Rating Rationale
March 18, 2020 | Mumbai
Krypton Industries Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.20.1 Crore
Long Term Rating CRISIL BB-/Stable (Reaffirmed)
Short Term Rating CRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL BB-/Stable/CRISIL A4+' ratings on the bank facilities of Krypton Industries Limited (KIL).

The ratings reflect KIL's healthy relationship 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 relationship: The promoters' experience of over 27 years in the PU tyre industry has helped in bagging big-ticket contracts. The company's long-term relationships with customers, who are mostly overseas, should help in promoting its products globally.
 
Weakness:
* Susceptibility to volatility in raw material prices: Raw material costs account for a major portion of operating expenses. The prices of key raw materials, such as synthetic chemicals, have remained volatile in the past. Raw material inventory holding period was around 196 days as on March 31, 2019. High raw material inventory further exposes the company to risks of volatility in input prices.
 
* Working capital-intensive operations: Gross current assets decreased to 289 days as on March 31, 2019, from 349 days a year earlier, mainly because of higher inventory of 196 days against 240 days. Debtors, however, reduced to 67 days from 94 days.
Liquidity Stretched

Bank limit is moderately utilised for the six months through December 2019. Cash accrual, expected to be over Rs 2.52 crore over the medium term should comfortably cover term debt obligation of Rs 1.00 crore. Current ratio was moderate at 1.61 times as on March 31, 2019.

Outlook: Stable

CRISIL believes KIL will continue to benefit from its established relationship with customers.

Rating Sensitivity factors
Upward factor
* Sustained increase in revenue by 20% and stable operating margin, leading to higher cash accruals.
* Improvement in working capital cycle.

Downward factor
* Stretch in working capital cycle
* Decline in operating profitability by over 20% on a sustainable basis or reduction in scale of operations leading to fall in revenue hence resulting in net cash accrual lower than Rs 2.0 crore.
About the Company

Established in 1991, KIL had set up units for manufacturing tyres at Falta Export Processing Zone, West Bengal. The company currently manufactures tubeless PU tyres, tubes, wheels, castors, shoe soles, military shoes, safety shoes, and footwear, and wheelchairs and components for rehabilitation care.

Key Financial Indicators
As on/for the period ended March 31 Unit 2019 2018
Operating income Rs crore 36.36 29.73
Reported profit after tax (PAT) Rs crore 0.93 (0.04)
PAT margin % 2.56 (0.14)
Adjusted debt/adjusted networth Times 0.55 0.59
Interest coverage Times 2.29 1.48

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.Cr) Rating assigned with outlook
NA Bank Guarantee NA NA NA 0.25 CRISIL A4+
NA Cash Credit NA NA NA 6.5 CRISIL BB-/Stable
NA Letter of Credit NA NA NA 2.65 CRISIL A4+
NA Packing Credit NA NA NA 4 CRISIL A4+
NA Proposed Fund-Based Bank Limits NA NA   2.2 CRISIL BB-/Stable
NA Term Loan NA NA Mar-2027 4.5 CRISIL BB-/Stable
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  17.20  CRISIL BB-/Stable/ CRISIL A4+          06-12-18  CRISIL BB-/Stable/ CRISIL A4+  08-11-17  CRISIL B+/Stable/ CRISIL A4  CRISIL BB-/Stable/ CRISIL A4+ 
Non Fund-based Bank Facilities  LT/ST  2.90  CRISIL A4+          06-12-18  CRISIL A4+  08-11-17  CRISIL A4  CRISIL A4+ 
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 .25 CRISIL A4+ Bank Guarantee .45 CRISIL A4+
Cash Credit 6.5 CRISIL BB-/Stable Cash Credit 8.3 CRISIL BB-/Stable
Letter of Credit 2.65 CRISIL A4+ Import Letter of Credit Limit 1.5 CRISIL A4+
Packing Credit 4 CRISIL A4+ Letter of Credit 4 CRISIL A4+
Proposed Fund-Based Bank Limits 2.2 CRISIL BB-/Stable Packing Credit 4 CRISIL A4+
Term Loan 4.5 CRISIL BB-/Stable Proposed Long Term Bank Loan Facility 1.7 CRISIL BB-/Stable
-- 0 -- Term Loan .15 CRISIL BB-/Stable
Total 20.1 -- Total 20.1 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Auto Component Suppliers
CRISILs Criteria for rating short term debt

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