| Kanpur Plastipack Limited | ||||||
| Ratings upgraded to 'CRISIL A-/Stable/CRISIL A2+'; rated amount enhanced for 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 upgraded its ratings on the bank facilities of Kanpur Plastipack Limited (KPL) to ‘CRISIL A-/Stable/CRISIL A2+’ from ‘CRISIL BBB+/Positive/CRISIL A2’.
The upgrade reflects a belief that the business risk profile of KPL will continue to improve, supported by optimal utilisation of the increased installed capacity, geographically diversified customer and supplier portfolios, and the recent rally in prices across the packaging industry. Sales worth Rs 458 crore has been reported for the first nine months of fiscal 2022 and should reach over Rs 600 crore by fiscal end, a 33% growth from sales worth Rs 452 crore in fiscal 2021; the operating margin remained stable at 11-13%. . The financial risk profile should continue to be healthy, despite capital expenditure (capex) of Rs 96.78 crore planned for the medium term.
The ratings continue to consider established market position of KPL, above-average operating efficiency and comfortable financial risk profile. These strengths are partially offset by exposure to intense competition in the packaging segment and limited diversification in revenue to few regions. |
Key Rating Drivers & Detailed Description Strengths:
The market position of KPL is supported by a reputed clientele and steady repeat orders from them. The five-decade experience of the promoter in the packaging industry, his strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business. Revenue reported a 44% growth to Rs 452 crore in fiscal 2021 (from Rs 319 crore in fiscal 2020) and is likely to rise by 33% on-year to over Rs 600 crore in fiscal 2022, driven by better realisation and higher utilisation of the installed capacity. Since the company also benefits from the recent rally in packaging material price and demand, sustenance of volume sales with similar capacity utilisation would remain a key rating monitorable.
Gearing has remained around 1 time over the four fiscals through 2021, backed by strong accretion to networth with limited dividend payouts; gearing was around 0.9 time till the third quarter of fiscal 2022 and is expected at around 1 time over the medium term.
Debt protection metrics were adequate, with net cash accrual to total debt and interest coverage ratios of 0.24 time and 6.80 times, respectively, in fiscal 2021 (against 0.10 time and 2.38 times in fiscal 2020). The operating margin and return on capital employed were adequate at 13.61% and 18.59%, respectively, for fiscal 2021.
Financial risk profile should remain comfortable, despite the recently announced capex to set up a production line for manufacturing cast polypropylene film for which an additional term loan of Rs 62 crore is likely to be undertaken.
Weaknesses:
Of the 25-30 players in the flexible intermediate bulk container (FIBC) industry in India, only 10 have large capacities. Apart from competing among themselves, players face competition from Turkey (which benefits from proximity to the European Union). Turkey continues to be one of the largest exporters to Europe.
KPL is on an expansion phase with total installed capacity increasing to 25,300 as on March 31, 2021 from 19,100 as on March 31, 2020. The current infrastructure supports further expansion of capacities without major capex on the same. Going forward, sustenance of utilisation similar to 95-98% last year would be a key rating monitorable.
The product-folio of the company comprises three segments: FIBC, fabrics, and multi-filament yarn. FIBC contributed for approximately 52% of the revenue in fiscal 2021; around 77% of the revenue came from exports during the fiscal. The company has a wallet share of 4-5% of India’s total export of FIBC from India.
The top 10 customers contributed around 77% of total revenue in fiscal 2021 (around 74% in fiscal 2020). Further, sales to clients in Europe account for 55-65% of revenue, while that from North and South America accounted for 20-30% of revenue. Susceptibility to economic cyclicality in Europe & America continents and volatility in foreign exchange rates persists. |
Liquidity: Strong Cash accrual is projected at Rs 38-40 crore per annum, sufficient to meet the debt obligation of Rs 12-17 crore over the medium term. Bank limit utilisation was moderate, at 55-60% for the 12 months through December 2021. Current ratio was 1.23 times on March 31, 2021 |
Outlook: Stable CRISIL Ratings believes KPL will continue to benefit from the established market position and comfortable financial risk profile. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company KPL was incorporated in Kanpur in July 1971 as a private limited company by Mr Mahesh Swarup Agarwal. It began operations by manufacturing high-density polyethylene woven fabric and sacks and plastic packaging materials; installed capacity was 130 tonne per annum. The company was listed on the Bombay Stock Exchange in December 1985. In fiscal 2004, KPL shifted focus to FIBCs from woven fabric and sacks. |
Key Financial Indicators*
*CRISIL Adjusted 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 04-Mar-2022 in line with the lender-wise facility details as on 04-Mar-2022 received from the rated entity.
Criteria Details
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