Rating Rationale
January 23, 2020 | Mumbai
MSR India Limited
'CRISIL BB-/Stable' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.30.5 Crore
Long Term Rating CRISIL BB-/Stable (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL BB-/Stable' rating to the bank facilities of MSR India Limited (MSRIL).
 
The rating reflect MSRIL's established market position, moderate working capital cycle and moderate financial profile. These strength are partially offset by its susceptibility of the operating margin to volatility in commodity prices and presence in a highly fragmented industry with limited size.

Key Rating Drivers & Detailed Description
Strengths: 
* Established market position:
MSRIL moderate scale provides it an operating flexibility in an intensely competitive industry. Further, it also benefits from the promoters' experience of over the decades, their strong understanding of market dynamics, and healthy relations with customers and suppliers and will continue to support the business.
 
* Moderate working capital cycle:
Gross current assets were at 97 ' 101 days over the three fiscals ended March 31, 2019. Its moderate working capital management is reflected in its gross current assets (GCA) of 97 days as on March 31, 2019 as against over 108 days GCAs of some of its peers.
 
* Moderate financial profile:
MSRIL's capital structure have been at moderate healthy level due to limited reliance on external funds yielding moderate total outside liabilities to tangible net-worth (TOL/TNW) for last three year ending on 31st March 2019. MSRIL's debt protection measures have also been at comfortable level despite leverage due to moderately healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 2.79 times and 0.10 times for fiscal 2019. MSRIL debt protection measures are expected to remain at similar level over medium term.
 
Weaknesses:
* Susceptibility of the operating margin to volatility in commodity prices: Operating margins are exposed to volatility in raw material prices, moreover raw material cost accounts for 45% of the operating revenue/total manufacturing cost.
 
* Presence in a highly fragmented industry with limited size:
The industry is highly fragmented and competitive, with a large number of unorganized players in the market. Such high fragmentation limits the pricing flexibility and bargaining power of the players. Also, the threat from large integrated players in the form of capacity additions limits the growth. The industry is exposed to the risk low entry barriers. The small initial investment and the low complexity of operations have resulted in existence of innumerable entities, much smaller in size, leading to significant fragmentation.
Liquidity Stretched

Bank limit utilization is at around 90% with sufficient accruals to clear off the Debt obligation and a moderate current ratio 1.24 times on March 31, 2019.

Outlook: Stable

CRISIL believe MSRIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.
 
Rating Sensitivity Factors:
Upward factors
* Improvement in cash accruals above 15%.
* Improvement in working capital cycle.
 
Downward factors
* Decline in operating margins below 4%.
* Witnesses a substantial increase in its working capital requirements thus weakening its liquidity & financial profile.

About the Company

MSRIL was incorporated in 2002. MSRIL is owned & managed by K.V. Rajasekhar Reddy. MSRIL is engaged in manufacturing of copper bottles, battery cell cases and consumer goods such as Pasta, Vermicelli, Chakki Atta, battery cells. MSRIL market it under brand name 'Today' under consumer Goods and 'Dr. Copper' under Copper water bottles. MSRIL manufacturing facility is located in Hyderabad (Telangana).

Key Financial Indicators
As on / for the period ended March 31  Units 2019 2018
Operating income Rs crore 170.02 122.05
Reported profit after tax Rs crore 0.62 1.58
PAT margins % 0.29 1.45
Adjusted Debt/Adjusted Net worth Times 1.00 0.36
Interest coverage Times 2.79 6.44
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 Cash Credit NA NA NA 30.1 CRISIL BB-/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 0.4 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  30.50  CRISIL BB-/Stable    --    --    --    --  -- 
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
Cash Credit 30.1 CRISIL BB-/Stable -- 0 --
Proposed Long Term Bank Loan Facility .4 CRISIL BB-/Stable -- 0 --
Total 30.5 -- Total 0 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Approach to Recognising Default
CRISILs Bank Loan Ratings
The Rating Process

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