| Hitech Corporation Limited | ||||||
| Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1' | ||||||
| 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 reaffirmed its 'CRISIL A/Stable/CRISIL A1' ratings on the bank facilities of Hitech Corporation Limited (Hitech).
The ratings continue to reflect the company’s established market position backed by reputed clientele and strategically located manufacturing facilities along with strong financial risk profile. These strengths are partially offset by susceptibility of operating profitability to volatility in raw material prices and to intense competition in the packaging industry. |
Key Rating Drivers & Detailed Description Strengths: Established market position: A diversified customer base in the paints, pharmaceuticals, fast moving consumer goods, and consumer goods industries has enabled Hitech to maintain a leadership position in the plastic-based rigid container segment. It is a leading supplier to Asian Paints Ltd (‘CRISIL AAA/Stable/CRISIL A1+’), clientele also include reputed companies such as Berger Paints India Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) Pidilite Industries Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) and Reckitt Benckiser (India) Ltd. Further, Hitech also benefits from its geographically spread manufacturing facilities located close to clients’ plants, which provide cost advantages over competitors.
Healthy financial risk profile: Financial risk profile continues to be comfortable, with networth at around Rs 217 crore as on March 31, 2022 (Rs 182 crore as on March 31, 2021). Total outside liabilities to adjusted networth ratio is 0.68 times as on March 31, 2022; the ratio may further improve over the medium term, in the absence of any further large debt funded capex, scheduled repayments and healthy accruals. Debt protection metrics is comfortable backed by interest coverage and net cash accrual to adjusted debt of 5.98 and 0.61 times respectively, likely further improve over the medium term. Overall financial risk profile is expected to remain healthy over the medium term.
The promoter’s (the Dani family’s) reputation and financial strength enhances Hitech’s ability to raise additional financing in case of exigencies and enhances its financial flexibility. The promoters will continue to support the company, both financially and in operations, over the medium term.
Weakness: Susceptibility to raw material price volatility and intense competition: Raw materials include polymers such as polypropylene, polyethylene, terephthalate glycol and polyvinyl chloride, prices of which are directly linked to crude oil rates. Hence, any fluctuation in crude prices is reflected in polymer prices and in turn, affects operating margin. This is compounded by intense competition in the packaging industry because of low entry barrier, resulting in competitive pricing. However, the company does pass on hikes in input prices to the customers, though with a lag. |
Liquidity: Strong Net cash accrual is estimated at Rs.71 crore against the against the repayment obligation of Rs. 31 crores in fiscal 2023. Similar cushion is expected over medium term. Current ratio is moderate at 1.03 times on March 31, 2022. Bank limit utilization is low at around 45.47 percent for the past twelve months ended September 2022. Cash accruals are expected to be over Rs 71 crore which are sufficient against term debt obligation of Rs 30.78 crore over the medium term. In addition, it will be act as cushion to the liquidity of the company. There is no large capex plan over the medium term. Routine capex of Rs 15-20 crore is expected gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable Hitech should continue to benefit from its established market position and healthy relationship with customers. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Hitech (formerly, Hitech Plast Ltd) was established in 1991 by Mr Ashwin Dani. This Mumbai head quartered company with manufacturing facilities in multiple states, manufactures plastic-based rigid packaging products for the paints, personal care, agricultural chemicals, healthcare, confectionery, and lubricants segments. Hitech acquired Clear Plastics Ltd (CPL) in 2003 and Mipak Polymers Ltd (MPL) in 2006. In fiscal 2010, the management merged CPL and MPL into Clear Mipak, which was eventually merged with Hitech in fiscal 2015. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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This Annexure has been updated on 27-Dec-2022 in line with the lender-wise facility details as on 14-Dec-2021 received from the rated entity.
Criteria Details
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