Rating Rationale
July 28, 2022 | Mumbai
Kanchi Karpooram Limited
Rating Reaffirmed
 
Rating Action
Corporate Credit RatingCCR BBB/Positive (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CCR BBB/Positive’ corporate credit rating to Kanchi Karpooram Limited (KKL)

 

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 risk profile. These rating strengths 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

Strengths:

  • 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 realization compared to historical levels. While increase in domestic capacity is expected to moderate realization, it is continued to be supported by growth in domestic demand and lower import from China. KKL being one of the large players in India is expected to continue to benefit from the favorable market conditions and enhanced capacity.

 

  • Healthy financial risk profile: The financial risk profile is supported by comfortable net worth and debt protection metrics. As on March 31, 2022, net worth is estimated at around Rs.185 crores. Despite the capex in the past, leverage remains low, with total outside liabilities to adjusted net worth ratio at less than 0.1 time as on March 31, 2022. Debt protection metrics are healthy with interest coverage at around 50.3 times during fiscal 2022.

 

Weaknesses:

  • Susceptibility to volatility in raw material prices: Operating margin is moderate, however the same has been volatile in the range of 44.3% to 17.2% in the last three fiscals ended FY22. In FY21, Operating margin increased from 18.2% to 44.3% and again came down to 17.3% in the next fiscal i.e., FY22. This was due to improved realization owing to reduced imports from China and favorable raw material price in FY21. 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 and the same remains rating sensitivity factor.

 

  • 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

Net Cash accrual are expected to be more than Rs.30 crores over the medium term. Cash and bank balance of around Rs.26.6 crores as on March 31, 2022 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 favorable market conditions

Rating Sensitivity factors

Upward factors

  • Strong Improvement in revenue along with sustenance of margin leading net cash accruals of over Rs.35 crore.
  • Sustenance of strong financial risk profile and maintenance of moderate cash and cash equivalents

 

Downward factors

  • Sustained decline in revenue or operating margins dropping below 14%, leading to significantly lower net cash accruals
  • Stretch in working capital or higher than expected debt funded capex or large dividend payouts weakens the financial risk profile.

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

As on / for the period ended March 31

 

2022*

2021

Operating income

Rs crore

250.4

184

Reported profit after tax

Rs crore

29.7

62.7

PAT margins

%

11.9

34.1

Adjusted Debt/Adjusted Net worth

Times

0.00

0.00

Interest coverage

Times

50.3

262

*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)

ISIN

Name of Instrument

Date of

Allotment

Coupon R

ate (%)

Maturity

Date

Issue Size

(Rs cr.)

Complexity

Level

Rating Assigned

with Outlook

NA

NA

NA

NA

NA

NA

NA

NA

 

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT   --   -- 05-08-21 Withdrawn 30-11-20 CRISIL B+ /Stable(Issuer Not Cooperating)* 30-08-19 CRISIL B+ /Stable(Issuer Not Cooperating)* CRISIL B+ /Stable(Issuer Not Cooperating)*
Corporate Credit Rating LT 0.0 CCR BBB/Positive   -- 23-08-21 CCR BBB/Positive   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information

                                                                 

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Assessing Information Adequacy Risk
Rating Criteria for Chemical Industry
Understanding CRISILs Ratings and Rating Scales

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Himank Sharma
Director
CRISIL Ratings Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com


Jayashree Nandakumar
Associate Director
CRISIL Ratings Limited
D:+91 40 4032 8218
Jayashree.Nandakumar@crisil.com


Vishnu Sinha
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 40 4032 8200
Vishnu.Sinha@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.


For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html