| Ester Industries Limited | ||||||
| Rating outlook revised to ‘Stable’; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 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 revised its outlook on the long-term bank facilities of Ester Industries Limited (EIL) to ‘Stable’ from ‘Negative’ while reaffirmed the rating at ‘Crisil A-’. The short term rating has been reaffirmed at ‘Crisil A2+’.
The revision in outlook factors in improvement in operating performance of the company, driven by steady demand and correction in demand supply imbalance that was impacting the flexible packaging industry. Revenue of EIL increased by 22% year-on-year (y-o-y) during fiscal 2025 (provisional) due to improvement in both volumes (3% y-o-y) and realisation (16%). The improvement in realisation was led by healthy market dynamics, which resulted in better prices and margins for biaxially oriented polyethylene terephthalate (BOPET) products in the domestic industry. The earnings before interest taxes depreciation and amortisation (Ebitda) margin also improved to 11.5% in fiscal 2025, from -1.3% in fiscal 2024, supported by better prices of BOPET products against past few fiscals. Revenue growth is projected at a healthy 14-18% and the Ebitda margin at 12-13% over the medium term.
Financial risk profile has also improved, with interest coverage and net cash accrual to total debt ratios increasing to 2.43 times and 0.13 time respectively in fiscal 2025 from 0.01 time and -0.07 time in fiscal 2024; the metrics are projected at 3-4 times and 0.2-0.3 time over the medium term. The capital structure also got better, with gearing reducing to 0.86 time as on March 31, 2025, from 1.08 times a year ago, and expected to remain less than 1 time over the medium term.
EIL set up a joint venture -- Ester Loop Infinite Technologies Pvt Ltd -- with the Canada-based Loop Industries Inc for manufacturing dimethyl terephthalate and/or monoethylene glycol through depolymerisation of polyethylene terephthalate (PET) and/or polyester waste. The project cost of the same is estimated at $180 million (~Rs 1,530 crore). The project is at the planning phase and the company is looking for a land parcel to set up the project. The project contours are being finalised and the clarity is expected to emerge over the next 9-12 months. The management has communicated that financing of the project will not have any impact on the liquidity or financial risk profile of EIL as no support or funds from the business will be used towards the project. The company has issued warrants of Rs 175 crore for the project to meet the equity commitment, of which 49% of the funds has been received as on date. Crisil Ratings will continue to monitor the project progress, including final project cost, sources of funding and implementation timelines.
The ratings continue to reflect the company’s established market position and long track record in the packaging films business diversified product profile. These strengths are partially offset by susceptibility to volatile raw material costs and realisations driven by demand-supply dynamics and pending stabilisation of operations of the recently commissioned capital expenditure (capex). |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of EIL and Ester Filmtech Ltd (EFL; a wholly owned subsidiary), together referred to as Ester, given their business and financial linkages and common management.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position along with long track record in packaging films business: EIL has been manufacturing packaging films for three decades at its plant in Uttarakhand. Though it has diversified into various other segments (such as specialty polymers) over the years, it still derives a major portion of its revenue from the packaging films business. The consolidated installed capacity comprises BOPET (108,000 tonne per annum [TPA]), metallised films (23,000 TPA), and specialty polymers (30,000 TPA). Capacity utilisation in the BOPET line should remain supported by moderately strong demand in the industry in the near to medium term. Established customer relationship should also help EIL sustain volumes in the packaging films business over the medium term.
Diversified product profile: The company has a diversified product portfolio in the polyester films and specialty polymers divisions. Though revenue is dominated by the films segment, share of the other segment has increased in the past two years.
Fiscal 2025 saw healthy improvement of volumes in specialty products, supported by growth in export demand while volumes in the domestic market also remained driven by steady demand.
Weaknesses: Exposure to volatility in input cost and realisations, led by demand-supply dynamics: The packaging films business remains prone to cyclicality, as evident from fluctuations in product realisations and profitability, owing to the demand-supply mismatch. The industry is also highly competitive, with aggressive capacity expansions by few large players exerting pressure on realisations. Players tend to add large capacities whenever prices pick up, which leads to a fall in product realisations. Further, key raw materials, such as PET resin or chips, pure terephthalic acid and monoethylene glycol, are derivatives of crude, and hence, profitability remains susceptible to volatility in crude prices.
The demand-supply imbalance in the industry has improved, reflected in the operating margin increasing to 11.5% in fiscal 2025, from -1.3% in fiscal 2024. The margin is expected at 12-13 % over the medium term, with healthy demand for packing products.
The margin is likely to remain susceptible to demand-supply dynamics and volatility in raw material prices, and hence, will continue to be a key monitorable.
Large, debt-funded projects and ramping up of EFL capacity: Due to the growing demand in the films business, the players add capacities every 4-5 years to keep up with the industry dynamics and maintain its market share. These capacities are bulky in nature and hence result in intermittent imbalance of demand and supply.
The company (in its subsidiary, EFL) had commissioned a 48,000 metric TPA capacity in Telangana in January 2023, the commercial operations of which started in the fourth quarter of fiscal 2023. EIL (in its subsidiary EFL) has taken debt in the ratio of 70:30 for this capacity. EFL has turned Ebitda positive in fiscal 2025 and is expected to turn profitable this fiscal, with increase in scale of operations. Improvement in profitability (at EFL level) while ramping up the capacity will remain a key monitorable. |
Liquidity: Adequate Liquidity remained adequate, with the company having enough cash accrual, cash and equivalents and unutilised bank lines to support debt obligations and working capital requirement. Ester currently has cash of Rs 114 crore (including encumbered cash of Rs 7 crore). The company on consolidated basis is expected to generate net cash accrual of Rs 120-130 crore per annum, against yearly debt obligation of Rs 80-90 crore over the medium term. Fund-based limit of Rs 290 crore was utilised at 60% over the six months through April 2025, providing adequate cushion. |
Outlook: Stable EIL will sustain its business risk profile over the medium term, supported by a diversified product profile. Debt protection metrics, however, will remain average owing to a debt-funded greenfield capex. |
Rating sensitivity factors Upward factors
Downward factors
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About Ester Promoted by Mr Arvind Singhania and incorporated in 1985, EIL manufactures packaging films and specialty polymers. Its manufacturing facility is in Khatima, Uttarakhand. Total operational capacity is 108,000 TPA for BOPET (new capacity of 48,000 TPA [in EFL] started operations in the fourth quarter of fiscal 2023 in Telangana), 23,000 TPA for metallised films and 30,000 TPA for specialty polymers. |
Key Financial Indicators (Consolidated)
*as per analytical adjustments made by Crisil Ratings |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^ Balance as on June 30, 2025 |
Annexure – List of entities consolidated
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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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