Rating Rationale
November 08, 2024 | Mumbai
Balmer Lawrie-Van Leer Limited
Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.208.33 Crore
Long Term RatingCRISIL A/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL A/Stable/CRISIL A1’ ratings on the bank loan facilities of Balmer Lawrie-Van Leer Limited (BLVL).

 

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

CRISIL Ratings has evaluated the standalone business and financial risk profiles of BLVL

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 35-45% of the total revenue for past 3 fiscals ending March 2024. Furthermore, the necessity to have critical accreditations and customer approvals, offers barriers to entry for any new competition. Repeat orders from established customers in addition to patented technologies and steady capacity expansions, supported the scale of the company with revenues sustained at a CAGR of 10% over the past three years through fiscal 2024, it is expected to grow at healthy levels over the coming fiscals.

 

  • Strategically located manufacturing units: BLVL has its five manufacturing facilities (including new unit at Dahej, Gujarat) 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. In addition, the company continues to expand its facilities in line with increasing repeat orders from customers which further supports the business risk profile.

 

  • 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. 20% 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 net worth was strong at Rs 223 crore while gearing and total outside liabilities to adjusted net worth ratio were comfortable at 0.49 times and 0.99 times, respectively, as on March 31, 2024, aided by strong accretions and controlled reliance on external debt and creditors. Capital structure is expected to be comfortable in the medium term and gearing and TOLANW is likely to remain below 0.5 time and 1 times respectively, in medium term. Debt protection metrics are adequate as reflected in interest coverage and net cash accrual to adjusted debt ratios of 5.95 times and 0.35 time, respectively, in fiscal 2024. 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 about 40% imports and about 25% exports. As a result, BLVL's operating profitability has remained volatile in range of 11.25-13.61% for past four fiscals ended fiscal 2024. 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 136-180 days, for past four fiscal ended March 31, 2024, with debtors of 60 – 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 60-70 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 about Rs 46-53 crore in medium term, should comfortably cover the annual repayment obligation of Rs.4.7-18.62 crore in medium term. Fund-based bank limit was utilized moderately at an average of 40% during the 12 months through September 2024. Cash and cash equivalents were of around Rs 6.73 crore as on March 31, 2024. Internal cash accrual, cash and cash equivalents, and unutilized bank lines should be sufficient to meet repayment obligation as well as incremental working capital requirement over the medium term. With gearing of below 0.5 time, 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 factors:

  • Sustained improvement in scale of operation and sustenance of healthy operating margin, leading to higher cash accruals of above Rs 50 crores
  • Sustenance of working capital cycle and financial risk profile

 

Downward factors:

  • Significant decline in revenue or operating profitability, leading to significantly lower cash accruals
  • Large debt-funded capital expenditure weakening the capital structure with gearing above 1 time
  • Substantial increase in its working capital requirements with gross current assets of more than 200 days, thus impacting its liquidity profile

About the Company

BLVL, incorporated in 1960, 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

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

560.57

590.97

Reported profit after tax

Rs crore

26.66

29.19

PAT margins

%

4.76

4.94

Adjusted Debt/Adjusted Networth

Times

0.49

0.74

Interest coverage

Times

5.95

5.26

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA  Cash Credit & Working Capital Demand Loan  NA  NA  NA  133 NA  CRISIL A/Stable 
NA  Letter of credit & Bank Guarantee  NA  NA  NA  2 NA  CRISIL A1 
NA  Proposed Working Capital Facility  NA  NA  NA  5 NA  CRISIL A/Stable 
NA  Proposed Term Loan  NA  NA  NA  38.91 NA  CRISIL A/Stable 
NA  Term Loan  NA  NA  31-Mar-27 15.55 NA  CRISIL A/Stable 
NA  Working Capital Term Loan  NA  NA  31-Mar-27 3.42 NA  CRISIL A/Stable 
NA  Working Capital Term Loan  NA  NA  31-Mar-27 4.83 NA  CRISIL A/Stable 
NA  Working Capital Term Loan  NA  NA  31-Mar-27 5.62 NA  CRISIL A/Stable 
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 206.33 CRISIL A/Stable 10-01-24 CRISIL A1 / CRISIL A/Stable 11-08-23 CRISIL A/Stable 20-07-22 CRISIL A/Stable 28-10-21 CRISIL A/Stable CRISIL A/Stable
      --   --   -- 05-07-22 CRISIL A/Stable   -- --
Non-Fund Based Facilities ST 2.0 CRISIL A1 10-01-24 CRISIL A1 11-08-23 CRISIL A1 20-07-22 CRISIL A1 28-10-21 CRISIL A1 CRISIL A1
      --   --   -- 05-07-22 CRISIL A1   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit & Working Capital Demand Loan 25 Axis Bank Limited CRISIL A/Stable
Cash Credit & Working Capital Demand Loan 10 Standard Chartered Bank CRISIL A/Stable
Cash Credit & Working Capital Demand Loan 40 HDFC Bank Limited CRISIL A/Stable
Cash Credit & Working Capital Demand Loan 38 Kotak Mahindra Bank Limited CRISIL A/Stable
Cash Credit & Working Capital Demand Loan 20 Shinhan Bank CRISIL A/Stable
Letter of credit & Bank Guarantee 2 Kotak Mahindra Bank Limited CRISIL A1
Proposed Term Loan 38.91 Not Applicable CRISIL A/Stable
Proposed Working Capital Facility 5 Not Applicable CRISIL A/Stable
Term Loan 15.55 Standard Chartered Bank CRISIL A/Stable
Working Capital Term Loan 5.62 Standard Chartered Bank CRISIL A/Stable
Working Capital Term Loan 3.42 Kotak Mahindra Bank Limited CRISIL A/Stable
Working Capital Term Loan 4.83 Axis Bank Limited CRISIL A/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies

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