Rating Rationale
September 22, 2022 | Mumbai
Alpha Packaging Private Limited
Ratings Reaffirmed and Withdrawn
 
Rating Action
Total Bank Loan Facilities RatedRs.40 Crore
Long Term RatingCRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
Short Term RatingCRISIL A3+ (Rating Reaffirmed and Withdrawn)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ratings on the bank facilities of Alpha Packaging Private Limited (APPL) and has subsequently withdrawn the ratings at the company's request and on receipt of ‘no objection certificates’ (NOC) from the bankers. This is in line with the policy of CRISIL Ratings regarding withdrawal of bank loan ratings.

 

The ratings reflect the group’s strong presence in the rigid packaging industry, and extensive experience of the promoters in the plastic packaging industry along with healthy financial risk profile. These strengths are partially offset by the modest scale of operations coupled with volatility in operating margin and moderately large working capital requirement.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of APPL, Alpha Pure Pack Pvt Ltd (APPPL), Viva Pack Pvt Ltd (VPPL) and Arova Pumps Pvt Ltd (ARPPL). This is because these entities, together referred to as the Alpha group, have common promoters and management, are in the same business, and have fungible cash flow.

 

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of promoters coupled with strong market position: Presence of more than 25 years in the plastic packaging industry has enabled the group to expand capacities and scale up rapidly in the last couple of years. The group’s strong market presence is reflected in its reputed clientele, which includes Patanjali Ayurveda, Marico Ltd, Hygienic Research Institute Pvt Ltd, and The Himalaya Drug Company. The established clientele base is backed by developing products as per customers’ requirements and setting up capacities closer to clients’ manufacturing units.

 

  • Healthy financial risk profile: Networth was healthy at Rs 93 crore, gearing at 0.70 time, and total outside liabilities to tangible networth comfortable at 1.07 times as on March 31, 2022. Despite the capital expenditure in the past, the gearing levels have remained at about 0.6-0.8 times due to prudent mix of promoter funding, internal accruals and external debt. Debt protection metrics are comfortable, as reflected in interest coverage and net cash accrual to total debt ratios of 4.3 times and 0.25 times, respectively, in fiscal 2022. In Fiscal 2022, the company short term debt utilization increased to a level of 87% which was due to increase in scale of operations and higher working capital requirement. Additionally, absolute debt levels will be key monitorable going forward.

 

Weaknesses:

  • Moderate scale of operations coupled with volatility in operating margin: Scale remains moderate at about Rs 196.60 crore in fiscal 2022 in a highly fragmented industry. Also, operating margin has been volatile in the range of 10%-16% in the three fiscals ended in FY 2022 due to variation in input prices and raw material cost. The company is expected to be able to transfer 60-70% of the price hike with a lag of 1-1.5 months. The company keeps updating its prices regularly also during certain events. While the revenue is expected to grow over the medium term, profitability will be susceptible to changes in input prices and ability to pass on the cost as seen from dip in fiscal 2022.

 

  • Moderately large working capital requirement: Alpha Group’s operations are moderately working capital-intensive, as reflected in gross current assets of 134 days as on March 2022, driven by receivables of around 86 days and inventory of 37 days. However, long term relationship with the clients and track record of prompt payments partially mitigates the credit risk associated with receivables

Liquidity: Adequate

The group’s net cash accrual, expected at Rs 17-18 crore per fiscal, should adequately cover yearly debt obligation of Rs 9-12 crore over the medium term. Utilisation of fund-based limit averaged 87% over the 13 months through April 2022. The current ratio remains moderate at about 1.33 times as on 31st, March 2022. Liquidity is partially supported by need-based unsecured loans provided by the promoters in case of any exigencies.

Outlook: Stable

CRISIL Ratings believes the Alpha group will continue to benefit from the promoters' extensive experience and strong clientele.

Rating Sensitivity factors

Upward Factors

  • Sustained revenue growth and profitability over the medium term strengthens net cash accruals to above Rs 20 crore
  • Equity infusion or substantial reduction in debt levels or improved working capital cycle enhances financial flexibility

Downward Factors

  • Sustained decline in revenue or profitability constrains net cash accruals to below Rs 10 crore over the medium term
  • Large, debt-funded capital structure or stretch in working capital cycle or large dividend payout weaken the financial risk profile

About the Company

Incorporated in 1988 and promoted by Mr Shyam Agarwal and Mr Nilaksh Agarwal, APPL manufactures polypropylene (PP), polyethylene terephthalate (PET), and polyethylene (PE) bottles and preforms and caps and closures used predominantly in the fast-moving consumer goods (FMCG) and cosmetics, pharmaceuticals, and dairy products segments.

 

APPPL (formerly SRB Vanijya Pvt Ltd) was incorporated on July 10, 2006. The name was changed to the current one with effect from November 12, 2012. The company manufactures PET bottles for the pharma, FMCG, and liquor industries.

 

VPPL (formerly Special Lamps & Components Pvt Ltd) was incorporated on June 16, 2006. Promoters acquired the company in 2010 and renamed it with effect from October 10, 2014. It manufactures PP, PE, and PET bottles used predominantly in FMCG, pharma, and dairy products sectors

 

ARPPL was incorporated in July 7, 2020. It is mainly engaged in Manufacturing and sale of plastic pumps, sanitizer pumps, shampoo pumps and Caps & Closures.

Key Financial Indicators

As on / for the period ended March 31

 

2022*

2021

Operating income

Rs crore

196.60

153.64

Reported profit after tax

Rs crore

3.67

3.89

PAT margins

%

1.9

2.5

Adjusted Debt/Adjusted Net worth

Times

0.70

0.78

Interest coverage

Times

4.3

5.6

*Provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)

ISIN Name of
instrument		 Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
NA Letter of credit & Bank Guarantee NA NA NA 5 NA CRISIL A3+ (Rating Reaffirmed and Withdrawn)
NA Overdraft Facility NA NA NA 25 NA CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
NA Term Loan NA NA Mar-27 10 NA CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Alpha Packaging Private Limited

Full

Similar line of business with common management

Alpha Pure Pack Private Limited

Full

Similar line of business with common management

Viva Pack Private Limited

Full

Similar line of business with common management

Arova Pumps Private Limited

Full

Similar line of business with common management
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 35.0 CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn) 01-09-22 CRISIL BBB/Stable 30-03-21 CRISIL BBB+/Stable   -- 26-12-19 CRISIL BBB+/Stable CRISIL BBB+/Stable / CRISIL A2
      -- 31-05-22 CRISIL BB+ /Stable(Issuer Not Cooperating)*   --   --   -- --
Non-Fund Based Facilities ST 5.0 CRISIL A3+ (Rating Reaffirmed and Withdrawn) 01-09-22 CRISIL A3+ 30-03-21 CRISIL A2   -- 26-12-19 CRISIL A2 CRISIL A2
      -- 31-05-22 CRISIL A4+ (Issuer Not Cooperating)*   --   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Letter of credit & Bank Guarantee 5 Standard Chartered Bank Limited CRISIL A3+ (Rating Reaffirmed and Withdrawn)
Overdraft Facility 25 Standard Chartered Bank Limited CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)
Term Loan 10 Standard Chartered Bank Limited CRISIL BBB/Stable (Rating Reaffirmed and Withdrawn)

This Annexure has been updated on 22-Sep-2022 in line with the lender-wise facility details as on 31-Jul-2021 received from the rated entit

Criteria Details
Links to related criteria
The Rating Process
Assessing Information Adequacy Risk
CRISILs Bank Loan Ratings
CRISILs Criteria for Consolidation
Understanding CRISILs Ratings and Rating Scales

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