Rating Rationale
December 22, 2020 | Mumbai
B&B Triplewall Containers Limited
Rating outlook revised to 'Positive', rating reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.40 Crore
Long Term Rating CRISIL BBB/Positive (Outlook revised from 'Stable' and rating reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has revised its outlook on the bank facilities of B&B Triplewall Containers Limited (BBTCL) to 'Positive' from 'Stable' while reaffirming the long term rating at 'CRISIL BBB'.
 
The revision in outlook has been due to steady improvement in BBTCL's business risk profile owing to better operating performance. Operating income is likely to witness a growth, despite the pandemic in the current fiscal, largely supported by demand from its e-commerce customers. The company has reported Rs.103.10 crore in first 6 months of this fiscal, and has a strong revenue visibility for the next 6 months. This growth of the company is likely to continue over the medium term. The company caters almost 35% to e-commerce players, whose demand is seen higher in this fiscal. With better operating rates, the operating margins are likely to be higher at around 14%, leading to higher cash accruals. As a result, the company is likely to witness an improvement in its financial risk profile over the medium term. Ability of the company to sustain the margins and improve its cash accruals will remain a key sensitivity factor.
 
The rating continues to reflect extensive entrepreneurial experience of the promoters in the industrial paper packaging industry, their established relationships with clients and BBTCL's comfortable financial risk profile. These strengths are partially offset by moderate scale, exposure to customer concentration risk and exposure to cyclicality in the end-user industry.

Analytical Approach

Unsecured loans (Rs.10.54 crore as on March 31, 2020) have been treated as neither debt nor equity because these loans are expected to remain in the business over the medium term.

Key Rating Drivers & Detailed Description
Strengths:
* Extensive entrepreneurial experience of promoters and established client relationships
The promoters' experience of two decades, their strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. End-user profile is well-diversified and comprises fast-moving consumer goods (FMCG), processed food and beverages and online retail segments.
 
* Comfortable financial risk profile
Networth was adequate at Rs 47.86 crore as on March 31, 2020, with gearing comfortable at 0.38 time. Debt protection metrics were moderate, with interest coverage and net cash accrual to adjusted debt ratios of 3.93 times and 0.38 time, respectively, for fiscal 2020.
 
Weaknesses:
* Moderate scale and exposure to revenue concentration risk
The industrial paper packaging industry in India is highly fragmented and the consequent intense competition may continue to constrain scalability, pricing power and profitability. Furthermore, the company's top-5 customers contribute to about 51.16 percent to the overall revenues, with single customer being at 19.41 percent. Any loss of customers or change in terms may significantly weaken the business risk profile.
 
* Exposure to cyclicality in the end-user industry
Cyclical downturns or adverse variability in the demand-supply balance may result in lower realisations. Any adverse impact in the end-user industry may have an impact on the overall revenues and profitability of the company.
Liquidity Adequate

Liquidity is likely to remain healthy, supported by the surplus in cash accrual and bank lines. Cash accrual is projected at around Rs 20 crore per annum in the near term, sufficient to meet the debt obligation of Rs 8.90 crore in fiscal 2021 and Rs 4.81 crore in fiscal 2022. The fund-based limit of Rs 18 crore was utilised at an average of 55% during the 12 months through November 2020. CRISIL expects internal accruals, and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements.

Outlook: Positive

BBTCL should continue to benefit from extensive entrepreneurial experience of its promoters and established relationship with customers.

Rating Sensitivity factors
Upward factors
* Substantial and sustainable increase in revenue or profitability, leading to cash accrual of over Rs 22 crore
* Sustenance of financial risk profile at optimal levels
 
Downward factors
* Steep decline in revenue or profitability, resulting in lower-than-expected cash accrual
* Deterioration in gearing to over 2 times due to sizeable stretch in working capital cycle or any large, debt-funded capital expenditure
About the Company

BBTCL was incorporated in August 2011 and commenced commercial operations in June 2012. The company, based in Bengaluru, manufactures corrugated boxes used for packaging of products in FMCG and electronic-commerce industries.

Key Financial Indicators
Particulars Unit 31-Mar-20 31-Mar-19
Revenue Rs crore 197.04 200.15
Profit after tax (PAT) Rs crore 4.37 5.18
PAT margin % 2.22 2.6
Adjusted debt/adjusted networth Times 0.78 1.02
Interest coverage Times 3.93 3.84

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity
date		 Issue size (Rs.Cr) Complexity
Levels		 Rating assigned
with outlook
NA Cash Credit NA NA NA 15 NA CRISIL BBB/Positive
NA Proposed Cash Credit Limit NA NA NA 3 NA CRISIL BBB/Positive
NA Proposed Long Term
Bank Loan Facility		 NA NA NA 0.5 NA CRISIL BBB/Positive
NA Term Loan NA NA 30-Sep-22 21.5 NA CRISIL BBB/Positive
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  40.00  CRISIL BBB/Positive  24-06-20  CRISIL BBB/Stable  01-03-19  CRISIL BBB/Stable      01-12-17  CRISIL BB+/Stable  CRISIL BB/Stable 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 15 CRISIL BBB/Positive Cash Credit 15 CRISIL BBB/Stable
Proposed Cash Credit Limit 3 CRISIL BBB/Positive Proposed Cash Credit Limit 3 CRISIL BBB/Stable
Proposed Long Term Bank Loan Facility .5 CRISIL BBB/Positive Proposed Long Term Bank Loan Facility .5 CRISIL BBB/Stable
Term Loan 21.5 CRISIL BBB/Positive Term Loan 21.5 CRISIL BBB/Stable
Total 40 -- Total 40 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Paper Industry
CRISILs Bank Loan Ratings
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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