Key rating drivers and detailed description

Strengths:

Established market position and strong relationship with MSIL

Presence of around three decades in the auto components industry has enabled the promoters to establish a strong customer base. Being a major supplier of bumpers, instrument panels and other parts for various car models, MPL is strategically important for MSIL, the key client. Proximity to MSIL's plants in Gurugram and Manesar in Haryana reduces freight cost, enabling MPL to quote the lowest price and ensure timely availability of products.

Efficient working capital management

Gross current assets are estimated to be 74 days as on March 31, 2022 (76 days as on March 31, 2021). Receivables and inventory remained at 51 days and 29 days (59 days and 27 days as on March 31, 2021). Raw material is sourced from the domestic market against credit period of 30-35 days on average. Timely realisation from MSIL further supports the working capital cycle.

Weaknesses:

Modest scale of operations and high customer concentration in revenue

The company has recorded revenue of Rs 265 crore in fiscal 2022, against Rs 210 crore in fiscal 2021. However, the scale of operations continues to remain average. Revenue in fiscal 2023 is expected to grow 15-17% on account of recovery in demand from its customers, majorly MSIL, which contributes to around 90% of MPL’s total sales and addition of new customers, such as Daikin and Exide. The product portfolio is restricted to a few plastic components. The company caters mainly to MSIL through direct sales to the primary and replacement segments and does not have its own brand. The company has now started diversifying into plastic components for non-auto segments and manufacturing of die and castings. Incremental revenue from these segments will remain a key monitorable.

Vulnerability to fluctuations in raw material prices

As polypropylene compound, the key raw material, is a downstream petrochemical product, its price is highly volatile. Since cost of procuring the raw material accounts for a bulk of total operating revenue, even a slight variation in rates may drastically impact profitability. Also, as the sale price to MSIL is based on average raw material prices prevailing in the current quarter, MSIL factors in any price escalation (only if incremental cost is beyond a certain threshold) with a time lag of up to three months.

Key Financial Indicators

Annexure - Details of Instrument(s)

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