Rating Rationale
February 17, 2022 | Mumbai
Perfectpac Limited
Ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.10.55 Crore
Long Term RatingCRISIL BBB-/Stable (Reaffirmed)
Short Term RatingCRISIL A3 (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings on the bank facilities of Perfectpac Limited (PPL).

 

The ratings continue to reflect the company’s established position in the corrugated box industry, longstanding relationships with clients and comfortable financial risk profile. These strengths are partially offset by modest scale of operations and exposure to intense competition.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position and longstanding client relationships: Presence of more than four decades in the corrugated box segment has enabled the company to establish healthy relationships with customers. The key clients have been associated with PPL for more than two decades. The company now has also started to diversify its customer mix with focus on FMCG industry along with existing consumer goods industry customers.

 

  • Comfortable financial risk profile: The networth was moderate at Rs 28.34 crore as on March 31, 2021. Gearing and total outside liabilities to adjusted networth ratio were healthy at 0.35 time and 0.63 time, respectively, as on March 31, 2021. The debt protection metrics were strong, with net cash accrual to total debt and interest coverage ratios at 0.26 times and 5.65 times, respectively, for fiscal 2021. With higher credit period expected to be extended for new customer acquisition as well has higher working capital requirement amid increasing input costs, the working capital borrowing are expected to increase over medium term. Also, any unanticipated debt-funded capex could have a bearing on financial risk profile. Hence, the same would remain a key rating monitorable.

 

Weaknesses:

  • Modest scale of operations amid exposure to intense competition: With turnover of Rs 65.90 crore in fiscal 2021, the scale remains small. The same stood moderated from Rs. 73 crore in Fiscal 2020 and Rs. 78 crore in Fiscal 2019, largely on account of impact of Covid-19.

 

During 9MFY22 (Apr-Dec 2021), it has already achieved sales of Rs. 63 crore.

 

  • Susceptibility to intense competition and cyclicality in the industry: The industry is highly fragmented with several organised and unorganised players. Competition is intense. Consequently, players have limited pricing flexibility and bargaining powers. This situation is expected to continue over the medium-to-long term, as consolidation is unlikely because of unviable capacities.

 

During Fiscal 2021, the operating margins stood moderated to 4.4% from 7.3-7.5% over past 3 earlier years, largely due to increase in raw material and input costs and inability of the company to time pass on the same to its customers. During 9MFY22, the margins were at 4.75%.

Liquidity: Adequate

Bank limit utilisation is moderate at around 60 percent for the past twelve months ended January 2022. Cash accrual are expected to be over Rs 3 crore in Fiscal 2022 and Rs. 4 crore in Fiscal 2023, which would be sufficient  against term debt obligation of Rs 0.80-1 crore per year over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio are healthy at 2.12 times on March 31, 2021. Low gearing and moderate net worth support its financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Ratings believes PPL will continue to benefit, over the medium term, from its established relationships with customers.

Rating Sensitivity factors

Upward factors:

  • Increase in operating income by more than 20% per fiscal and in the operating margin by 200 basis points, leading to an increase in cash accrual
  • Improvement in the working capital cycle

 

Downward factors:

  • Decline in operating income by more than 20% per fiscal
  • Fall in the operating profitability margin by 200 basis points
  • Larger-than-expected, debt-funded capital expenditure, weakening the financial risk profile

About the Company

Incorporated in 1973 as a private limited company and reconstituted as a public limited company in 1994, PPL is promoted by Mr Sanjay Rajgarhia. It manufactures corrugated boxes and boards at its facilities in Greater Noida, Uttar Pradesh. The company is listed on the Bombay Stock Exchange and the Calcutta Stock Exchange.

 

PPL has reported the sales of Rs. 63.35 crore and PAT of Rs. 0.51 crore in first 9 months period ended Sept 30, 2021 against sales and PAT of Rs. 41.70 and Rs 0.20, respectively for same period last year.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

65.90

73.28

Reported profit after tax

Rs crore

0.91

2.91

PAT margins

%

1.17

3.56

Adjusted Debt/Adjusted Net worth

Times

0.35

0.10

Interest coverage

Times

5.65

13.92

Status of non cooperation with previous CRA

PPL had not cooperated with Brickwork Ratings India Private Limited (Brickworks), which classified it as non-cooperative vide release dated October 27, 2017. The reason provided by Brickworks is non-furnishing of information by PPL for monitoring of ratings.

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)

ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs crore) Complexity level Rating assigned with outlook
NA Cash credit NA NA NA 7.5 NA CRISIL BBB-/Stable
NA Letter of credit & bank guarantee NA NA NA 1 NA CRISIL A3
NA Term loan NA NA Dec-2024 2.05 NA CRISIL BBB-/Stable
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 9.55 CRISIL BBB-/Stable   --   -- 17-11-20 CRISIL BBB-/Stable 06-12-19 CRISIL BBB-/Stable CRISIL BBB-/Stable
Non-Fund Based Facilities ST 1.0 CRISIL A3   --   -- 17-11-20 CRISIL A3 06-12-19 CRISIL A3 CRISIL A3
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 7.5 CRISIL BBB-/Stable
Letter of credit & Bank Guarantee 1 CRISIL A3
Term Loan 2.05 CRISIL BBB-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Paper Industry

Media Relations
Analytical Contacts
Customer Service Helpdesk

Pankaj Rawat
Media Relations
CRISIL Limited
B: +91 22 3342 3000
pankaj.rawat@crisil.com

 


Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com


Nitin Kansal
Director
CRISIL Ratings Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Nilesh Agarwal
Associate Director
CRISIL Ratings Limited
D:+91 79 4024 4531
Nilesh.Agarwal1@crisil.com


Devansh Jain
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 124 672 2000
Devansh.Jain@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.


For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html