| IPM India Wholesale Trading Private Limited | ||||||
| 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 reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities of IPM India Wholesale Trading Private Limited (IPM). CRISIL Ratings has withdrawn its ratings on bank facilities of Rs 721.75 crore on the request of the client and independent confirmation. The withdrawal is in line with the CRISIL Ratings' withdrawal policy.
The ratings continue to factor in the business and financial support that IPM enjoys from the ultimate parent, Philip Morris International Inc (PMI; rated 'A/Negative/A1' by S&P Global Ratings) due to strong managerial, operational and financial linkages. Furthermore, the ratings continue to take into consideration established market position of the Marlboro brand. The ratings reflect healthy operating performance and consequent improvement in financial risk profile. These strengths are partially offset by modest networth position and susceptibility to regulatory changes. |
Analytical Approach CRISIL Ratings has applied its parent notch-up criteria to factor in support from the ultimate parent, PMI. |
Key Rating Drivers & Detailed Description Strengths:
The strong business, financial and operational linkages with the parent continue to support IPM’s credit risk profile. IPM holds the license to PMI’s flagship brand, Marlboro, for the Indian market. The parent has strong control over the company's product and sales strategy with integrated systems and processes. In addition, it exercises control over the board of directors and oversees the daily operations. Resultantly, the company enjoys strong financial flexibility and relationships with lenders. The parent’s stake in IPM is held through its wholly owned indirect subsidiary, Philip Morris Brand Sarl of Switzerland.
Marlboro’s market share rose to above 2% in calendar year 2021 from 1.1% in calendar year 2015, driven by strong growth in volume during this period. Products such as Marlboro Gold Advance, Marlboro Regular Filter and Fuse Beyond have witnessed healthy volume growth in recent years. Company also entered regular size and pocket size cigarette segment in last years and has seen healthy volume growth in the regular size segment in calendar year 2021.
The company reported a healthy operating profit before depreciation, interest and tax (OPBDIT) margin of 27.0% in calendar year 2021. The operating performance has seen a gradual improvement with revenues increasing to Rs 987 crores in calendar year 2021 as against Rs 706 crores in fiscal year 2020. The improvement in performance over the years was driven by sustained growth in volume, higher realisations and cost rationalisation measures. IPM’s gradually improving market share, along with timely price hikes, should ensure healthy profit over the medium term.
With healthy accruals, the company became debt free in March 2022 supporting the capital structure.
Earlier the capital structure was constrained due to negative networth of Rs 131 as on December 31, 2021. This was due to large accumulated losses during the initial years which were funded via borrowings over the years. However, given healthy profitability, networth has turned positive in calendar year 2022.
Weakness:
The cigarette industry remains highly vulnerable to changes in government policies and regulations. An elevated tax structure on one hand, and curbs on promotion, consumption and packaging of cigarettes, on the other hand, constrain the overall growth. |
Liquidity: Strong The company had liquidity of over Rs 310 crore as of November 2022, in the form of unutilised bank lines. Liquidity is aided by the letter of indemnity provided by PMI, which enables the company to have significant cushion in its bank limit. Moreover, absence of any long-term debt or significant capital expenditure further aids liquidity |
Outlook: Stable CRISIL Ratings believes IPM will continue to benefit from its association with its ultimate parent, PMI, and maintain a healthy business risk profile, backed by its license for sale of the Marlboro brand in India. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Incorporated in 2009, IPM is a joint venture between Philip Morris Brands Sarl (a wholly owned indirect subsidiary of PMI) and two Indian partners, Godfrey Phillips India Ltd (rated 'CRISIL AA+/Stable/CRISIL A1+') and KK Modi Investment and Financial Services Pvt Ltd. Philip Morris Brands Sarl holds 50.1% stake in IPM, whereas the other two partners hold 24.8% and 25.1%, respectively. IPM holds the licence for the flagship brand of PMI, Marlboro, for the Indian market. The company is a wholesale trader of Marlboro cigarettes in India. IPM has an arrangement with Godfrey Philips India Ltd, which manufactures and sells the cigarettes on its behalf. |
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)
*DB has sanctioned USD 14 million. It has been converted at 80 for reporting purpose ^Interchangeable with short-term loan |
| 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 24-Nov-2022 in line with the lender-wise facility details as on 02-Aug-2021 received from the rated entity.
*DB has sanctioned USD 14 million. It has been converted at 80 for reporting purpose
^Interchangeable with short-term loan
Criteria Details
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