Tega Industries rated [ICRA]A+/A1 on Watch with Developing Implications
ICRA assigned [ICRA]A+/A1 ratings to Tega Industries' bank facilities, placing them on Rating Watch with Developing Implications due to the proposed acquisition of Molycop for ~$1.455 billion. TIL has raised Rs. 1713 crore in equity and plans a Rs. 1500 crore term loan for funding. The transaction is expected to complete by June 2026.
The rating action and the underlying acquisition are significant events for Tega Industries, involving substantial debt and strategic changes that will materially impact the company's financial structure and future operations.
The rating action is neutral as it involves placing the ratings on 'Watch with Developing Implications' due to a significant acquisition. While the acquisition presents growth opportunities, it also introduces potential moderation in credit metrics due to increased debt.
ICRA Limited has assigned credit ratings to the bank facilities of Tega Industries Limited (TIL) and placed them on Rating Watch with Developing Implications. This action is in view of the proposed acquisition of AIP MC Holdings LLC (Molycop) by TIL in collaboration with Apollo Funds. The assigned ratings are [ICRA]A+ for long-term instruments and [ICRA]A1 for short-term instruments, with a total rated amount of Rs. 2000 crore.
ICRA will resolve the watch post receipt of pending regulatory approvals and successful completion of the transaction, including the finalization of debt terms. The proposed acquisition of Molycop involves an enterprise value of approximately $1.455 billion. TIL will acquire an ~84.18% equity stake for ~$394 million, with the remaining stake acquired by Apollo Funds. To fund part of this acquisition, TIL has raised equity of ~Rs. 1713 crore, and the balance funding is expected from a proposed term loan of Rs. 1500 crore and internal accruals. Apollo Funds will also infuse ~$270 million through perpetual redeemable preference shares (RPS) to facilitate deleveraging of Molycop’s existing debt.
TIL expects to complete the transaction by June 2026, having already received antitrust approvals in all jurisdictions except one. The assigned ratings also derive comfort from TIL’s established market position in the global mining consumables and equipment industry, its diversified product portfolio, and geographically diversified revenue stream. The acquisition of Molycop is expected to enhance the company’s scale of operations, improve its global market position, and provide product complementarities and cross-selling opportunities, supporting medium-term revenue growth.
However, credit metrics are anticipated to moderate over the near-to-medium term due to the sizeable debt-funded acquisition and existing debt at Molycop. ICRA expects consolidated debt/OPBDITA to remain elevated for the next two years before gradually improving. Key monitorables include the timely completion of the acquisition, seamless integration of operations, and achievement of envisaged synergy benefits. The company's working capital-intensive operations and its acquisition-led growth strategy also expose it to integration and execution risks.
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