| Nithya Packaging 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 ratings on the bank facilities of Nithya Packaging Private Limited (NPPL; part of Nithya group) to ‘CRISIL BBB/Stable/CRISIL A3+’ from ‘CRISIL BBB-/Stable/CRISIL A3’.
The upgrade reflects sustained improvement in its operational performance during the last 3 years ended fiscal 2021 during which operating income grew at a compounded annual growth rate of about 10% supported by ramp up of operation in Srilankan subsidiary. With steady demand for corrugated boxes and expected increase in captive consumption of kraft paper from current 50% level, business risk profile is expected to improve over the medium term. Financial risk profile also has improved over the period marked by gearing of 1.24 times as on March 31, 2021 vis-à-vis 2.4 times as on March 31, 2019 supported by moderate accretion to reserves and repayment of term debt. With steady retirement of term debt and absence of large debt-funded capital expenditure plans, financial risk profile should improve further over the medium term.
The ratings continue to reflect the extensive experience of the promoters in the packaging industry, and the group’s healthy operating efficiency and improving financial risk profile. These strengths are partially offset by susceptibility to intense competitive pressure and volatile raw material prices |
Analytical Approach To arrive at the ratings, CRISIL Ratings has consolidated the business and financial risk profiles of NPPL and its subsidiaries Nithya Paper and Boards Lanka Pvt Ltd (NPBLPL) and Nithya Steels and Alloys private limited (no operation in the company).
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: * Extensive experience of promoters' in the packaging industry: Supported by promoters’ long-standing experience in the packaging industry, the group has established strong relations with their key customers over past ten years, and have gained repeat orders.
* Sound operating efficiency: Operations are integrated, with the presence of both kraft paper and packaging segments. Raw material requirements of the packaging division are met by the paper division, ensuring high operating efficiencies. Operating margin has remained healthy in the range of 13-17% during the last 3 fiscal ended 2021. Lock down measures taken by government because of COVID outbreak has not impacted the group as the group caters to FMCG industry and has been classified as essential goods. With addition of new capacity in its packaging division, captive consumption of kraft paper is expected to increase and consequently, profitability is expected to improve.
* Above average financial risk profile: Financial risk profile has improved in fiscal 2021 followed by repayment of term debt and moderate net worth levels. Gearing improved to 1.24 time as on March 31, 2021 from 2.43 times as on March 31, 2019. Interest coverage improved to over 5 times in fiscal 2021 from 3.3 times in fiscal 2020 and is estimated to improve further supported by reducing debt levels and healthy operating profitability.
Weakness: * Susceptibility to intense competitive pressure and fluctuations in raw material prices: Intense competition in the paper and packaging industry should continue to constrain business risk profile. Also, susceptibility to volatile raw material (waste paper) prices, which are linked to international rates, persists. Any adverse impact in profitability due to volatility in material prices could hamper its improvement in financial risk profile over the medium term |
Liquidity: Adequate Liquidity is adequate. The group is estimated to generate accruals of over 30 crores against repayment obligation of about Rs 12 crores per annum. Bank limit utilisation is moderate at around 69 percent for the past twelve months ended June - 2021. In the absence of large capital expenditure plans, liquidity should improve further. However, any large fund support for investment in group companies shall remain a key rating sensitivity factor. |
Outlook: Stable CRISIL Ratings believes that Nithya group will continue to benefit from its promoters' extensive experience and healthy operating efficiency. |
Rating Sensitivity Factors Upward factor
Downward factor
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About the Company Set up in 1997, NPPL is the flagship entity of the Nithya group and manufactures kraft paper and corrugated boxes at its unit in Puducherry. Operations are managed by Mr Thamodharan and Mr Vijayaraman. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 - List of Entities Consolidated
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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 | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Bank Guarantee | Indian Bank | 2 | CRISIL A3+ |
| Cash Credit | Axis Bank Limited | 25 | CRISIL BBB/Stable |
| Cash Credit | Indian Bank | 5 | CRISIL BBB/Stable |
| Long Term Loan | Axis Bank Limited | 51.67 | CRISIL BBB/Stable |
| Proposed Long Term Bank Loan Facility | Not Applicable | 0.55 | CRISIL BBB/Stable |
| Total | - | 84.22 | - |
This Annexure has been updated on 17-Aug-2021 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity.
Criteria Details
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