| Krypton Industries Limited | ||||||
| Long-term rating upgraded to 'CRISIL BB/Stable'; short-term rating reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank facilities of Krypton Industries Limited (KIL) to ‘CRISIL BB/Stable’ from ‘CRISIL BB-/Stable’. The short-term rating has been reaffirmed at ‘CRISIL A4+’.
The rating upgrade reflects sustained improvement in the overall credit profile of KIL over the past few fiscals. Revenue has grown to Rs 40.85 crore in fiscal 2022, from Rs 29.87 crore in fiscal 2021, backed by healthy demand, higher volume sales and better realisation. Furthermore, this has led to improvement in the financial profile of the company supported by moderate networth estimated at Rs 28 crore as on March 31, 2022, and comfortable capital structure. Total outside liabilities to adjusted networth (TOLANW) ratio has improved to 0.72 time as on March 31, 2022, from 0.90 time as on March 31, 2021. Steady accretion to reserves will continue to aid the financial risk profile over the medium term.
The ratings reflect the company’s healthy relationships with customers in the polyurethane (PU) tyre segment. This strength is partially offset by susceptibility to volatility in raw material prices and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths: Experienced management and established customer relationships: Presence of over 28 years in the PU tyre industry has enabled the promoters to bag big-ticket contracts and establish long-term relationships with overseas customers
Moderate financial risk profile The debt protection metrics were comfortable with interest coverage and net cash accrual to total debt ratios of 4.6 times and 0.26 time, respectively, in fiscal 2022. Networth remains modest at around Rs 28 crore while gearing and TOLANW ratio were moderate at 0.72 time and 0.72 time, respectively, as on March 31, 2022. Improvement in networth and gearing are key rating sensitivity factors.
Improving business risk profile: Revenue is estimated to grow around 36% year-on-year to Rs 44.60 crore in fiscal 2022 from Rs 32.71 crore in fiscal 2021. Operating margin is estimated to have sustained at 11-12%.
Weaknesses: Susceptibility to volatility in input prices: Raw material costs account for a major portion of operating expenses. The prices of key raw materials such as synthetic chemicals have fluctuated in the past. This is compounded by inventory of 137 days as on March 31, 2022, which further exposes the company to risks of change in input prices.
Moderately large working capital requirement: Gross current assets (GCAs) are estimated to be 241 days as on March 31, 2022, driven by large inventory and moderate receivables. Though working capital requirement is moderately high, it is funded through internal accrual and external debt. |
Liquidity: Adequate Bank limit utilization was high at 85% on average for the 12 months through March 2022. However, annual cash accrual is expected to be Rs 2.85 crore over the medium term. Current ratio is estimated to be healthy at 1.93 times as on March 31, 2022. The promoters are likely to extend equity and unsecured loans to meet working capital requirement and debt obligation. Strong gearing and moderate networth provide the financial flexibility and liquidity cushion required in case of any adverse conditions or downturn in the business. |
Outlook: Stable The company will continue to benefit from its established relationships with customers. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Established in 1991, KIL manufactures tubeless PU tyres, tubes, wheels, castors, shoe soles, military shoes, safety shoes and footwear, and wheelchairs and components for rehabilitation care. Its manufacturing facility is in Falta Export Processing Zone, West Bengal. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 6.9 | Bank of Baroda | CRISIL BB/Stable |
| Letter of Credit | 2.65 | Bank of Baroda | CRISIL A4+ |
| Packing Credit | 3 | Bank of Baroda | CRISIL A4+ |
| Proposed Fund-Based Bank Limits | 2.55 | Bank of Baroda | CRISIL BB/Stable |
| Term Loan | 4.5 | Kotak Mahindra Bank Limited | CRISIL BB/Stable |
| Working Capital Demand Loan | 0.5 | Bank of Baroda | CRISIL A4+ |
This Annexure has been updated on 13-Mar-23 in line with the lender-wise facility details as on 22-Feb-23 received from the rated entity.
Criteria Details
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