| Hitech Corporation Limited | ||||||
| Ratings reaffirmed at 'CRISIL A / Stable / CRISIL A1 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
CRISIL Ratings has reaffirmed its 'CRISIL A/Stable/CRISIL A1' ratings on the bank facilities of Hitech Corporation Ltd (Hitech).
The ratings continue to reflect the company’s established market position backed by reputed clientele and strategically located manufacturing facilities. Rating also continue to reflect strong financial risk profile of the company as reflected in healthy capital structure and strong financial flexibility. These strengths are partially offset by susceptibility of operating profitability to volatility in raw material prices and to intense competition in the packaging industry.
Performance in fiscal 2021 was moderately impacted by pandemic related disruptions, Revenue declined by 2.91% in fiscal 2021 with improved operating margin of 14.3%. Revenue is expected to be better than pre-pandemic levels in fiscal 2022 onwards on the back increased utilization levels at Mysore and Vizag plants, improved economic conditions and sustained demand from major clients; sustaining overall business risk profile |
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 suppliers 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+’) Reckitt Benckiser (India) Ltd, and Pidilite Industries Ltd (‘CRISIL AAA/Stable/CRISIL A1+’). Further, Hitech also benefits from it’s geographically spread manufacturing facilities located close to clients’ plants, which provide locational and cost advantages over competitors.
Healthy financial risk profile Financial risk profile continues to be comfortable, with networth at Rs 181.8 crore as on March 31, 2021 (Rs 165.2 crore as on March 31, 2020). Despite the large, debt-funded capital expenditure (capex) in the recent past, total outside liabilities to adjusted networth ratio is 1.1 times as on March 31, 2021; 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 3.7 and 0.3 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: Adequate Net Cash accruals (NCA) were Rs 46.5 crore in fiscal 2021 against debt repayment obligation of Rs 21.3 crores. NCA is likely to be around Rs 46-55 crore per fiscal over the medium term, adequate to meet repayment obligations Rs Rs 29.25-31crores per fiscal. There are no large capex planned over the medium term and routine capex is funded adequately by internal sources. Bank limit utilisation averaged 55% during the 12 months through June 2021. Liquidity is also supported by bills discounting facilities (without recourse) available to monetise receivables from Asian Paints Ltd. Available bank facilities and surplus cash accrual should comfortably cover working capital requirement over the medium term; need-based support from the promoters is also expected in case of any exigencies. |
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: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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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 | ||
| Facility | Amount (Rs.Crore) | Rating |
| Fund-Based Facilities | 19 | CRISIL A1 |
| Fund-Based Facilities | 15 | CRISIL A/Stable |
| Fund-Based Facilities | 20 | CRISIL A/Stable |
| Fund-Based Facilities | 10 | CRISIL A/Stable |
| Fund-Based Facilities | 10 | CRISIL A/Stable |
| Letter of credit & Bank Guarantee | 10 | CRISIL A1 |
| Letter of credit & Bank Guarantee | 15 | CRISIL A1 |
| Long Term Bank Facility | 45 | CRISIL A/Stable |
| Proposed Long Term Bank Loan Facility | 9 | CRISIL A/Stable |
| Term Loan | 57 | CRISIL A/Stable |
Criteria Details
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