CRISIL has assigned its ‘A/Stable/P1’ ratings to the bank facilities of Alpha Pharma Daman Pvt Ltd (APDPL, a part of the Alpha group). The ratings reflect the Alpha group’s healthy financial risk profile marked by a comfortable net worth and healthy gearing and debt protection measures, established market presence, diversification into drinking water and carbonated soft drinks (CSD) bottles, and its sound operating efficiencies. The rating strengths are partially offset by the group’s small scale of operations, above-average working capital requirements, and susceptibility of its margins to volatility in foreign exchange rates.

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of APDPL, Alpha Packaging Ltd (APL), Alpha Plastomers Pvt Ltd (APPL), and Prathamesh Polymers Pvt Ltd (PPPL), collectively referred to as the Alpha group. This is because all the entities are in the same line of business, have intra-group operational and financial linkages, are under a common management, and have provided cross-corporate guarantees for bank lines. The group’s promoters plan to consolidate all the group companies, with APL as the parent company, over the medium term. Also, CRISIL has treated unsecured loans of about Rs.150 million outstanding as on March 31, 2009, extended by the promoters and other affiliates, as quasi equity, because these loans are non-interest bearing, and the group has provided an undertaking for non withdrawal/replacement of these loans by equity.

Outlook: Stable
CRISIL believes that the Alpha group will maintain its stable business risk profile over the medium term on the back of its established presence in the packaging business, established customer base, and improving operating efficiencies. The outlook may be revised to ‘Positive’ if the group increases its scale of operations and diversifies its revenue and product profile. Conversely, the outlook may be revised to ‘Negative’ in case the Alpha group’s financial risk profile deteriorates steeply, due to lower-than-expected cash accruals or fresh large debt-funded capital expenditure.

About the Group
Promoted by Mr. Kanhaiyalal Agarwal, the Alpha group manufactures rigid packaging products, mainly polyethylene terephthalate (PET) bottles, which are used in various industries, such as pharmaceuticals, agriculture, CSD, water, and liquor. APDPL’s manufacturing unit is located at Daman in Gujarat. APL, which has its unit at Roorkee and Baddi, is into manufacturing PET bottles. One of its units is also a del credre agent of Reliance Industries Ltd. PPPL’s manufacturing unit is located in Baddi. The company is into manufacturing of PET bottles for the pharmaceutical industry. APPL has its unit at Daman and is engaged in the manufacture of flexible packaging products for the textile industry.

The Alpha group reported a profit after tax (PAT) of Rs.102 million on net sales of Rs.1274 million for 2007-08 (refers to financial year, April 1 to March 31), against a PAT of Rs.15.3 million on net sales of Rs.1201 million for 2006-07.