Rating Rationale
September 29, 2018 | Mumbai
MMP Industries Limited
Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2'
 
Rating Action
Total Bank Loan Facilities Rated Rs.43 Crore
Long Term Rating CRISIL BBB+/Stable (Upgraded from 'CRISIL BBB/Stable')
Short Term Rating CRISIL A2 (Upgraded from 'CRISIL A3+')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank facilities of MMP Industries Limited (MMP) to 'CRISIL BBB+/Stable/CRISIL A2' from 'CRISIL BBB/Stable/CRISIL A3+'.
 
The upgrade reflects improvement in MMP's financial risk profile post initial public offering (IPO) with healthy networth and low gearing of Rs 65.2 crore and 0.2 time, respectively, as on March 31, 2018. Liquidity has also improved as some portion of the proceeds from IPO have been used to reduce utilisation of bank lines. The upgrade also factors in continuous improvement in business risk profile with 19% annual increase in revenue to Rs 243 crore in fiscal 2018 from Rs 203.5 crore in fiscal 2017 and expansion in operating margin to 12.4% from 10.5%.
 
The ratings continue to reflect MMP's established market position in the aluminium powder products industry, with continuous scale up of operations and established clientele; aided by the extensive experience of its promoters. The ratings also factor in the moderate financial risk profile. These strengths are partially offset by vulnerability to volatility in raw material prices.

Key Rating Drivers & Detailed Description
Strengths
* Extensive experience of the promoters:
Benefits from the promoters' experience of more than three decades, their in-depth knowledge of industry dynamics and established relationships with suppliers and customers should continue to support the business. Revenue has increased to Rs 243 crore in fiscal 2018 from Rs 157.5 crore in fiscal 2015.
 
* Moderate financial risk profile:
Networth almost doubled to Rs 83.22 crore as on March 31, 2018 from Rs 46.4 crore a year ago on account of MMP going public. Gearing was also low at 0.42 time as on March 31, 2018. Debt protection metrics are adequate as reflected in interest coverage and net cash accrual to total debt ratios of 7.8 times and 0.46 time, respectively, for fiscal 2018. Financial risk profile is expected to remain healthy over the medium term.
 
* Credit availability and reduction in procurement costs due to agreements with suppliers:
MMP has entered into agreements with its suppliers, National Aluminium Company Ltd and Bharat Aluminium Company Ltd, for bulk procurement, which ensures raw material availability, reduced procurement costs, and letter of credit-backed supplies. This has allowed working capital cycle to remain stable.
 
Weakness
* Vulnerability to volatility in raw material prices:
Prices of raw materials such as aluminium ingots and foils, which account for nearly 75% of sales, are volatile and mainly governed by demand-supply dynamics. The company may be able to pass on increase in input prices partially, leading to volatility in operating margin.
Outlook: Stable

CRISIL believes MMP will continue to benefit from its established presence in the aluminium powder product industry and the extensive experience of its promoters. The outlook may be revised to 'Positive' if revenue and profitability increase and financial risk profile is stable. The outlook may be revised to 'Negative' if decline in revenue or profitability or any time or cost overrun in the ongoing capital expenditure weakens financial risk profile. 

About the Company

MMP, incorporated in 1984, is promoted by Mr Arun Bhandari and his father-in-law Mr PM Lodha. The Nagpur (Maharashtra)-based entity manufactures aluminium-based products such as pyro and flake aluminium powder, atomised aluminium powder, aluminium paste, and aluminium conductors.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs. crore 242.84 203.50
Profit after tax (PAT) Rs. crore 15.37 14.49
PAT margin % 6.33 7.12
Adjusted debt/adjusted networth Times 0.42 0.88
Interest coverage Times 7.81 5.04

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)
Rating assigned
with outlook
NA Bill Discounting NA NA NA 3.0 CRISIL A2
NA Cash Credit NA NA NA 29.0 CRISIL BBB+/Stable
NA Letter of Credit NA NA NA 8.0 CRISIL A2
NA Foreign Currency Term Loan NA NA 18-May-19 3.0 CRISIL BBB+/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  35.00  CRISIL BBB+/Stable/ CRISIL A2      12-09-17  CRISIL BBB/Stable/ CRISIL A3+  22-08-16  CRISIL BBB-/Positive/ CRISIL A3  29-06-15  CRISIL BBB-/Stable/ CRISIL A3  CRISIL BBB-/Stable/ CRISIL A3 
Non Fund-based Bank Facilities  LT/ST  8.00  CRISIL A2      12-09-17  CRISIL A3+  22-08-16  CRISIL A3  29-06-15  CRISIL A3  CRISIL A3 
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
Bill Discounting 3 CRISIL A2 Bill Discounting 3 CRISIL A3+
Cash Credit 29 CRISIL BBB+/Stable Cash Credit 29 CRISIL BBB/Stable
Foreign Currency Term Loan 3 CRISIL BBB+/Stable Foreign Currency Term Loan 3 CRISIL BBB/Stable
Letter of Credit 8 CRISIL A2 Letter of Credit 8 CRISIL A3+
Total 43 -- Total 43 --
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 Chemical Industry
CRISILs Criteria for rating short term debt

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