| Kuloday Plastomers Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB/Stable/CRISIL A3+' | ||||||
| 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 rating on bank facilities of Kuloday Plastomers Private Limited (KPPL) to ‘CRISIL BBB/Stable/CRISIL A3+’ from “CRISIL BBB-/Stable/CRISIL A3”.
The upgrade reflects steady improvement in KPPL’s business risk profile marked by growth in revenues and maintaining operating efficiencies. KPPL is expected to report revenues of Rs.210-220 crores in fiscal 2021 from Rs.166 crore in fiscal 2020, backed by increased capacities and higher demand from export markets. It also foraying into manufacturing of paper bags from fiscal 2022 which will further increase the revenues. With operating margin at comfortable level and sustenance of financial profile, accruals have also improved, further supporting liquidity. Financial profile and liquidity is expected to remain comfortable over the medium term |
Analytical Approach Unsecured loan of Rs.4.86 crore as on March 31, 2020, is from the promoters and has been treated as neither debt nor equity as the loan is expected to be retained in the business over the medium term |
Key Rating Drivers & Detailed Description Strengths: * Extensive experience of the promoters with established relationships with customers and suppliers: Presence of more than two decades in the plastic packaging industry has enabled the promoters to expand scale as reflected in increase in revenue in the past three years to estimated Rs.210-220 crore in fiscal 2021 from Rs.95.11 crore in fiscal 2018. Furthermore, it has established strong relationships with its customers with 85-90% of the revenues being generated from export business and top 10 customers generating 30-40% of revenues in fiscal 2021 and suppliers across various geographies such as Malaysia and UAE with less 50% of purchases being done from top 5 suppliers in fiscal 2021, which has continued to support the business risk profile.
* Controlled working capital cycle: Gross current assets are expected to be around 70-80 days as on March 31, 2021. In the current fiscal, 90% of the revenue is generated from export and due to increase in the transit period, debtors are expected to increase for the current fiscal from 23 days as on March 31, 2020 to an estimated 40-45 days as on March 31, 2021. However, timely realisation of payments is expected to keep debtors at moderate level. The company maintains inventory of around 30 days, which are order backed. Overall, the working capital cycle will continue to remain moderate and under control.
* Comfortable financial risk profile: Due to healthy accretion to reserves, networth is expected to improve between Rs.46-50 crore as on March 31, 2021. Because of strong networth, the company’s gearing and total outside liabilities to adjusted networth (TOLANW) ratio is estimated to be 0.50-60 time and 1.25-1.35 time, respectively, as on March 31, 2021. Despite planned debt-funded capital expenditure (capex) of Rs.20-25 crores, capital structure is expected to remain at similar levels. With healthy operating margin, the debt protection metrics are comfortable, as indicated by estimated interest coverage and net cash accrual to adjusted debt ratios of 12-13 times and 0.55-0.65 time, respectively, for fiscal 2021.
Weaknesses: * Moderate scale of operations in a highly competitive industry: Moderate scale is reflected in estimated revenue of Rs.210-220 crore in fiscal 2021, which restricts bargaining power with customers and suppliers. Furthermore, the plastic packaging industry is fragment and intense competition due to low entry barriers and low product differentiation in the industry, which limits scalability in operations and also leads to low pricing power.
* Susceptibility to volatility in raw material prices: Operating margins is susceptible to fluctuations in raw material prices, which are linked to global crude prices. This is reflected in volatile operating margins of 8-13% over the last three fiscals ending March 31, 2020. The fragmented nature of the industry leads to limited flexibility to increase prices in proportion to the rise in input prices, and leads to fluctuations in the operating margin. |
Liquidity: Adequate KPPL has adequate liquidity driven by expected cash accruals of Rs.18-21 crores annually in fiscal 2022 and fiscal 2023 against repayment obligations of Rs.4.87 crore and Rs.5.98 crore respectively. Cash and cash equivalents were Rs.13.61 crore as on March 31, 2020. KPPL's fund based limits have been unutilized around 4% over 7 months ended October 2020. CRISIL expects internal accruals and cash & cash equivalents to be sufficient to meet its repayment obligations and incremental working capital requirements. KPPL has planned capex of Rs.30 crores of which Rs.20-25 crores will be funded by debt over medium term. Liquidity is also supported by timely, need-based funds extended by the promoters |
Outlook: Stable CRISIL Ratings believes KPPL will continue to benefit from the extensive experience of the promoters and established customer relationships |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Incorporated in 1995 by the late Mr. Subodh Chokani and his family members, KPPL manufactures plastic bags at its plant in Daman, Daman and Diu. The company is currently managed by the second generation entrepreneur, Mr. Amol Chokani |
Key Financial Indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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