Rating Rationale
March 07, 2018 | Mumbai
Lawreshwar Polymers Limited
'CRISIL BB+/Stable/CRISIL A4+' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.38.5 Crore
Long Term Rating CRISIL BB+/Stable (Assigned)
Short Term Rating CRISIL A4+ (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL BB+/Stable/CRISIL A4+' ratings to the bank facilities of Lawreshwar Polymers Limited (LPL).
 
The ratings reflect the promoters' established track record in the footwear industry and the benefits that LPL derives from fully integrated operations. These strengths are partially offset by exposure to intense competition, average financial risk profile, and large working capital requirement.

Key Rating Drivers & Detailed Description
Strengths
* Promoters' established track:  Benefits from the extensive experience of the promoters, their understanding of local market dynamics, and established relationships with suppliers and customers should continue to support the business. LPL's track record established over 23 years, demonstrates its ability to survive cyclicality in business. Its Lehar brand of footwear is established especially in Rajasthan, Madhya Pradesh, Gujarat and Maharashtra.
 
* Fully integrated operations: Operations are fully integrated, and include design of footwear, production of ethylene vinyl acetate (EVA) sheets, and manufacture of soles, uppers and straps, fitting, finishing and packaging.
 
Weaknesses
* Exposure to intense competition: Intense competition and low product differentiation constrain scalability and profitability for small players such as LPL as reflected in operating margin fluctuating in the range of 5.7% to 9.9% in last 4 years through fiscal 2017.  
 
* Average financial risk profile: Networth was average at Rs 36.5 crore, and total outside liabilities to adjusted networth ratio high at 1.8 times as of March 2017. Net cash accrual of Rs 3.1 crore was just about adequate for servicing maturing debt - of Rs 3 crore - in fiscal 2017.  Debt has increased on account of capital expenditure necessitated by a fire in May 2016.
 
* Large working capital requirement: Operations are working capital intensive, with sizeable gross current assets, debtors and inventory of around 321, 143, and 115 days as of March 2017.
Outlook: Stable

CRISIL believes LPL will continue to benefit from the promoters' established track record in the footwear industry. The outlook may be revised to 'Positive' if substantial ramp-up in scale of operations and profitability results in healthier accrual and financial risk profile. Conversely, the outlook may be revised to 'Negative' if low accrual, large working capital requirement, or a sizeable, debt-funded capital expenditure weakens financial risk profile.

About the Company

LPL, set up in 1994 by the late Mr Mohan Lal Agarwal, is now managed by his sons Mr Ramesh Chand Agarwal (chairman), Mr Rajkumar Agarwal (managing director) and Mr Pramod Agarwal. Under its brand, Lehar, the company manufactures footwear including light weight fancy slippers, PVC and TPR footwear, canvas shoes, and synthetic leather chappals and Hawai chappals.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs crore 79.5 100.1
Profit after tax (PAT) Rs crore 1.2 2.6
PAT margins % 1.47 2.57
Adjusted debt/Adjusted networth Times 1.1 1.0
Interest coverage Times 1.9 2.7

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 Proposed Long Term Bank Loan Facility NA NA NA 0.29 CRISIL BB+/Stable
NA Long Term Loan NA NA Mar-2021 9.21 CRISIL BB+/Stable
NA Letter of Credit NA NA NA 2 CRISIL A4+
NA Buyer`s Credit NA NA NA 3 CRISIL BB+/Stable
NA Cash Credit NA NA NA 24 CRISIL BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  36.5  CRISIL BB+/Stable    --    --    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  CRISIL A4+    --    --    --    --  -- 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Proposed Long Term Bank Loan Facility .29 CRISIL BB+/Stable -- 0 --
Long Term Loan 9.21 CRISIL BB+/Stable -- 0 --
Letter of Credit 2 CRISIL A4+ -- 0 --
Buyer`s Credit 3 CRISIL BB+/Stable -- 0 --
Cash Credit 24 CRISIL BB+/Stable -- 0 --
Total 38.5 -- Total 0 --
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
CRISILs Criteria for rating short term debt

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