| Balmer Lawrie-Van Leer Limited | ||||||
| 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 reaffirmed its ratings on the bank facilities of Balmer Lawrie-Van Leer Limited (BLVL) at 'CRISIL A/Stable/CRISIL A1'.
The ratings continue to reflect BLVL's strong business risk profile marked by its established market position in industrial packaging industry benefiting from its association with its parent companies (Balmer Lawrie Co. Ltd. (BL) and Greif Corporation, Inc (Greif)), long standing relationships with its customers, diversified end user industries, diverse product basket and strategically located manufacturing units. The ratings also factor the strong financial profile marked by comfortable capital structure and adequate debt protection metrics. These strengths are partially offset by its susceptibility of operating margin to volatility in raw material prices and forex rates and its moderate working capital requirements. |
Analytical Approach Unsecured loans of Rs 18.2 crore (as on March 31, 2021) provided by one of its parents, BL, have been treated as neither debt nor equity as it is not expected to be paid back. |
Key Rating Drivers & Detailed Description Strengths: * Established market position backed by long standing relationships with diversified client base and diverse product basket: BLVL's long track record of operations of more than 6 decades has helped to establish its market position in the industrial packaging industry. Its products find application in packaging and storage in various industries such as spice oils, lubricants, chemicals and agro-chemicals. Hence, it has a diverse customer base with top 10 customers accounting for around 30-35% of the total revenue for past 2 fiscals ended March 2021. Furthermore, necessity to have critical accreditations and customer approvals, offers barriers to entry for any new competition. With repeat orders from customers and steady capacity expansions, the revenues have sustained at more than Rs 425 crores for the past 4 fiscals ended 2021 and is expected to grow by around 20% in the current fiscal.
* Strategically located manufacturing units: BLVL has its five manufacturing facilities (including new unit at Dahej, Gujarat which became operational from July-2021) spread across the country providing advantages of geographical diversification such as reduced logistics costs being near to its customers, and ability to serve a wider geography.
* Technical support from and assured sales to parent entities: BL is one of the largest steel drums manufacturers in India and Greif, is a global leader in industrial shipping containers and products. BLVL generates approx. 25-30% revenues from sales to BL and Greif, which is an assured business. Majority exports of Tri-Sure Closure Systems (which is the flagship product) is through Greif and its subsidiaries. It also benefits from the technical support provided by Greif for manufacturing of Tri-Sure closures. This shall continue to benefit BLVL's business profile over the medium term.
* Strong financial profile: The networth was strong at Rs 154 crore while gearing and total outside liabilities to adjusted networth ratio were comfortable at 1.15 times and 1.76 times, respectively, as on March 31, 2021, aided by strong accretions and controlled reliance on external debt and creditors. Debt protection metrics are adequate as reflected in interest coverage and net cash accrual to adjusted debt ratios of 6.28 times and 0.15 time, respectively, in fiscal 2021. Financial profile is expected to remain strong over the medium term, backed by strong accruals and no major debt funded capital expenditure plans.
Weaknesses * Susceptibility to volatility in raw material prices and exposure to forex risk: BLVL uses polymer resins and steel as raw materials. As the prices of polymers are volatile, BLVL passes on the price fluctuations to its customers with a lag of 1-2 months. For steel products, it takes relatively more time to pass on the fluctuations. Further, BLVL is exposed to sharp fluctuation in forex rates, despite partial natural hedge with 45% imports and 25% exports for fiscal 2021. As a result, BLVL's operating profitability has remained volatile in range of 11.7-13.5% for past three fiscals ended fiscal 2021. BLVL's margins would remain exposed to any sharp fluctuation in raw material prices, particularly steel, or in case of changes in escalation policy with customers.
* Moderate working capital requirements: BLVL’s moderate working capital requirements are reflected in its gross current assets (GCA) of 165-180 days, for past 2 fiscal ended March 31, 2021 with debtors of 70-90 days and inventory of 70-80 days. It typically extends credit of 45-60 days to its customers and maintains inventory of around 2-2.5 months which majorly consist of raw materials. Against this, it gets credit of 30-60 days from its suppliers which partly support the working capital needs. BLVL’s working capital requirements are expected to remain moderate over the medium term. |
Liquidity: Strong Liquidity remains strong, marked by healthy cash accruals and moderate bank limit utilization. Expected net cash accrual of more than Rs 30 crore per fiscal in fiscals 2022 and fiscal 2023, should comfortably cover the annual repayment obligation of Rs 13 crore and Rs 17.1 crore, respectively. Fund-based bank limit of Rs 96 crore was utilized moderately at an average of 80% during the 12 months through September 2021. Cash and cash equivalents were of Rs 8.9 crore as on March 31, 2021. Internal cash accrual, cash and cash equivalents, and unutilised bank lines should be sufficient to meet repayment obligation as well as incremental working capital requirement over the medium term. With a gearing of 1.15 times, BLVL has sufficient gearing headroom, to raise additional debt to meet its capex or working capital requirement. |
Outlook: Stable CRISIL Ratings believe BLVL will continue to benefit from strong market position, support from parent and comfortable financial risk profile. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company BLVL, incorporated in 1956, is a joint venture between BL and Greif, each holding 47.91% stake. BLVL manufactures industrial packaging such as plastic containers in various sizes under the brand 'Valerex', steel closures under the brand of Tri-Sure and rubber gaskets. Its manufacturing units are located in Thane, Bangalore, Chennai, Dehradun and Dahej. Its operations are managed by a professional team, headed by Mr. Girish Pundlik (Managing Director). |
Key Financial Indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
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Criteria Details
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