Rating Rationale
May 28, 2021 | Mumbai
Kris Flexipacks Private Limited
Ratings reaffirmed at 'CRISIL BBB+ / Stable / CRISIL A2 '
 
Rating Action
Total Bank Loan Facilities RatedRs.88.15 Crore
Long Term RatingCRISIL BBB+/Stable (Reaffirmed)
Short Term RatingCRISIL A2 (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2' ratings on the bank facilities of Kris Flexipacks Pvt Ltd (KFPL).

 

The ratings continue to reflect the extensive experience of the promoters in the packaging industry along with an established customer base and a strong financial risk profile of KFPL. These strengths are partially offset by a moderate scale of operations amid intense competitive pressure and large working capital requirement

Key Rating Drivers & Detailed Description

Strengths:

Extensive industry experience of promoters: The promoters have been in the packaging industry for over three decades. Their strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. The promoters have also been steadily diversifying the product portfolio. Revenue grew to Rs 340 crore in fiscal 2021 from Rs 300 crore in fiscal 2019.             

 

Established relationship with customers Clientele comprises reputed players such as Hindustan Coca-Cola Beverages, Pepsico India Holdings, GlaxoSmithKline, Mondelez India Foods, Bisleri International, Jyothy Laboratories, Dabur India, Johnson & Johnson, Mapro Fruit Bar and Heinz India. Also, top 10 clients contributed to just around 50% of the total revenue in fiscal 2021, thereby mitigating risks related to customer concentration in the revenue profile.

 

Strong financial risk profile: As on March 31, 2021, the networth is strong at Rs.118 crore. Strong networth had helped the company to keep its gearing and total outside liabilities to adjusted networth (TOLANW) ratio below 1 time as on March 31, 2021. Capital structure is expected to remain comfortable over medium term in absence of major debt funded capital expenditure (capex). Debt protection metrics remained comfortable, with an interest coverage and net cash accrual to total debt ratios at around 13.39 times and 0.66 time, respectively, in fiscal 2021.

 

Weaknesses:

Moderate scale of operations: Despite steady growth, KFPL's scale of operations is moderate as at Rs.340 crore in fiscal 2021. This restricts the bargaining power with customers and suppliers. Moreover, the plastic packaging industry in India is marked by intense competition and is highly fragmented, which leads to stiff pricing competition and acts as a cap on operating margins of players in the industry

 

Large working capital requirement: Gross current assets were sizeable at 160 days as on March 31, 2021, driven by debtors of 107 days and moderate inventory of 43 days. Debtors are high due to substantial credit period (90-120 days) given to customers. However, the working capital is partially supported by healthy cash accrual and comfortable credit of 60-90 days extended by the suppliers. Going forward, working capital cycle will continue to remain large over medium term

Liquidity: Adequate

Cash accrual is expected at Rs.18-19 crore per fiscal for fiscals 2022 and 2023, against no repayment obligation. The fund-based limit of Rs.70 crore has been utilised, at an average of around 29% during the 12 months through March 2021. The unencumbered cash and bank balance was at Rs.6.63 crore as on March 31, 2021. Adequate cash accrual, unutilised bank lines, unsecured loans, and the cash and bank balance should be adequate to support working capital requirement over the medium term

Outlook Stable

KFPL will continue to benefit from the extensive experience of the promoters and its healthy financial risk profile

Rating Sensitivity factors

Upward factors

  • Substantial and sustainable increase in revenue and operating profitability, leading to cash accrual of Rs.30 crore per annum
  • Significant improvement in the working capital cycle

 

Downward factors

  • Steep decline in revenue and operating profitability, resulting in cash accrual below Rs.10 crore each fiscal
  • Further stretch in the working capital cycle or any large, debt-funded capex

About the Company

KFPL was incorporated in 2007 by Mr Shailesh Sheth, Mr Rajesh Sheth & Mr Viresh Sheth. The company manufactures flexible packaging products such as shrink sleeves, labels, laminates and specialty flexibles. Its manufacturing facilities are based in Gujarat, Himachal Pradesh and Tamil Nadu

Key Financial Indicators

As on / for the period ended March 31

 

2021*

2020

Operating income

Rs crore

340.75

329.28

Reported profit after tax (PAT)

Rs crore

12.39

3.18

PAT margin

%

3.63

0.95

Adjusted debt/adjusted networth

Times

0.25

0.35

Interest coverage

Times

13.39

4.92

*provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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
rate (%)

Maturity date

Issue size (Rs crore)

Complexity level

Rating assigned with outlook

NA

Cash Credit

NA

NA

NA

70.0

NA

CRISIL BBB+/Stable

NA

Bank guarantee

NA

NA

NA

3.0

NA

CRISIL A2

NA

Letter of credit

NA

NA

NA

5.15

NA

CRISIL A2

Na

Proposed fund based bank limits

NA

NA

NA

10

NA

CRISIL BBB+/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 80.0 CRISIL BBB+/Stable   -- 03-02-20 CRISIL BBB+/Stable 15-03-19 CRISIL BBB+/Stable   -- --
Non-Fund Based Facilities ST 8.15 CRISIL A2   -- 03-02-20 CRISIL A2 15-03-19 CRISIL A2   -- --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 3 CRISIL A2 Bank Guarantee 3 CRISIL A2
Cash Credit 70 CRISIL BBB+/Stable Cash Credit 59 CRISIL BBB+/Stable
Letter of Credit 5.15 CRISIL A2 Letter of Credit 6.15 CRISIL A2
Proposed Fund-Based Bank Limits 10 CRISIL BBB+/Stable Letter of credit & Bank Guarantee 20 CRISIL A2
Total 88.15 - Total 88.15 -
Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios

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