| Hubergroup India Private Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| & carved out of the sanctioned working capital limits | ||
| 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 A1+' rating on the commercial paper programme of Hubergroup India Private Limited (HIPL).
The rating factors in expected stability in the operating performance of the company on the back of recovery from the newspaper industry and supported by healthy growth in the packaging industry. Diversification into sale of key raw materials of the ink business such as pigments and resins, which also find application in other industry segments as well will also benefit the business risk profile of the company. HIPL’s revenue grew 11% y-o-y from Rs. 3446 crores in CY21 to Rs. 3,837 crores in CY22 primarily driven by higher realisations even as volumes remained subdued owing to slowdown in export markets. Further, operating margin stood at 8.5%, in CY2022 vis-à-vis 9.0% in CY21. Operating margins moderated on account of higher crude oil prices and increase in raw material prices.
Operating margins are expected to remain stable at 8-9% over the medium term, aided by cost plus structure of the company, enabling them to pass on price volatility to their customers. Backward integration into manufacturing of key raw materials is expected to sustain the profitability as well.
Healthy financial risk profile should sustain supported by strong networth of Rs. 1799 crore as on 31st December 2022, moderate debt, and strong cash generation. Adequate liquidity and strong capital structure provides comfort to the overall credit profile. HIPL has access to bank lines of Rs 280 crore which remain utilised at an average of 77% in the last twelve months ending December 2022. The company is expected to do annual maintenance capex of about Rs 50-60 crore over the medium term, and same is expected to be funded primarily through internal accruals.
The rating continues to reflect HIPL's dominant market position in the printing ink industry and its sound operating efficiency, backed by strong backward-integrated operations. The rating also factors in a strong financial risk profile, with comfortable debt protection metrics. These strengths are partially offset by susceptibility to risks inherent in the printing ink industry owing to customers shifting to online channels and volatile crude oil prices which impact raw material cost. |
Analytical Approach For arriving at its rating, CRISIL Ratings has combined the business and financial risk profiles of HIPL and its subsidiaries, Hubergroup USA Inc., USA, Hubergroup Australia Pty Ltd, Hubergroup New Zealand Ltd and Huber Inks (Thailand), Hubergroup Malaysia Sdn, Bhd., PT Hubergroup Inks Indonesia and Hubergroup South Africa Pty. Ltd. because of significant operational and financial linkages among the companies.
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: * Sound market position in the domestic printing industry and superior operating efficiencies marked by high backward integration HIPL is the largest printing ink manufacturer in India, with a track record of over three decades and commands a market share of around 33% in the domestic market. The company has a healthy business risk profile, characterised by its market leadership position, integrated operations and also supported by diversity in end-user industries and geographies. While revenues from the printing ink segment are expected to be at similar levels due to volume loss owing to consumer shift towards digital sources for newspapers; it is expected to be compensated by increase in the packaging ink due to rise in FMCG and ecommerce industries.
The company has also diversified into sale of specialty chemicals such as pigments, flushes, resins and varnishes which were earlier used only captively. High level of backward-integrated operations, leading to strong operating efficiency will continue to support the healthy business risk profile.
The company receives strong technological support from its parent, a large player in the global inks industry. HIPL's association with its parent has resulted in better access to the global printing inks market because of the group's presence in about 29 countries across six continents. Further, sales to the group companies contribute roughly 30-40% of HIPL revenue providing geographical diversity and revenue stability.
The company has a strong financial risk profile marked by a healthy capital structure, moderate debt mainly in form of working capital. The capital structure and debt protection metrics should remain strong over the medium term with Total Outside Liabilities to total Net worth (TOL/TNW) and interest coverage expected at below 0.55 times and over 19 times respectively over the medium term. Absence of any debt-funded capex plans over the medium term will also benefit the financial risk profile.
Weakness: Large working capital requirement is inherent in the printing ink industry. HIPL had gross current assets of 216 days as on December 31, 2022, as a result of considerable credit extended to overseas customers and increase in levels of inventory. Expected slowdown in demand from the newspaper segment on account of rising shift of consumer towards online channels is expected to also impact the printing inks segment. Also, operating margin in this industry is susceptible to volatility in prices of petroleum-based raw materials. |
Liquidity: Strong Liquidity is likely to remain strong in the medium term. The company has access to total limits of Rs 280 crore with average utilization of 77% and adequate expected cash accruals of Rs 120-140 crore in medium term to support capex and minimal long term debt repayments. Any large debt-funded capex/acquisition impacting credit metrics will remain a key rating sensitivity factor. |
Rating Sensitivity Factors Downward Factors
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About the Company Set up in 1991, HIPL (formerly Micro Inks Pvt Ltd) is a part of the Hubergroup, one of the largest manufacturers of printing inks globally. MHM Holding GmbH, a Hubergroup company, currently owns 99.69% of HIPL's equity share. The group has been in the printing inks business for over 250 years and is renowned for its extensive experience, continuous focus on quality, and strong technical knowhow.
Headquartered in Vapi (Gujarat), HIPL has plants at Vapi, Daman and Silvassa (Union Territory of Dadra and Nagar Haveli and Daman and Diu). HIPL is the largest printing ink company in India, with installed capacity of 203,000 tonne per annum. |
About the Group The Hubergroup, which holds 99.69 per cent of HIPL’s shareholding through MHM Holding GmbH, has been in the printing inks business for more than 250 years. By virtue of its extensive experience, continuous focus on quality and strong technical know how, it is the sixth-largest printing inks manufacturer globally. The group primarily manufactures printing inks and varnishes, coatings for printing, fountain solution concentrates, and printing auxiliaries. It also offers ink mixing systems, ink development services, consulting services and technical service. |
Key Financial Indicators
*CRISIL Ratings adjusted |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Carved out of the sanctioned working capital limits |
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. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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