Press Release

Epsilon Carbon Private Limited (Revised)

April 04, 2022

Ratings
Amount (Rs.
Facilities/Instruments Rating1 Rating Action
crore)
Reaffirmed at CARE A-; Stable / CARE A2
Long Term / Short Term Bank
- - (Single A Minus; Outlook: Stable / A Two); Outlook revised
Facilities
from Negative and Withdrawn
Reaffirmed at CARE A-; Stable
Long Term Bank Facilities - - (Single A Minus; Outlook: Stable); Outlook revised from
Negative and Withdrawn
0.00
Total Bank Facilities
(Rs. Only)
Details of facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

CARE has withdrawn the rating assigned to the bank facilities of Epsilon Carbon Private Limited with immediate effect. The
above rating action has been taken at the request of Epsilon Carbon Private Limited and ‘No Objection Certificate’ received from
the lenders that have extended the facilities rated by CARE.
The rating continues to derive strength from established market position of the company in the domestic coal tar pitch (CTP)
segment, high degree of business integration with JSW Steel Limited (JSWSL; rated CARE AA; Stable/CARE A1+) owing to
presence of exclusive long-term raw material supply arrangement for crude coal tar, thus assuring raw material availability.
Further, ECPL also derives benefit of having the plant located near raw material source, thereby translating into relatively lower
logistic cost and lower working capital intensity due to credit period extended by JSWSL. The ratings also continue to factor in
experienced promoters, diversified product portfolio of the company, presence of supply contract with customers providing
revenue visibility for its coal tar business.
The strengths are however tempered by ECPL’s presence in highly cyclical industry where the business is significantly linked to
fortunes of aluminium manufacturers (as Coal Tar Pitch is sold to aluminium manufacturers) and automobile tyre industry (as
Carbon Black would be sold to tyre manufacturers). The rating also factors in the susceptibility of its operating profit margins
and consequently the cash flows to global prices and government policies on key product.
The outlook has been revised to Stable from Negative. The operating performance of the company has improved during
11MFY22 with healthy ramp up of new capacity backed by improved demand from end user industry.

Detailed description of the key rating drivers

Key Rating Strengths
Experienced management
Mr. Mohinder Singhania, CEO, ECPL has over 3 decades of experience in project execution and plant operation in chemical and
synthetic fibre industry. Mr. Vikram Handa, Managing Director, and his wife Ms. Tarini Jindal, Director (daughter of Mr. Sajjan
Jindal (promoter of JSW Group)) have reasonable professional and business experience. Mr. Mohinder Singhania and Mr.
Vikram Handa are assisted by a team of well qualified professionals with diverse experience.
Diversified product portfolio and end-user industries
ECPL has a diversified product portfolio covering Binder Pitch, Zero QI Impregnation Pitch, Carbon Black Oil, Creosote Oil, Wash
Oil and Refined Naphthalene. The products are widely used in the Aluminium, Graphite, Rubber, Tyre, Chemical, Steel,
Plywood, Dyes and Pharmaceutical Industries. Coal tar and coal tar pitch are the highest contributors to the gross revenues
over the years. The company also manufactures other coal tar-based products, such as naphthalene and various oils, which find
application in various end user industries- such as paint, coating, construction chemicals etc. The product concentration risk is
expected to dilute over next 1-2 years on back of addition of new products- carbon black and mesophase coke, being added to
the product portfolio. The carbon black capacity is being utilized currently at low levels. As such, consistent growth in its
capacity utilization, along with consistent increase in demand from tyre manufacturers, remains critical to diversification efforts.
High degree of business integration with JSWSL
ECPL’s manufacturing facility is in close vicinity of JSWSL’s plant and it uses by-product derived in manufacturing of steel as key
raw material. ECPL has entered into a Memorandum of Understanding (MoU) with JSWSL for a period of 10 years starting FY15
for the supply of crude coal tar which is the primary feedstock in the production of its various products. Coal tar is distilled to
manufacture CTP (Coal Tar Pitch) and a variety of intermediate chemicals. Thus, presence of long-term supply arrangement

1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications

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Press Release

with JSWSL coupled with proximity to the source of raw material, ensures assured raw material availability on a sustained basis.
With secured supply of crude coal tar, the production of carbon black will not be dependent on procurement from external
sources.
Supply contract for products with aluminium and graphite producers
ECPL enters into supply contracts (for a year) with various companies including Vedanta Limited, Hindalco Industries Limited,
Colourtex Industries Pvt. Ltd, Bharat Aluminium Company Limited, Continental Carbon India Ltd, LRC Specialty Chemicals
Private Limited, Mangalore Chemicals & Fertilizers Ltd etc for the supply of CTP and other various products. The prices of CTP
are passed on its customer with index+ conversion cost. Thus, the contracts fix the product volume off-take as well as
conversion price of the company giving reasonable revenue visibility during the tenure of contracts. The prices are passed on to
customer on fortnightly basis which is based on the index pricing.
Healthy operating margins
The PBILDT margin of the company have improved to 19.72% in FY21 as compared to 14.23% in FY20. Increased focus on the
sale of manufactured goods and by-product sales leading to improvement in the PBILDT margins y-o-y. During 11MFY22 (UA)
ECPL achieved turnover of Rs.1580crore and reported PBILDT of Rs.265crore, backed by a better CTP capacity utilization,
improved realizations and healthy demand from key end user industries. ECPL also benefits from declining coal tar production in
China amid plant shutdowns, which has constrained Chinese supply of CTP and CB. Gradual ramp-up in CB sales is expected in
the near term.
Moderate Capital structure
The capital structure moderated over the past two years on account of debt-funded capex of over Rs 450 crore. ECPL set up a
new CB facility of 115,000-TPA capacity. ECPL also set up a 2,500-TPA capacity in its subsidiary, EAMPL, for advance carbon
materials to be used in rechargeable batteries. This debt-funded capex has led to moderation in gearing to 1.66 times as on
March 31, 2021, from 0.92 time as on March 31, 2019. ECPL’s reliance on short-term working capital debt remains limited, as it
is supported by procurement credit available from suppliers. Interest coverage ratio stood at 8.27 times in FY21 on account of
healthy operating profitability.

Key Rating Weaknesses

Susceptibility of business to cyclicality in end-user and supplier industries

Majority of the revenue of the company is derived from CTP which is mainly used in the aluminium and graphite industries, as a
result of which the company is expected to see significant dependence on these two cyclical industries for its revenues and
operating margins. Further, the company’s main feedstock requirement is also sourced from the cyclical steel industry.
However, the risk of raw material supply is significantly reduced due to the long-term supply arrangement with JSWSL. ECPL
has also entered into customer supply contracts with several aluminium and graphite producers for the supply of CTP and other
various products.

Liquidity: Adequate
The liquidity of ECPL remains adequate, due to healthy cash accrual and moderately utilised bank limits. Bank limit utilization
averaged 70% over the 12 months ending December 2021. Also, it maintains surplus liquidity of around Rs.15crore of
cash/bank balance to meet any exigencies.

Analytical approach: Consolidated

CARE has considered consolidated financials of EPCL and its subsidiaries, while arriving at the ratings owing to operational
linkages, financial linkage as well as explicit support in the form of corporate guarantee to the lenders of its subsidiary EAML
and also with all entities having common promoters. CARE also continue to factor in the operational support provided by
JSWSL.
Name of the subsidiaries % of holding as on March 31, 2021
EAMPL 87.19%
Nyri Coaltar Pitch Pvt. Ltd 92%

Applicable Criteria
Criteria on assigning Outlook to Credit Ratings
CARE’s Policy on Default Recognition
Criteria for Short Term Instruments
Rating Methodology-Manufacturing Companies
Financial ratios - Non-Financial Sector
Rating Methodology: Consolidation
Liquidity Analysis- Non-Financial Sector
Criteria for Rating Credit Enhanced Debt

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Press Release

Policy on Withdrawal of ratings

About the Company

Incorporated on August 27, 2010, Epsilon Carbon Private Limited (ECPL; formerly known as AVH Private Limited) is engaged in
the business of producing derivatives of coal. The company has set up a coal tar distillation plant in Toranagallu in Bellary
district of Karnataka {near the steel plant of JSW Steel Limited, trial run of the same was completed in June 2017. The
company is also engaged in trading of Coal tar, wherein the company procures coal tar from JSWSL and sells based on
confirmed orders. Apart from this the company has also a pitch melting facility to increase the quinoline insolvent (QI) value of
its soft pitch in Sambalpur, Odisha operated by its Subsidiary Nyri Coaltar Pitch Private Limited (NCPPL). The company also has
set up a carbon black unit within its existing plant in Karnataka.
Brief Financials (Rs. crore) FY20 (A) FY21 (A) 11MFY22(UA)
Total operating income 851.81 746.18 1580
PBILDT 121.18 147.17 265
PAT 65.16 72.43 NA
Overall gearing (times) 1.24 1.66 NA
Interest coverage (times) 7.61 8.27 NA
A: Audited; UA: Un-audited; NA: not available

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

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
(Rs. crore)
March
Fund-based - LT-Term Loan - - 0.00 Withdrawn
2027
Fund-based/Non-fund-
- - - 0.00 Withdrawn
based-LT/ST
Fund-based - LT-Working
- - - 0.00 Withdrawn
capital Term Loan

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Type Outstanding Rating
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2021-2022 2020-2021 2019-2020 2018-2019
1)CARE A-; 1)CARE A-; 1)CARE A-;
Fund-based - LT-
1 LT - - - Negative Negative Stable
Term Loan
(06-Jan-21) (03-Jan-20) (28-Dec-18)
1)CARE A-; 1)CARE A-; 1)CARE A-;
Fund-based/Non- Negative / Negative / Stable /
2 LT/ST* - - -
fund-based-LT/ST CARE A2 CARE A2 CARE A2
(06-Jan-21) (03-Jan-20) (28-Dec-18)
Fund-based - LT- 1)CARE A-; 1)CARE A-; 1)CARE A-;
3 Working capital Term LT - - - Negative Negative Stable
Loan (06-Jan-21) (03-Jan-20) (28-Dec-18)
*Long term/ short term

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

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
2 Fund-based - LT-Working capital Term Loan Simple
3 Fund-based/Non-fund-based-LT/ST Simple

Annexure 5: Bank Lender Details

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

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Press Release

Note on complexity levels of the rated instrument: CARE 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.
Contact us
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Contact no.: +91-22-6754 3573
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Email ID: arunava.paul@careedge.in

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Email ID: saikat.roy@careedge.in

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