| Kanchi Karpooram Limited | ||
| 'CCR BBB/Positive’ rating assigned | ||
| 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 ‘CCR BBB/Positive’ corporate credit rating to Kanchi Karpooram Limited (KKL)
The rating reflects CRISIL Ratings’s belief that KKL’s improvement in business performance is likely to be sustained along with its strong financial risk profile. The company had reported a revenue CAGR of 33 percent in the past four years through fiscal 2021 largely led by higher realization. The company reported revenues of Rs.184 crores in fiscal 2021 as against Rs.203 crores in fiscal 2020.The marginal decline in revenues was on account of the disruption in operations due to the pandemic. Going forward, revenues are expected to improve, supported by enhanced capacity and sustenance of shortage in supply. The operating margins were at 44.2 percent in fiscal 2021, however, are expected to moderate over the medium term. The operating margins, are expected to continue to remain comfortable in the medium term. Cash accruals are likely to remain strong and will support the incremental working capital requirements. Absence of any bank borrowings further strengthens the financial risk profile.
The rating continues to reflect KKL's promoters’ extensive experience and KKL’s established market position, established relationships with major suppliers and customers and healthy financial profile. These strength are partially offset by its susceptibility to volatility in raw material prices, intense competition from the domestic manufacturers as well as revival of imports from China. |
Key Rating Drivers & Detailed Description Strength Promoters’ extensive experience and KKL’s established market position: KKL benefits from its promoters’ extensive experience in the camphor industry, and its position as one of the leading players in the Indian camphor market. The Shah family has experience of around four decades and healthy relationship with customers and suppliers. Further, India’s camphor industry benefits from the lower imports from China and healthy domestic demand, leading to improved realisation compared to historical levels. While, increase in domestic capacity is expected to moderate realisation, it is continued to be supported by growth in domestic demand and lower import from China. KKL being one of the large player in India is expected to continue to benefit from the favourable market conditions and enhanced capacity.
Healthy financial profile: The financial risk profile is supported by comfortable networth and debt protection metrics. As on March 31, 2021, networth is estimated at Rs.156 crores. Despite the capex in the past, leverage remains low, with total outside liabilities to adjusted networth ratio at 0.13 time as on March 31, 2021.Debt protection metrics are healthy with interest coverage at over 250 times during fiscal 2021.
Weakness Susceptibility to volatility in raw material prices: KKL's major raw material is alpha pinene, which it imports from Indonesia Vietnam, Brazil and other European countries and accounts for majority of KKL’s raw material cost. Alpha pinene prices have been volatile, thereby exposing the company to price risk. So, any adverse movement in prices can impact profitability of the company.
Intense competition from the domestic manufacturers as well as revival of imports from China: The camphor industry is an intensely competitive business, with presence of many domestic players as well as foreign players, especially from China. Due to the favorable market conditions, players are going ahead with capacity expansion, increasing the supply and intensifying competition among players – likely to lead to moderation in realization. Revival of imports from China, may also have an adverse impact on the entire industry. |
Liquidity: Adequate Cash accrual are expected to be more than Rs 40 crores over the medium term. Cash and bank balance of around Rs. 63 crores as on March 31, 2021 also supports liquidity. The Company does not have any term debt obligation and has not availed any working capital facilities from any bank. |
Outlook: Positive CRISIL Ratings believes KKL’s business risk profile is expected to further strengthen supported by favourable market conditions |
Rating Sensitivity Factors Upward Factors
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About the Company Incorporated in 1991, KKL manufactures camphor and its by-products, dipentene, sodium acetate trihydrate, and pine tar. The company's manufacturing unit is in Kanchipuram .The company is promoted by Mr Suresh Shah and his family. The company is listed on the Bombay Stock Exchange. |
Key Financial Indicators
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Status of non cooperation with previous CRA The company has not cooperated with Acuite Ratings and Research Ltd, which has classified it as non-cooperative vide a release dated April 5, 2021. The reason provided is non-furnishing of information for monitoring of ratings. |
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 Instruments
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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Criteria Details
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