| Jaidayal Packaging Private Limited | ||||||
| 'CRISIL BB+/Stable/CRISIL A4+' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BB+/Stable/CRISIL A4+’ ratings to the bank facilities of Jaidayal Packaging Private Limited (JPPL, part of the Jaidayal group).
The rating reflects the extensive experience of the promoters, established clientele, sound operating efficiencies and moderate financial risk profile. These strengths are partially offset by exposure to intense competition and volatility in raw material prices. |
Analytical Approach: Further to a revision in the analytical approach, CRISIL Ratings has combined the business and financial risk profiles of JHPL with those of Neel Kamal Polytex Industries Pvt Ltd (NKPIPL) and Jaidayal Packaging Pvt Ltd (JPPL). This is because all these entities, together referred as the Jaidayal group, are under a common management with operational and financial linkages.
Unsecured loans of around Rs 17.80 crore has been considered as 75% equity and 25% debt as these loans have been extended by the promoters of the Jaidayal group, and are likely to remain in business over the long term. and do not carry any fixed repayment obligation.
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: Extensive experience of the promoters: The two-decade-long experience of the promoters in manufacturing of polypropylene (PP) and high-density polyethylene (HDPE) bags, their strong understanding of market dynamics and established relationships with suppliers and customers, will continue to support the business risk profile.
Strong clientele and quick scale up of operations: Longstanding presence in the polypropylene bag manufacturing segment has enabled the promoters to build a strong clientele, and carry it forward to the new company. Clientele includes Emami Cement Ltd, UltraTech Cement Ltd (‘CRISIL AAA/Stable/CRISIL A1+’), ACC Ltd (‘CRISIL AAA/Stable/CRISIL A1+’), Dalmia Cement (Bharat) Ltd and JSW Cement Ltd. This has led to a quick ramp up in scale, to be further aided by capacity additions.
Sound operating efficiencies: Operating efficiencies are marked by a healthy return on capital employed (RoCE), in turn driven by large economies of scale and an experienced management.
Moderate financial risk profile: Capital structure of the group remains moderate, aided by limited reliance on external debt, as reflected in adjusted gearing of 1.25 times and total outside liabilities to adjusted networth (TOL/ANW) ratio of 1.65 times as on March 31, 2021. Debt protection measures were also comfortable despite leverage, due to moderately healthy profitability. Interest coverage and net cash accrual to total debt ratios stood at 2.86 times and 0.15 time, respectively, for fiscal 2021.
Weakness: Susceptibility to volatility in raw material prices and intense competition: Profitability remains vulnerable to volatility in prices of polymers, which are key inputs for manufacturing PP fabrics. Polymer prices are further linked to international crude oil prices, which have been highly volatile in the past few years. Intense competition further limits the ability to pass on any hike in raw material cost to customers. However, the group enters into contracts based on PP prices plus a conversion cost model, and this should provide a buffer against any unfavorable shocks. Overall operating margin has been stable between 5.83% and 6.41% for the three fiscals through March 2021. |
Liquidity: Adequate Liquidity is adequate, marked by sufficient cash accrual and moderate bank limit utilisation. Expected cash accrual of over Rs 15 crore should suffice to cover the term debt obligation of Rs 6.5-8 crore in the medium term. Bank limit utilisation averaged around 76% for the 12 months through June 2021. Current ratio was healthy at 1.55 times on March 31, 2021.
The promoters are likely to extend support via unsecured loans to meet the working capital expenses and debt obligation. |
Outlook: Stable CRISIL Ratings believes the Jaidayal group will continue to benefit from the extensive experience of its promoter in the PP bag manufacturing business, and established relationships with clients. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company JPPL was earlier engaged in purchase and sale of equity shares, securities and derivatives such as futures and options. Since August 2020, the company has started manufacturing PP/HDPE bags, at its unit in Jagdishpur, UP |
About the Group The Varanasi (Uttar Pradesh)-based Jaidayal group has been formed by Mr Pradeep Tulsyan and his family members. The group manufactures PP/high density polyethylene (HDPE) bags, sacks and woven fabric, all of which are used in packaging of food grains, cement and fertilisers.
NKPIPL, which was incorporated in 1999, manufactures PP/HDPE bags, sacks and woven fabric used to package food grains and cement. It has a manufacturing unit in Varanasi. |
Key Financial Indicators (Consolidated)
*Provisional |
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 - 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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Criteria Details
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