Rating Rationale
April 05, 2018 | Mumbai
Beardsell Limited
Ratings Reaffirmed
 
Rating Action
Rs.5 Crore Fixed Deposits Programme  FB+/Stable (Reaffirmed)
Rs.10 Crore Commercial Paper CRISIL A1+(SO) (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the commercial paper programme (CP) and fixed deposits (FD) of Beardsell Limited (Beardsell) at 'FB+/Stable/CRISIL A1+(SO)'.
 
The structured obligation (SO) has been assigned on the CP as it is supported by an unconditional and irrevocable standby letter of credit (SBLC) extended by Bank of India (BOI; 'CRISIL AA+/Stable/CRISIL A+/Negative/CRISIL A1+').
 
Rationale for reaffirmation of rating for FD:
The rating continues to reflect the extensive industry experience of Beardsell's promoters and moderate financial risk profile marked by moderate networth and debt protection metrics. These strengths are partially offset by susceptibility of revenue and operating margin to end user industry and volatility in raw material prices.
 
Rationale for reaffirmation of rating for SBLC backed CP:
The rating continues to reflect the strength of the unconditional and irrevocable SBLC from BOI, acting in dual capacity, as the SBLC providing bank and the issuing and paying agent (IPA). The rating is also supported by a well-defined payment structure (refer to annexure for details) to ensure timely servicing of obligations. The CP under this programme is valid for a maximum tenor of 90 days, subject to maturity date being on or before the expiry date of the SBLC facility i.e. November 5, 2018. The maximum CP at any point of time is Rs 10 Crore.

Analytical Approach

CRISIL has consolidated the business and financial risk profile of Beardsell with subsidiaries Saideep Polytherm (SP) and Sarovar Insulation Private Limited (SIPL) together referred to as Beardsell group. Beardsell, SP and SIPL are engaged in similar line of business. SIPL is a 100% subsidiary of Beardsell, while SP is 99.99% owned by Beardsell.

Key Rating Drivers & Detailed Description
Strengths
* Extensive experience of promoters: The promoters have been in this business since 1936 and understand the dynamics of the packaging and construction industry. Backed by promoters extensive industry experience group has established strong relationship with customers and suppliers.
 
* Moderate financial risk profile: Moderate networth and low gearing (Rs 37.02 crore and 0.95 times as on March 31, 2017) along with interest coverage ratio of 3.57 times for fiscal 2017 represent moderate financial risk profile. Debt protection metrics are expected to be weaker in fiscal 2018 on account of lower operating profitability.
 
Weakness
* Susceptibility of revenue and operating margin to end user industry and volatility in raw material prices: Group majorly caters to white goods (for packaging) and construction industry. Any slowdown in end user industry would have an adverse impact on the business risk profile of the group.
 
Further the group remains susceptible to volatility in raw material prices. Major raw materials for the group are crude oil derivatives and steel ' any sharp variations in the prices of these materials would impact the group's operating profitability, as is the case in fiscal 2018.
 
Key Rating Drivers and Description (for SBLC backed CP programme):
* Unconditional and irrevocable SBLC from BOI, covering the entire rated amount: The rating is based on strength of the credit enhancement facility provided by BOI, through an unconditional and irrevocable SBLC for the entire rated amount. The SBLC is valid for CP's (maturing till November 05, 2018), to be issued for a maximum tenor of 90 days subject to maturity date being on or before the expiry date of the SBLC facility and quantum, subject to maximum outstanding amount of Rs 10 Crore under the CP programme. The current SBLC shall remain in full force and effect till November 05, 2018.
 
* Well-defined payment structure designed to ensure full and timely payment to investors: A well-defined payment mechanism has been put in place to ensure timely payment of obligation to the investors of the CP programme. The payment structure is depicted in the Annexure.
Outlook: Stable

CRISIL believes Beardsell Group will continue to benefit over the medium term from the extensive experience of its promoters. The outlook may be revised to 'Positive' if the group diversifies and scales up operations and sustainably improves profitability, while maintaining capital structure. The outlook may be revised to 'Negative' if financial risk profile, especially liquidity, weakens because of a sharp decline in operating margin and revenue, large, debt-funded capital expenditure, or stretch in working capital cycle.

About the Group

Incorporated in 1936 in Chennai and currently promoted by the Anumolu family, Beardsell manufactures polystyrene sheets and prefabricated panels. Operations are managed by Mr. Bharat Anumolu. The company is listed on the National Stock Exchange.
 
SIPL is 100% subsidiary of Beardsell and is based out of Coimbatore. Company is engaged in manufacturing of Expanded Polystyrene products majorly catering to engineering goods industry and sea foods export industry.
 
SP is a Pune based partnership firm ('Controlled Entity') and is engaged in the manufacturing of Expanded Polystyrene products majorly catering to packaging industry.
 
CRISIL's rating on Bank of India
 
Annexure: Payment Structure for SBLC backed CP programme

Timeline Event
T -1 day
  • Beardsell shall deposit the requisite amount in the collection and payment account held with BOI (IPA) on or before 4.00 pm one working day in advance of due date/date of maturity of each tranche
  • In case if Beardsell fails to deposit the requisite amount by 4.00 pm one working day in advance of due date/date of maturity of each tranche, the IPA shall provide a written notice to SBLC Bank calling upon the bank to arrange requisite amount for repayment
  • IPA shall also ensure that the notice reaches the SBLC bank by 5.00 pm on T-1 date
T day by 12.00 pm
  • Upon receipt of notice, SBLC bank shall make payments of requisite amount to the collection and payment account by atleast 12.00 pm on due date/date of maturity of each tranche
T day
  • Payment made to investor based on funds deposited in the collection and payment account

If Beardsell ascertains that it is unable to meet repayment obligations, it will intimate the SBLC bank and IPA in writing on or before Day T-2 (2 days in advance of due date of the CP). Failure to do so shall not in any manner affect the obligation of the SBLC bank to advance the facility or obligation of the IPA under this agreement.
Key Financial Indicators
Particulars Unit 2017* 2016*
Revenue Rs. Cr. 190.04 161.26
Profit After Tax Rs. Cr. 4.81 3.14
PAT Margins % 2.5 1.9
Adjusted Debt/Adjusted Net worth Times 0.95 1.12
Interest coverage Times 3.57 2.51
*Consolidated

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)
ISIN Name of instrument Date of allotment Coupon
rate (%)
Maturity date Amount
(Rs crore)
Rating assigned 
with outlook
NA Fixed Deposits NA NA NA 5.0 FB+/Stable
NA Commercial Paper NA NA 7 to 90 days  10.0 CRISIL A1+(SO)
 
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  10  CRISIL A1+(SO)    No Rating Change  11-09-17  CRISIL A1+(SO)    --    --  -- 
Fixed Deposits  FD  FB+/Stable    No Rating Change    No Rating Change    No Rating Change  25-02-15  FB+/Stable  -- 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
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
CRISILs Criteria for rating short term debt
The Rating Process
Understanding CRISILs Ratings and Rating Scales

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000
 jyoti.parmar@crisil.com

Arvind Rao
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8278
arvind.rao@crisil.com


Rushabh Borkar
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8302
Rushabh.Borkar@crisil.com


Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY NOTICE

CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit https://www.crisil.com/en/home/privacy-and-cookie-notice.html. You can view the Company’s Customer Privacy at https://www.spglobal.com/corporate-privacy-policy

Last updated: April 2016


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL