| Amar Polyfils Private Limited | ||||||
| Rating outlook revised to 'Positive'; ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Amar Polyfils Private Limited (APPL) to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL BBB-‘. The short term rating has been reaffirmed at 'CRISIL A3'.
The outlook revision reflects CRISIL Ratings’ belief that APPL’s business and financial risk profiles likely to improve over the medium term. The business risk profile is comfortable, with diversified product portfolio, steady performance during fiscal 2021 with estimated revenue of Rs 103 crore and improved operating margin of 10.2%. APPL is in the process of capacity expansion for marine collagen division and expected to derive benefit from July/August 2021. The ability of company to sustain revenue growth after revision in payment terms with existing customer, improvement in profitability, and timely completion of ongoing expansion project will be a key monitorable. Working capital is prudently managed, resulting in lower reliance on external debt. As a result, financial risk profile of company expected to strengthen with Networth of over Rs 25 crore and gearing of below 0.30 times as on March 31, 2021. The interest coverage ratio also expected to improve to over 10 times in FY21. Return on capital employed (RoCE) was comfortable at over 25% in fiscal 2021, and is expected to remain at similar level over the medium term. The ratings continue to reflect the extensive experience of the promoters in the fishing and fishing equipment industry, sound operating efficiency and comfortable financial risk profile. These strengths are partially offset by working capital-intensive operations and susceptibility to volatility in raw material prices. |
Key Rating Drivers & Detailed Description Strengths Extensive industry experience of the promoters The two-decade-long experience of the promoters in the fishing and fishing equipment industry, their strong grasp of market dynamics, and healthy relationship with suppliers and dealers should continue to support the business risk profile and help add new clients.
Moderate operating efficiency Moderate operating efficiency with expected improvement in operating margin from 8.5% in FY20 to 10.2% in FY21. The ROCE is comfortable and expected to improve from 23.11% in FY20 to 28.21% in FY21. In absence of large debt funded capex, ROCE of company expected to remain comfortable at 23-25% over the medium term.
Comfortable financial risk profile Financial risk profile remain comfortable with expected networth and gearing over Rs 25 crore and 0.30 time, respectively, as on March 31, 2021. Debt protection metrics were healthy too, with expected interest coverage and net cash accrual to adjusted debt ratios of over 12 times and 1.24 time, respectively, in fiscal 2021. In absence of large debt funded capex and lower reliance on external borrowings, the financial risk profile is expected to strengthen over the medium term.
Weaknesses Moderate working capital requirement The operations are moderately working capital intensive with gross current assets (GCA) of 127 days in FY20 due to large receivables of 59 days and inventory of 53 days. However with revision in payment terms with customers and efficient inventory management, the GCA days are expected to decline marginally in range of 110-120 days. The plastic products division accounts for the bulk of the working capital requirement. Efficient management amidst increasing scale, will remain a key rating driver over the medium term.
Susceptibility to volatility of raw material prices Polypropylene granules, a key raw material, is a crude-oil derivate and hence, its price moves in tandem with crude oil prices. In an adverse market scenario, the company might find it difficult to pass on the increase in prices to end-users. Further, prices of fish, being a natural and seasonal product, are also volatile. |
Liquidity: Adequate Liquidity is adequate, backed by sufficient cash accrual of over Rs 8-9 crore vis-a-vis maturing term debt of Rs 0.5-1.5 crore over the medium term; the surplus cash will be used to meet the working capital expenses. The fund-based limit of Rs 9 crore was modestly utilised at 49% during the 12 months through March 2021. |
Outlook Positive CRISIL Ratings believes APPL’s business and financial risk profile likely to strengthen over the medium term on the back of ongoing capacity expansion, and diversified product portfolio; while improving above average financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1994 at Porbandar, Gujarat, APPL manufactures high-density polyethylene and polypropylene nets, twines, and ropes. The promoters also manufacture collagen protein under Amar Aquatic Chemical, and fishmeal protein under Amar Sterilised Fish Meal. |
Key Financial Indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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