| Ajay Poly Private Limited | ||||||
| Rating Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed the rating at ‘CRISIL BBB-/Stable’ while assigning short term rating of ‘CRISIL A3’ on the bank facilities of Ajay Poly Private Limited (APPL).
The rating continues to reflect the company’s established market position in the gasket industry, backed by strong relationships with key customers; and a healthy financial risk profile. These strengths are partially offset by product concentration in revenue, Woking capital intensive operations and vulnerability to volatility in raw material prices. |
Analytical Approach Unsecured loans from promoters and related parties of Rs 4.66 crores as on 31st March 2020 has been treated as neither debt nor equity as they are expected to remain in the business over medium term. |
Key Rating Drivers & Detailed Description Strengths:
The promoters’ experience of more than two decades has helped forge strong relationships with key customers leading to a robust market share. The strong relationship with customers is expected to result in higher demand over medium term supporting the growth in scale of operations.
Adjusted networth was Rs 51.90 crores and gearing was strong at 0.44 time as on March 31, 2020. Debt protection metrics were comfortable, with interest coverage and net cash accrual to total debt ratios of 4.99 times and 0.29 time, respectively, in fiscal 2020.
Weaknesses:
Nearly 65-70% of revenue comes from flexible gaskets (sold in the domestic market to white goods manufacturers), which exposes growth to any slowdown in that industry. However, company is planning new product introduction over medium term which can diversify the risk.
Operations are working capital intensive with gross current asset of 132 days as on 31st March 2020. The same is driven by debtor of 73 days and inventory of 48 days. The major raw material procurement i.e. PVC resin is done against advance payment however, credit period of 30-45 days is received for other raw materials. Working capital cycle is supported by creditors and working capital limits.
Profitability is susceptible to fluctuation in raw material prices, mainly PVC resin prices. Any increase in prices of raw material are passed on with a time lag. Hence, EBITDA margins have fluctuated between 7-10.7% for the past four years ending fiscal 2020. With increase in PVC resin prices in fiscal 2021, the margins are expected to be marginally impacted. |
Liquidity: Adequate Bank limit utilization is moderate at an average of 67.1% for the past 12 months ending February 2021. Bank limit utilization has increased since January 2021 to above 90% owing to peak sales season and increase in prices of raw material. Hence, company has availed ad-hoc limits. However, with debtor payments being received timely, the limit utilization is expected to be moderate down by May 2021. Net cash accruals are expected to be around Rs 3.5-4 crores for fiscal 2021 against repayment obligation of Rs 1.18 crores. In addition, it will be act as cushion to the liquidity of the company. Current ratio are moderate at 1.33 times as on March 31, 2020. Liquidity is supported by unsecured loans from promoters and related parties of Rs 4.66 crores as on 31st March 2020. Low gearing and moderate net worth support its financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Rating on the long-term bank facilities of APPL will continue to benefit from its strong and longstanding relationships with customers. |
Rating Sensitivity factors Upward factors:
Downward factors
|
About the Company Set up in 1980 by Jain family, APPL manufactures magnetic gaskets used in refrigerator doors. It has plants in New Delhi, Shahjahanpur, and Greater Noida (Uttar Pradesh); Mohali (Punjab); Shirur and Shirwal (Maharashtra); Bengaluru; and Chennai. Corporate office is in Okhla, New Delhi. |
Key Financial Indicators
|
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||
|