Rating Rationale
December 31, 2018 | Mumbai
Ecoplast Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.26.5 Crore
Long Term Rating CRISIL BBB-/Stable (Reaffirmed)
Short Term Rating CRISIL A3 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL BBB-/Stable/CRISIL A3' ratings on the bank facilities of Ecoplast Limited (Ecoplast; part of the Ecoplast group).
 
The ratings continue to reflect the group's moderate financial risk profile, established market position, and diversification into industrial films. These strengths are partially offset by modest scale of operations and exposure to intense competition in the domestic plastics packaging business.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of Ecoplast and Synergy Films Pvt Ltd (Synergy), together referred to as the Ecoplast group. This is because Ecoplast holds 100% stake in Synergy. Furthermore, both the entities have a common management and operate in the same business.

Please refer Annexure - Details of consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
Strengths
* Established presence in the domestic plastics packaging segment:
Strong product development capability has enabled the group to tap business opportunities in the high-margin specialty polyethylene film industry. Over the years, the group has introduced several variants of multilayer coextruded films used for packaging and non-packaging applications, such as aluminum composite and surface protection films. Ability to provide customised solutions and maintain a direct interface with clients, with no involvement of agents, has helped the group build strong relationships with key customers.
 
* Moderate financial risk profile:
The financial risk profile is supported by comfortable capital structure and debt protection metrics. Networth was Rs 25.9 crore and gearing was 0.41 time as on March 31, 2018. The capital structure is expected to improve, in the absence of any major capital expenditure (capex) planned over the medium term. Debt protection metrics remain comfortable, indicated by interest coverage and net cash accrual to total debt ratios of 4.9 times and 0.52 time, respectively, for fiscal 2018.
 
Weakness
* Average scale of operations amid intense competition:
The plastic packaging industry has several unorganised, small players catering to short-period service requirements on a regional level to save on transportation cost. This limits the scope for organised entities to expand their geographic presence and consolidate their business. As a result, the Ecoplast group's scale of operations remains average, reflected in revenue of Rs 90-110 crore in the three fiscals through March 2018.
 
* Presence in highly fragmented packaging industry
Packaging players can pass on any impact of change in raw material prices to end-users. This has helped the group recover conversion charges with healthy return on capital employed (RoCE). However, its ability to tide over economic cyclicality or fluctuations in raw material prices will remain a key rating sensitivity factor.
Outlook: Stable

CRISIL believes the Ecoplast group will continue to benefit from its established presence, geographical diversity in revenue, and moderate financial risk profile. The outlook may be revised to 'Positive' if there is a substantial growth in revenue and profitability. The outlook may be revised to 'Negative' if any large capex weakens the capital structure, or if a sharp decline in profitability adversely impacts debt protection metrics.
 
Liquidity
The group has adequate liquidity backed by healthy accruals against term debt obligations, moderate bank limit utilization, and steady working capital cycle. The group is expected to generate annual accruals of Rs. 5 cr which shall covering its debt obligations four times. The bank limit utilization was moderate around 50% of the sanctioned Rs. 14 cr during 12 months to September 2018. The flattish topline, steady working capital cycle and healthy capitalization has meant a moderate bank limit utilization for the group.

About the Group

Incorporated in 1981, Ecoplast manufactures multi-layer extrusion films used in flexible packaging. It also produces industrial films, such as aluminium composite films and surface protection films, which are widely used in the construction and durable goods industries. The given company is listed at Bombay Stock Exchange (BSE).
 
Incorporated in 2007, Synergy manufactures flexible packaging films used in durable goods industry.

Key Financial Indicators -Standalone
As on / for the period ended March 31   2018 2017
Operating income Rs crore 96.5 96.2
Reported profit after tax Rs crore 3 2
PAT margin % 3.1 2.1
Adjusted Debt/Adjusted Networth Times 0.39 0.62
Interest coverage Times 5.2 3.5

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 Issue size
( Rs crore )
Rating assigned with outlook
NA Bank Guarantee NA NA NA 0.15 CRISIL A3
NA Cash Credit NA NA NA 14 CRISIL BBB-/Stable
NA Letter of Credit NA NA NA 6.5 CRISIL A3
NA Long Term Loan NA NA 28-Feb-22 3.85 CRISIL BBB-/Stable
NA Proposed Bank Guarantee NA NA NA 2 CRISIL A3
 
Annexure - Details of Consolidation
Fully consolidated entities: Ecoplast Ltd and Synergy Films Pvt Ltd
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fixed Deposits  FD    --    --  28-12-17  Withdrawn 30-11-16  FA-/Stable  15-09-15  FA-/Stable  FA-/Stable 
Fund-based Bank Facilities  LT/ST  17.85  CRISIL BBB-/Stable      28-12-17  CRISIL BBB-/Stable  30-11-16  CRISIL BBB-/Stable  15-09-15  CRISIL BBB-/Stable  CRISIL BBB-/Stable 
Non Fund-based Bank Facilities  LT/ST  8.65  CRISIL A3      28-12-17  CRISIL A3  30-11-16  CRISIL A3  15-09-15  CRISIL A3  CRISIL A3 
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
Bank Guarantee .15 CRISIL A3 Bank Guarantee .15 CRISIL A3
Cash Credit 14 CRISIL BBB-/Stable Cash Credit 14 CRISIL BBB-/Stable
Letter of Credit 6.5 CRISIL A3 Letter of Credit 6.5 CRISIL A3
Long Term Loan 3.85 CRISIL BBB-/Stable Long Term Loan 3.85 CRISIL BBB-/Stable
Proposed Bank Guarantee 2 CRISIL A3 Proposed Bank Guarantee 2 CRISIL A3
Total 26.5 -- Total 26.5 --
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 Petrochemical Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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