mining sector. The ratings also take cognizance of decline in total operating income and profitability
margins during FY20 (refers to period from April 01 to March 31) and the company’s efforts to diversify its exports to countries
other than China.
The rating assigned to the long term facilities has been withdrawn on an account of repayment of outstanding term loan.
Rating Sensitivities
Positive: (Factors that could lead to positive rating action/upgrade)
 Increase in total operating income above Rs.200.0 crore while sustaining profit margins
Negative: (Factors that could lead to negative rating action/downgrade)
 Decline in total operating income below Rs.100.0 crore and deterioration in PBILDT margin below 15%.
 Weakening of capital structure to 1.00x.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced promoters with established track record in mining of granite stone
Fortune Stones Limited (FSL) was established in 1996 as a joint venture between Bhardwaj family and M.P. State Mining
Corporation Ltd (MPSMC). Mr. Nivedan Bhardwaj, an MBA from Simon School of Business, University of Rochester, is the
Managing Director of FSL. He has more than two decades of experience in the stone mining industry and is involved in overall
strategic decision making. The company has established track record of more than 2 decades in the mining business.
Mining rights till 2028 providing long term revenue visibility: FSL has mining lease valid till 2028 to extract granite stones from
the Kathera mines. In FY16 (refers to period from April 01 to March 31), the company received consent from the Madhya
Pradesh Pollution Control Board to expand the production capacity from 18,000 CBM to 60,000 CBM.
Long standing relation with clientele: FSL has long standing relations with clientele in international market ranging from 5
years to 20 years. The trend in FSL’s production over the years has been towards export grade granite. Contribution over the
years from export grade granite has been around 80% while the rest is sold domestically.
Self-owned fleet of modern equipment and good connectivity: FSL is equipped with self-owned modern machinery for the
efficient extraction of granite. Self-owned fleet of equipment ensures timely availability of machinery and efficient extraction
of granite. The mine of the company has good road and rail connectivity. Granite blocks extracted are transported to Kandla
port either by road or via railways via the Khajurao-Mohaba rail line located 35 Kilometres away.
Comfortable financial risk profile: The capital structure represented by overall gearing continues to remain at below unity at
0.14x as on March 31, 2020 against 0.11x as on March 31, 2019. The moderation is on an account of operating lease obligation
categorized as debt. Further, the company has also fully paid its outstanding term loan. The total debt to GCA stood at 0.66x
during FY20 against 0.34x during FY19. The moderation is on an account of decline in GCA level from Rs. 23.39 crore in FY19 to
Rs.17.05 crore in FY20.
Key Rating Weaknesses
Decline in total operating income and profitability margins: The company witnessed decline in total operating income to Rs.
113.81 crore in FY20 against Rs.138.68 crore in FY19 registering y-o-y de growth of 17.93%. This is on an account in decline in
export sales which contributed to around 80% of total sales. The decline is due to technical challenges faced and lockdown

1 CARE Ratings Limited

 Press Release

during last days of March 2020 due to COVID. FSL faced technical challenges w.r.t delay in receipt of e-pass which resulted in
stock piling up. In line with decline in total operating income, PBILDT level also declined from Rs.31.78 crore in FY19 to Rs.21.70
crore in FY20 which resulted in decline in PBILDT margin to 19.06% in FY20 vis-vis 22.92% in FY20. The PAT margin also declined
to 9.68% in FY20 against 13.07% in FY19.
During H1FY21, the company reported total operating income of Rs.63.40 crore. As on February 2021, the company reported
total operating income of Rs.127.0 crore.
Export regulation risk and geographic concentration: The major portion of exports is made to China and Hong-Kong, exposing
it to policies pertaining to export and import of granite in India and China. Granite is exported from India in two forms: raw
granite and polished granite. China procures raw stones from the international market, cuts and polishes the same and re-
exports them to European countries. FSL’s large chunk of income is through the export channel which is concentrated to China
and Hong-Kong thereby exposing the company to geographical concentration risk. However, the company had also initiated
production of granite slabs in FY19 for which it has already ventured into exports to Vietnam and Bulgaria, which is now
contributing to approx. 14% of the sales in current financial year. Going forward, it shall remain crucial for the company to
reduce dependence on China for its exports.
Susceptibility to foreign exchange risk: During FY20, approximately 82% (PY:89%) of its total operating income was from
exports while domestic sales accounted for around 18% (PY:11%). The company is exposed to foreign exchange risk to the
extent of its open position. The company does not hedge its foreign exchange receivables since it has natural hedge to some
extent in terms of payments related to packing credit in foreign currency. The company also imports equipment from foreign
countries which provides for a natural hedge against foreign exchange risk. FSL has earned an income of Rs. 1.10 crore in FY20
(PY: Rs.0.77 cr.) on account of foreign exchange fluctuations.
Regulatory risk related to the mining sector: Mining industry in the country is largely regulated by the government which
coupled with obtaining land for mining poses a major entry barrier. The mining industry is highly susceptible to the changes in
the regulations by the government (changes in royalty, export duty, ban on mining etc.) which exposes players like FSL to
regulatory risks.
Prospects: The granite industry is highly fragmented with presence of large number of organized and unorganized player.
Indian granite exporters face competition from growing preference of engineered stone and Brazilian granite industry. Granite
being a natural stone the key demand drivers for Indian granites worldwide depend on availability of new deposits of granites
with new colors and texture, as the same is not available in other countries. The granite export industry has moved from an
order driven market to a stock-and-sell market. This has impacted the dynamics of the industry and increased the working
capital requirements. The granite industry is primarily dependant upon demand from real estate, infrastructure and
construction sector across globe. Infrastructure sector is as growing sector despite the adverse movement in the
macroeconomic factors, infrastructure growth requirement universally remains high and in turn does not adversely affect
business of FSL
Strong Liquidity: The current ratio of the company remained comfortable at 2.19x as on March 31, 2020 (PY: 2.11x). The
average month end working capital utilizations of the company remain low at 17.59% for trailing 12 months ending December
2020. The liquidity profile is further strengthened by free cash and bank balance of Rs. 25.84 crore as on March 31, 2020 (PY:
Rs. 12.77 crore). Thus, the company had not opted for covid-19 related moratorium on debts. During FY21, FSL is expected to
report GCA of Rs 23.78 crore. It has already repaid its term loans and its capex requirements are modular in nature which are
expected to be met through internal accruals.

Analytical approach: Standalone

Applicable criteria –
Rating Outlook and Credit Watch
CARE’s Policy on Default Recognition
Financial ratios-Non-Financial Sector
Liquidity analysis -Non-Financial Sector
Criteria for Short Term Instruments
Rating Methodology-Service Sector

About the Company

FSL was established as MP Fortune Mining Limited on January 5, 1996, as a joint venture between the current promoters
(Bharadwaj family) and the Madhya Pradesh government through Madhya Pradesh State Mining Corporation Ltd (MPSMCL).
The name of the entity was thereafter changed to Fortune Stones Limited on June 8, 2000. FSL was established as a 100%
export-oriented unit (EOU) and was granted a lease license for extraction of red granite stones from the Kathera Mines on July
3, 1998 for a period of 10 years which was renewed in 2008 for next 20 years. FSL is involved in the selling of raw granite slabs
and blocks.

2 CARE Ratings Limited

 Press Release

Brief Financials (Rs. crore) FY19 (A) FY20 (A)

Total operating income 138.68 113.81
PBILDT 31.78 21.70
PAT 18.15 11.04
Overall gearing (times) 0.11 0.14
Interest coverage (times) 36.16 42.50
A: Audited;

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
Covenants of rated facilities: Detailed explanation of covenants of the rated instruments/facilities is given in Annexure-3

Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Issue Rating assigned along
Instrument Issuance Rate Date (Rs. crore) with Rating Outlook
Withdrawn
Fund-based - LT-Term Loan - - - 0.00

CARE BBB; Stable /

Fund-based - LT/ ST-Packing Credit in
- - - 27.50 CARE A3+
Foreign Currency

CARE BBB; Stable /

Non-fund-based - LT/ ST-Letter of
- - - 1.50 CARE A3+
credit

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2020-2021 2019-2020 2018-2019 2017-2018
1)CARE
BBB; Stable
(28-Mar- 1)CARE
20) BBB; Stable
1. Fund-based - LT-Term Loan LT - - - -
2)CARE (05-Apr-18)
BBB; Stable
(04-Apr-19)

1)CARE
CARE A3+
BBB; (28-Mar- 1)CARE
Fund-based - LT/ ST-Packing Stable / 20) A3+
2. LT/ST 27.50 - -
Credit in Foreign Currency CARE 2)CARE (05-Apr-18)
A3+ A3+
(04-Apr-19)

CARE
BBB;
Non-fund-based - LT/ ST- Stable /
3. LT/ST 1.50 - - - -
Letter of credit CARE
A3+

Annexure-3: Detailed explanation of covenants of the rated instruments/facilities – Not Applicable

3 CARE Ratings Limited
 Press Release

Annexure 4: Complexity level of various instruments rated for this Company

Sr. No. Name of the Instrument Complexity Level
1. Fund-based - LT-Term Loan Simple
2. Fund-based-LT/ST-PCFC Simple
3. Non-fund-based-LT/ST-LC Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This
classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write
to care@careratings.com for any clarifications.
Contact us
Media Contact
Mradul Mishra
Contact no. – +91-22-6837 4424
Email ID – mradul.mishra@careratings.com

Analyst Contact
Name: Mr. Ajay Dhaka
Tel: 011-45333218
Mobile: 8826868795
Email: ajay.dhaka@careratings.com

Business Development Contact

Name: Ms Swati Agarwal
Contact no. : 011-45333200
Email ID: swati.agarwal@careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit
rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an
External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the
Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the
corporates to raise capital for their various requirements and assists the investors to form an informed investment decision
based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and
analytical expertise backed by the methodologies congruent with the international best practices.

Disclaimer
CARE’s 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.
CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated
entity. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and
reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose
bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In
case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital deployed
by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in
case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial
performance and other relevant factors. CARE is not responsible for any errors and states that it has no financial liability
whatsoever to the users of CARE’s rating.
Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve
acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the
ratings may see volatility and sharp downgrades.

4 CARE Ratings Limited