| Indian Toners and Developers Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Indian Toners and Developers Ltd (ITDL) to ‘Positive’ from ‘Stable’ and reaffirmed the rating at 'CRISIL BBB+’. The short-term rating has been reaffirmed at ‘CRISIL A2+'.
The outlook revision reflects expected improvement in ITDL’s operating performance primarily led by anti-dumping duty levied on black toner imports in powder form, originating from China, Malaysia and Taiwan for five years starting August 10, 2020, coupled with revival of manufacturing and marketing activities post relaxation of the lockdown. This has translated into healthy operating performance in fiscal 2022. Revenue and operating margin improved to Rs 119 crore and 23.3%, respectively, in fiscal 2022, compared to Rs 88 crore and 26.3%, respectively, during fiscal 2021.
With anti-dumping duty in place leading to lower imports of toners, the dependency of end-users on ITDL is increasing. In order to cater to the incremental demand in the market, ITDL has planned expansion of two lines at Rampur, in the current fiscal, at a cost of Rs 21 crore to be fully funded through internal accrual. This will double the production capacity at Rampur, resulting in total installed capacity increasing to 4,800 tonne per annum (TPA) from 3,600 TPA (combined capacity at Rampur and Sitarganj).
The ratings continue to reflect the established market position and strong business risk profile of ITDL. The company is likely to maintain strong financial risk profile, supported by adequate liquidity and debt-free balance sheet. These strengths are partially offset by the company’s modest scale of operations and exposure to intense competition from low-priced imported toners. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered the standalone business and financial risk profiles of ITDL. |
Key Rating Drivers & Detailed Description Strengths Established position in the domestic toner replacement market: ITDL is the largest player in the domestic toner manufacturing segment and exports toners to over 20 countries. It has over 120 distributors and 600 dealers across India and is the sole distributor in Singapore. Apart from bulk toners, it also markets its toners under the ‘Supremo’ brand, which becomes a differentiator in a competitive market.
Strong financial risk profile: The financial risk profile is supported by healthy networth and nil debt, and comfortable debt protection metrics. Networth was Rs 166 crore as on March 31, 2022, which should improve over the medium term, aided by steady profitability and accretion to reserves. Debt protection metrics are expected to remain comfortable, supported by healthy accrual, nil long-term debt and strong liquidity.
Weaknesses Modest scale of operations: Despite the established market position of ITDL and its track record of over three decades, the scale remains modest. Intense competition limits room for scaling up operations. Moreover, as the company deals in a single product, it remains vulnerable to change in technology. Working capital cycle has improved, as reflected in gross current assets of 178 days as on March 31, 2021, against 192 days a year before.
Exposure to intense competition from the unorganised market and low-priced imported toners: Low product differentiation and intense competition from the unorganised market and cheaper imports from China and Malaysia, restricts the pricing power of players such as ITDL. Product saleability is also sensitive to import price parity and movements in foreign exchange rates. Levy of any anti-dumping duty on black toner imports for five years will benefit domestic players. |
Liquidity: Adequate Liquidity is supported by cash, bank balance, investments and cash equivalent of Rs 81 crore as on March 31, 2022. Expected net cash accrual of Rs 20-25 crore should suffice to cover incremental working capital requirement in the absence of any debt obligation and capital expenditure (capex). Cash credit limit of Rs 0.50 crore was not utilised during the 12 months through May 2022. |
Outlook: Positive CRISIL Ratings believes ITDL will benefit from anti-dumping duty levied on black toner imports in powder form, originating from China, Malaysia and Taiwan, and its established position in the domestic toner replacement market. The group's financial risk profile is expected to remain healthy, supported by nil debt, strong liquidity and negligible capex. |
Rating Sensitivity factors Upward factors: * Healthy revenue growth and sustained operating margin of over 20% * Steady net cash accrual sustaining above Rs 25 crore
Downward factors: * Muted revenue and operating margin sustaining below 15%, adversely affecting the cash accrual * Significant debt-funded capex or any large dividend, straining the capital structure |
About the Company ITDL manufactures toners for photocopiers, laser printers, digital machines and multi-function printers, and caters to the replacement market, under the Supremo brand. The company was set up in 1990 by the promoter and current chairman and managing director, Mr Sushil Jain. Its manufacturing unit in Rampur, Uttar Pradesh, has an installed production capacity of 1,200 TPA. In 2008, ITDL formed a 51% subsidiary, ITDL Imagetec Ltd (Imagetec), with toner production capacity of 2,400 TPA in Sitarganj, Uttarakhand. Imagetec started commercial operations in April 2009 and enjoyed a tax holiday for the first 10 years of operations.
In fiscal 2011, the group started catering to the international market through the Rampur plant under ITDL and to the domestic market through the Sitarganj plant under Imagetec. In 2017, the company amalgamated Imagetec and four other investment companies with itself, under the orders of the National Company Law Tribunal (NCLT), Allahabad, dated May 9, 2017, and NCLT, New Delhi, dated July 26, 2017. |
Key Financial Indicators
The numbers mentioned in the report are company reported numbers |
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 | ||||||||||||||||
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This Annexure has been updated on 26-Jul-2022 in line with the lender-wise facility details as on 17-Aug-2021 received from the rated entity.
Criteria Details
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