Press Release

RCCPL Private Limited

July 05, 2022
Ratings
Amount
Facilities/Instruments Rating1 Rating Action
(₹ crore)
1,205.38 CARE AA; Stable
Long-term bank facilities Reaffirmed
(Reduced from 1,442.26) (Double A; Outlook: Stable)
Revised from CARE AA
241.70 CARE AA; Stable (CE); Stable [Double A
Long-term bank facilities
(Reduced from 275.30) (Double A; Outlook: Stable) (Credit Enhancement);
Outlook: Stable]
CARE AA; Stable / CARE A1+
Long-term/Short-term bank 1,020.00
(Double A; Outlook: Stable/ Reaffirmed
facilities (Enhanced from 800.00)
A One Plus)
2,467.08
(₹Two thousand four
Total bank facilities
hundred sixty-seven crore
and eight lakh only)
Details of instruments/facilities in Annexure-1.

Detailed rationale and key rating drivers

The ratings assigned to the bank facilities of RCCPL Private Limited (RCCPL) continue to take into account the strategic
importance of the company for its parent entity, Birla Corporation Limited (BCL), with more than half of the profit before
interest, lease rentals, depreciation and taxation (PBILDT) of the group (refers to BCL – Consolidated) being derived from
RCCPL, which is further expected to increase in the subsequent years with the recent commissioning of the plant at Mukutban,
Maharashtra. The ratings also factor in the continued strength derived by way of implied support and financial linkages with
BCL, common finance and marketing function, selling under a common brand, 100% management control from the parent
company with experienced management and operational team with long and satisfactory track record, its multi-region presence
with strong brand recall and strong distribution network, majority sales from blended cement division, operational efficiency
along with availability of sizeable mineral reserves and captive power plants, cost optimisation offered by split units and
proximity of the project to various raw material sources, newly set up plants with updated technology resulting in high
operational efficiency, comfortable liquidity position and eligibility for various incentives which results in cost advantages.
However, the ratings continue to be constrained by volatility in input and finished goods prices and cyclicality of the cement
industry, which leads to variability in the profitability.

Rating sensitivities
Positive factors – Factors that could lead to positive rating action/upgrade:
• Improvement in the credit profile of BCL (parent).
• Significant improvement in RCCPL’s operating performance and financial flexibility.

Negative factors – Factors that could lead to negative rating action/downgrade:

• Deterioration in the credit profile of BCL.
• Significant deterioration in RCCPL’s operating performance.

Detailed description of the key rating drivers

Key rating strengths
Experienced management and operational team with long and satisfactory track record and diversified
operations: Incorporated in August 2007, RCCPL is engaged in the manufacturing of cement with an installed capacity of
around 10 MTPA which is around 50% of the group’s capacity of around 20 MTPA. In August 2016, BCL acquired entire
shareholding of RCCPL from Reliance Infrastructure Limited (RIL). Subsequently, RCCPL became a wholly-owned subsidiary of
BCL, an entity with more than 10 decades of operational experience. RCCPL sold around 6 MT cement in FY22 (refers to the
period April 1 to March 31) out of 14.2 MT sold by BCL (Consolidated) and the contribution from RCCPL is expected to increase
further with operationalisation of 3.89 MTPA Mukutban plant. RCCPL is strategically important to BCL, as it strengthens the
latter’s market presence in central India, and provides entry into premium cement segments and access to limestone mining
licences for future growth of the group in different regions.
RCCPL, after being taken over by BCL, has almost the same management as BCL. Furthermore, healthy cash and liquid
investment at group level provides financial flexibility and supports liquidity position of the group.

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

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Multi-region presence with strong distribution network and strong brand recall: RCCPL, along with BCL, has
significant presence in Central (Madhya Pradesh) and Northern regions (Uttar Pradesh and Rajasthan) of the country. With
operationalisation of 3.89 MTPA plant at Mukutban, Maharashtra, in April 2022, the company’s capacity has increased to around
10 MTPA and it has also forayed into the western region.. The group sells through a common network of around 250 sales
promoters, more than 9,500 dealers, and more than 24,000 sub-dealers. Approximately 80% of the company’s sales in FY22
were generated from Trade channels and the rest from non-trade channels. On a combined basis, the plants cover an average
radius of approximately 300 kms. The group sells its products under well-established brands, viz., MP Birla Perfect Plus, MP Birla
Samrat, MP Birla Samrat Advanced, MP Birla Chetak, MP Birla Unique, MP Birla Ultimate, MP Birla Ultimate Ultra, etc.

Majority sales from blended cement: The Group manufactures both blended (Pozzolona Portland Cement PPC, PSC, PCC –
91 % contribution of overall sales in FY22) and OPC. Furthermore, the Group is considering expanding its premium brands like
‘M.P Birla Perfect Plus’, M.P Birla Unique Cement, M.P Birla Ultimate, M.P Birla Ultimate Ultra, M.P Birla Samrat advance’, which
command premium prices. Recently, the group has launched a super-premium brand Rakshah. The group has increased the
share of premium brands in its total sales to 51 % in FY22 from 30% in FY19, which has positively impacted its profitability
margins.

Operational efficiency with availability of sizeable mineral reserve and captive power plant and robust operating
performance: RCCPL has waste heat recovery system (WHRS) and solar power capacities of around 12.25 MW and around 22
MW, respectively. After operationalisation of Mukutban plant, RCCPL will also has Captive Power Plant (thermal) capacity of
40MW. The company met around 27% of its total power requirement in FY22 (22% in FY21) through captive sources thereby
bringing economies to power cost of the company. Furthermore, the group has captive limestone mines across the country with
estimated limestone reserves of more than 300 MT and another around 100 MT non-operational (for which process of seeking
approvals is in progress). The group sources around 85% of its limestone requirements from its captive mines. Furthermore,
RCCPL has a captive coal mine at Sial Ghogri, Madhya Pradesh, with an extractable reserve of 5.69 MMT providing cost benefit
to the company for its fuel requirements. The production of coal from Sial Ghogri improved to around 2 lakh tons in FY22 from
1.85 lakh tons in FY21.

Cost optimisation offered by split units of the project and proximity of the project to various raw material
sources: RCCPL has its operational units spread across Madhya Pradesh, Uttar Pradesh and Maharashtra. Out of the four units
(Maihar [MP], Kundanganj [UP], Butibori and Mukutban [Maharashtra]), the units at Maihar and Mukutban are integrated
facilities, whereas in other two places, the company is operating grinding facilities near the user markets to save upon the cost
of logistics. Limestone requirements of the unit at Maihar are met through Sadhera and Salaiya mines, while the company has
received approval for development of Persoda mines for Mukutban plant. Major clinker requirements of the two grinding units
are met from the Maihar unit. Furthermore, other raw materials are also located near the project sites which in turn enables the
entity to optimise its cost.

RCCPL’s newly set up plants with updated technology ensures optimum efficiency in operations: RCCPL’s operating
units were commissioned in 2014. The plants are of latest technology, which in turn ensures optimum efficiency in terms of
operations. The same is evident from low power requirement per tonne of production of cement of 67 kw/ton as compared to
industry average of 75-80 kw/ton.

Comfortable financial risk profile, albeit high leverage: The capacity utilisation (CU) of RCCPL increased y-o-y to 108%
in FY22 from 92% in FY21, supported by boost in demand after easing of COVID-19-related restrictions, resulting in increase in
revenue to ₹3,140 crore from ₹2,830 crore. However, the PBILDT margin decreased to 20% from 26% due to increase in
power & fuel and freight expenses. Industry-wide there has been sharp increase in fuel, raw material, and packaging costs
during the year owing to a significant increase in commodity prices. Due to an increase in fuel prices along with prices of pet
coke and coal (both domestic and imported), total distribution cost in FY22 has also risen. The impact on the profitability is
expected to continue even in FY23 due to prolonged and unabated cost pressures. CARE Ratings Limited (CARE Ratings),
however, believes that various cost-saving initiatives taken by the company (such as waste heat recovery-based and solar
power plants to replace high-cost grid power, increase in clinker capacity and coal extraction from captive mines) would aid
profits.
The overall gearing though improved since FY21, continues to remain on a higher side and stood at 1.90x as on March 31, 2022
(2.13x as on March 31, 2021). The improvement in gearing was on account of accretion of profits coupled with slower-than-
anticipated debt drawdown.

RCCPL’s eligibility for various incentives results in cost advantages: RCCPL’s operating manufacturing units in MP, UP,
Maharashtra have been granted the status of Mega Projects and have been granted special incentives. Incentives categories
include value added tax (VAT) (now substituted with Goods and Service Tax [GST]) /Sales Tax and stamp duty exemption,
capital investment subsidy amongst others. The incentives have the potential to recover the entire investment, which can
provide cost advantages in the future course of operations. In FY22, accrued subsidy benefit was around ₹150 crore, while the
company received only ₹13 crore of subsidies, and subsidy receivable stood at ₹500 crore as on March 31, 2022. The new unit
at Mukutban, is eligible for subsidy of over ₹2,000 crore in a span of 20 years from FY22. Timely receipt of subsidies shall
remain one of the key monitorables as the same should not hamper the cashflows and thereby the liquidity of the group.

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Key rating weaknesses

Volatility in input and finished goods prices: In addition to raw material (Limestone) costs, power & fuel and freight costs
are the major cost components for the cement industry. During FY22, the PBILDT margin of RCCPL declined to 20% from 26%
in FY21 due to (i) increase in power and fuel expenses, which rose to 16.6% of revenue from 13.9% in FY21, and (ii) increase
in freight expenses which rose to 17.9% of revenue from 16.1%.
Crude oil prices went up at a rate of 74% in FY22. Tracking this, pet-coke has also reported a sharp increase of around 71% y-
o-y. International coal prices soared to USD 294.42/MT (record high) due to Russia-Ukraine war, widening demand-supply gap
leading to diminishing inventories, and Indonesia’s temporary ban on coal exports.
The surge in crude oil prices has raised freight costs significantly, resulting in diesel prices doubling up during FY22.
Furthermore, the price of cement remains susceptible to fluctuation on account of market dynamics. Hence, any adverse
movement in the prices of raw materials or the crude cost without a corresponding movement in the price of the cement can
affect the profitability of the company. However, backward integration and captive power sources partially mitigate the risk of
decrease in profitability. The group has captive limestone mines meeting around 85% % requirement and has also set up
WHRS, CPP (thermal), and solar power plants, to meet substantial portion of its power requirements in future and providing
power at much cheaper rates. The company meets its requirement of coal from its captive mines in Sial Ghogri along with a mix
of purchased indigenous and imported coal/Petcoke. RCCPL has a captive coal mine at Sial Ghogri, Madhya Pradesh, which
catered to around 42% (43% in FY21) of the total coal requirements in FY22 of the company.

Cyclicality of the cement industry: Cement industry is highly cyclical in nature and depends largely on the economic growth
of the country. There is a high degree of correlation between the GDP growth and the growth in cement consumption. Cement
being a cyclical industry goes through phases of ups and downs, and accordingly impacts the unit realisations and profitability.

Industry outlook: Growth in India’s cement sector has seen a strong bounce back in FY22. The year closed with a growth of
20%, reaching an all-time high, after witnessing a decline of 11% in FY21. The jump was on account of the government’s
infrastructure push via various schemes and allocations towards the creation of hard assets and a low base effect. Growth trend
continues in production FY21 created a low base primarily because of the COVID-19 pandemic. This, coupled with pent-up
demand, has led to the reversal in the muted trend in volumes. The 20% production growth in FY22 was driven by the strong
recovery witnessed during H1FY22, which saw a y-o-y growth of 36%. Owing to strong momentum in housing, infrastructure,
and industrial development, the cement industry in India is set to see an upswing in demand in FY23. CARE Ratings believes
the industry is likely to move at high single-digit growth on account of government thrust for infrastructure and strong traction
in capital expenditure. Various initiatives by the government along with several Micro, Small, and Medium Enterprises (MSME)
schemes are set to propel capital expenditure from private players. While demand is likely to remain strong in FY23, headwinds
arising out of rising cost pressure could create some stress on the profitability of cement companies. Resultant price hikes by
cement producers will become evident and might sustain in the near term. However, due to the competitive nature of the
industry, the magnitude of the price hikes driven by cost pressure remains to be seen.

Liquidity: Adequate
RCCPL’s average fund-based utilisation during 12 months ended March 2022 has been around 10%. Liquid
investment/unencumbered cash and bank balance stood at ₹94 crore as on March 31, 2022. The company’s gross cash accruals
(GCA) is expected to be around ₹470 crore in FY23 vis-à-vis debt repayment obligation of ₹291 crore (including ₹75 crore
WCDL and ₹100 crore preference shares). Mukutban plant has already been operationalised RCCPL’s management might defer
capex, esp. those related to sustenance and debottlenecking, if the targeted realisations are not achieved. RCCCPL’s liquidity
also draws comfort from BCL’s string liquidity position. On consolidated level, liquid investment/unencumbered cash and bank
balance stood at more than ₹1,200 crore as on March 31, 2022 (including equity investment of around ₹400 crore).
Consolidated GCA stood at ₹858.95 crore in FY22- vis-à-vis debt repayment obligation of ₹414.98 crore in FY23 (including
repayment of WCDL of ₹210 crore).
Furthermore, RCCPL enjoys additional financial flexibility from being a part of the MP Birla Group. The management has
indicated that though a need is not envisaged in the foreseeable future given BCL’s strong liquidity, group support will be
available, if required.

Analytical approach
Standalone
However, parentage of BCL is factored in, as these companies are engaged in similar line of operation under a common
management, having financial linkage and selling their products under the common brand and marketing team. Apart from the
above, RCCPL’s (a wholly-owned subsidiary of BCL) strategic importance is expected to increase in future with the expectation
of it contributing major share of profits of the consolidated entity on account of completion of Mukutban capex plan in RCCPL.
The rating also factors in the financial flexibility that it enjoys by virtue of being part the M.P Birla group.

CARE Ratings Ltd.

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Applicable criteria
Policy on default recognition
Consolidation
CARE’s Policy on Default Recognition
Factoring Linkages Parent Sub JV Group
Financial Ratios – Non financial Sector
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Credit Watch
Short Term Instruments
Cement
Manufacturing companies

About the company

RCCPL Private Ltd (RCCPL; erstwhile Reliance Cement Company Private Limited) was incorporated in 2007 and is engaged in
the manufacturing of cement with major presence in Madhya Pradesh, Uttar Pradesh and Maharashtra. RCCPL’s aggregate
installed cement capacity is of 9.47 million tonnes per annum (MTPA). The company was initially a wholly-owned subsidiary of
Reliance Infrastructure Limited. However, w.e.f. from August 22, 2016, ‘Birla Corporation Limited’, took over 100% shares of
RCCPL held by RIL to expand its existing operations, market presence and gain synergies as apart from its cement
manufacturing facilities in Rajasthan, BCL, like RCCPL, also has significant operations in Central India.

Brief Financials (₹ crore) March 31, 2020 (A) March 31, 2021 (A) March 31, 2022 (P)

Total operating income 2,477.69 2,829.58 3,140.11

PBILDT 669.21 724.43 619.85

PAT 139.22 275.36 217.31

Overall gearing (times) 2.35 2.13 1.90

Interest coverage (times) 3.16 4.12 4.02

A: Audited, P: Provisional
Latest quarter - NA

About the parent

Birla Corporation Limited (BCL), incorporated in August 1919, is currently the flagship company of the M. P. Birla group. The
company is a multi-location cement manufacturing company with an aggregate capacity of 15.6 MTPA as on March 31, 2022
(10 MTPA in BCL and 5.6 in RCCPL). Furthermore, BCL commenced cement production at the 3.89 MT Mukutban plant in April
2022, and with this, the overall capacity is increased and stood at around 20 MTPA.
BCL sells cement under various well-established brands, prominent being ‘Birla Cement Samrat’, ‘Birla Cement Unique’, a
premium Portland Slag Cement, MP Birla Perfect, MP Birla Perfect Plus and ‘Birla Cement Chetak’ with strong presence in
Central and North India. It is also engaged in jute sales. In August 2016, BCL successfully acquired 100% equity stake in RCCPL
Private Limited (RCCPL) (erstwhile Reliance Cement Company Private Limited) at an enterprise value of ₹4,800 crore (including
a debt of ₹2,400 crore) to expand its cement business.
After the death of Priyamvada Birla, wife of Madhav Prasad Birla, in July 2004, BCL was headed by Rajendra Singh Lodha.
Following his death in October 2008, his son, Harsh Vardhan Lodha, took over the charge as the company’s Chairman.
However, the ownership of BCL is under legal dispute, being contested by Harsh Vardhan Lodha and the descendants of the
Birla family. CARE Ratings will continue to monitor the developments in this regard.

Brief Financials (₹ crore) FY20 (A) FY21 (A) FY22 (A)

TOI 6,948.35 6,834.38 7,528.68
PBILDT 1,379.82 1,400.50 1,178.91
PAT 505.18 630.14 398.59
Overall gearing (times) 1.26 1.05 1.03
Interest coverage (times) 3.56 4.73 4.86
A: Audited
Latest quarter - NA

CARE Ratings Ltd.

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Status of non-cooperation with previous CRA:

Not applicable

Any other information:

Not applicable

Rating history for the last three years: Please refer Annexure-2

Covenants of the rated instruments/facilities: Detailed explanation of covenants of the rated instruments/facilities is
given in Annexure-3

Complexity level of various instruments rated for this company: Annexure-4

Annexure-1: Details of instruments/facilities

Size of the
Name of the Date of Coupon Maturity Rating Assigned along
ISIN Issue
Instrument Issuance Rate Date with Rating Outlook
(₹crore)

Dec,
Fund-based - LT-Term Loan - - 1035.38 CARE AA; Stable
2028

LT/ST Fund-based/Non-fund- CARE AA; Stable / CARE

- - - 715.00
based-CC/WCDL/OD/LC/BG A1+

CARE AA; Stable / CARE

Non-fund-based - LT/ ST-BG/LC - - - 305.00
A1+

Aug,
Fund-based - LT-Term Loan - - 241.70 CARE AA; Stable
2028

Dec,
Fund-based - LT-Term Loan - - 170.00 CARE AA; Stable
2028

Annexure-2: Rating history for the last three years

Current Ratings Rating History
Date(s) Date(s) Date(s) Date(s)
Name of the
Sr. and and and and
Instrument/Bank Amount
No. Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹crore)
in 2022- in 2021- in 2020- in 2019-
2023 2022 2021 2020
CARE 1)CARE AA; 1)CARE AA- 1)CARE AA-
Fund-based - LT-
1 LT 1035.38 AA; - Stable ; Stable ; Stable
Term Loan
Stable (05-Jul-21) (07-Jul-20) (20-Sep-19)
CARE
LT/ST Fund- 1)CARE AA;
AA; 1)CARE AA- 1)CARE AA-
based/Non-fund- Stable /
2 LT/ST* 715.00 Stable / - ; Stable ; Stable
based- CARE A1+
CARE (07-Jul-20) (20-Sep-19)
CC/WCDL/OD/LC/BG (05-Jul-21)
A1+
CARE
1)CARE AA;
AA;
Non-fund-based - LT/ Stable / 1)CARE A1+ 1)CARE A1+
3 LT/ST* 305.00 Stable / -
ST-BG/LC CARE A1+ (07-Jul-20) (20-Sep-19)
CARE
(05-Jul-21)
A1+
CARE 1)CARE AA 1)CARE AA 1)CARE AA
Fund-based - LT-
4 LT 241.70 AA; - (CE); Stable (CE); Stable (CE); Stable
Term Loan
Stable (05-Jul-21) (07-Jul-20) (20-Sep-19)
CARE 1)CARE AA; 1)CARE AA- 1)CARE AA-
Fund-based - LT-
5 LT 170.00 AA; - Stable ; Stable ; Stable
Term Loan
Stable (05-Jul-21) (07-Jul-20) (20-Sep-19)
*Long term/Short term.

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Annexure-3: Detailed explanation of the covenants of the rated instruments/facilities

Name of the Instrument Detailed Explanation
A. Financial covenants
I. DSCR Not below 1.15x
II. FACR Not below 1.2x
III. TTL/TNW Not to exceed 3.0x
IV. TOL/TNW Not to exceed 4.0x
B. Non-financial covenants
I. Maintenance of books of accounts The borrower shall maintain proper books of accounts to
accurately reflect its financial condition
II. Material events The borrower shall keep the Bank informed of the happening
of any event which is likely to have an impact on their profit
or business and the remedial steps proposed to be taken.

Annexure-4: Complexity level of various instruments rated for this company

Sr. No. Name of Instrument Complexity Level

1 Fund-based - LT-Term Loan Simple

Annexure-5: Bank lender details for this company

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

Note on complexity levels of the rated instruments: CARE Ratings has classified instruments rated by it on the basis of
complexity. Investors/market intermediaries/regulators or others are welcome to write to care@careedge.in for any
clarifications.

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Contact us
Media contact
Name: Mradul Mishra
Phone: +91-22-6754 3596
E-mail: mradul.mishra@careedge.in

Analyst contact
Name: Ravleen Sethi
Phone: +91-11-4533 3251
E-mail: ravleen.sethi@careedge.in

Relationship contact
Name: Saikat Roy
Phone: +91-98209 98779
E-mail: saikat.roy@careedge.in

About us:
Established in 1993, CARE Ratings is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise
capital and enable investors to make informed decisions. With an established track record of rating companies over almost
three decades, CARE Ratings follows a robust and transparent rating process that leverages its domain and analytical expertise,
backed by the methodologies congruent with the international best practices. CARE Ratings has played a pivotal role in
developing bank debt and capital market instruments, including commercial papers, corporate bonds and debentures, and
structured credit.

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 partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in
case of withdrawal of capital, or the unsecured loans brought 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.

For the detailed Rationale Report and subscription information, please visit www.careedge.in

CARE Ratings Ltd.

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