Rationale

 The upgrade in the long-term rating factors in the expected improvement in the credit profile of Asian Granito India Limited (AGL), following the fund raising of ~Rs. 225 crore through rights issue in October 2021 along with the divestment of its stake in an associate concern, Astron Paper and Board Mill Ltd. for ~Rs. 47 crore, which will substantially reduce the overall debt levels and support the liquidity position of the company. Of the proceeds from the right issue, around Rs. 80 crore will be utilised for working capital debt reduction which would improve the capital structure, while the balance will be utilized towards working capital requirements and general corporate purposes. Supported by healthy accruals and deleveraging measures undertaken by the company, ICRA expects AGL's consolidated Total Debt/OPBIDTA to be below 1.5 times in FY2022 compared to 2.2 times in FY2021. The ratings continues to favourably consider the extensive experience of AGL's promoters in the tiles industry and the company's established brand positioning in the domestic market, which along with its diversified product range and wide distribution network have resulted in steady sales growth. The ratings, however, are constrained by the working capital intensive nature of the company's operations and the susceptibility of its profitability to adverse fluctuations in raw material and fuel prices. AGL derives a sizeable share of its revenues from project business, which results in elongated receivable cycle and higher working capital intensity than other similar-sized peers in the industry. ICRA also notes that the gas price has witnessed significant upsurge in the recent past. Notwithstanding the periodic price revisions undertaken by the company, its ability to continue to pass on the same in a timely manner remains to be seen and could exert pressure on the company's margins in the current fiscal. However, AGL's subsidiary, Crystal Ceramic Industries Pvt. Ltd. (CCIPL) has access to cheaper gas from ONGC and CCIPL has recently concluded brownfield expansion in vitrified tiles and thus, the Group proposes to sweat CCIPL's capacity to mitigate the overall impact of higher gas prices on the margins. While no major debt-funded capex is proposed in the AGL, the Group intends to increase its capacity significantly in the medium to long term by entering into Joint Venture/Outsourcing tie-ups. The ratings also factor in the intense industry competition from large as well as mid-sized players in the organised market, and the cyclicality associated with the real estate sector, which remains the key end-user of tiles. The Stable outlook on the [ICRA]A+ rating reflects ICRA's opinion that AGL will continue to benefit from its established brand presence in the ceramic industry