Rating Rationale
September 27, 2018 | Mumbai
Perfectpac Limited
Ratings upgraded to 'CRISIL BBB-/Stable/CRISIL A3'
 
Rating Action
Total Bank Loan Facilities Rated Rs.10.55 Crore
Long Term Rating CRISIL BBB-/Stable (Upgraded from 'CRISIL BB+/Stable')
Short Term Rating CRISIL A3 (Upgraded from 'CRISIL A4+')
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 Perfectpac Ltd (PPL) to 'CRISIL BBB-/Stable/CRISIL A3' from 'CRISIL BB+/Stable/CRISIL A4+'.

The upgrade reflects sustained scale of operations on the back of an established clientele: operating income of Rs 80.62 crore in fiscal 2018 grew by 9 per cent. The upgrade also factors in the improvement in operating margin to 7.3% in fiscal 2018 from 6.3% in the previous fiscal. Further, the company recorded operating margins of 7.5 per cent in Q1 2019. Improvement in operating margins is expected to lead to cash accruals of Rs. 4.5-5 crore in fiscal 2019 as compared to Rs. 4.1 crore in fiscal 2018. Better profitability has also resulted in improvement in debt protection metrics, reflected in interest coverage and net cash accrual to total debt ratios of 9.4 times and 0.7 times, respectively, for fiscal 2018; against 7.1 times and 0.48 time, respectively, in fiscal 2017. The same is also expected to improve further in fiscal 2019 with no major debt funded capex plans over the medium term.

The ratings reflect PPL's established position in the corrugated box industry, longstanding relationship 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 relationship: Presence of more than four decades in the corrugated box segment has enabled the company to establish healthy relationship with customers. Key client, LG Electronics India Pvt Ltd, accounts for 27-30% of total revenue and has been associated with PPL for more than two decades.

* Comfortable financial risk profile: Networth was moderate at Rs 22.13 crore as on March 31, 2018, and gearing and total outside liabilities to adjusted networth ratio healthy at 0.27 time and 0.56 time, respectively. Also, debt protection metrics were strong, with net cash accrual to total debt and interest coverage ratios of 0.70 time and 9.51 times, respectively, for fiscal 2018. Financial risk profile will remain steady over the medium term.

Weaknesses
* Modest scale of operations and exposure to intense competition: With turnover of Rs 80.6 crore in fiscal 2018, scale remains small. This is compounded by intense competition in the packaging industry that has low entry barrier. 
Outlook: Stable

CRISIL believes PPL will continue to benefit over the medium term from its established relationship with customers. The outlook may be revised to 'Positive' if a substantial improvement in revenue, profitability, and cash accrual strengthens business risk profile. The outlook may be revised to 'Negative' if lower-than-expected business growth and profitability, significant debt-funded capital expenditure, or considerable stretch in working capital cycle weakens 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. The company is listed on the Bombay Stock Exchange and Calcutta Stock Exchange.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs.Cr 80.62 73.90
Profit After Tax (PAT) Rs.Cr 2.57 1.92
PAT Margin % 3.2 2.59
Adjusted debt/adjusted Networth Times 0.27 0.36
Interest coverage Times 9.4 7.26

Status of non cooperation with previous CRA
PPL has not cooperated with Brickwork Ratings India Private Limited (Brickwork) which has Classified it as Non Cooperative vide release dated October 27th 2017 . The reason provided by Brickwork is non-furnishing of information required for monitoring of ratings.

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 Cash Credit NA NA NA 7.5 CRISIL BBB-/Stable
NA Letter of credit & Bank Guarantee NA NA NA 2.5 CRISIL A3
NA Proposed Long Term Bank Loan Facility NA NA NA 0.55 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  8.05  CRISIL BBB-/Stable      27-09-17  CRISIL BB+/Stable    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  2.50  CRISIL A3      27-09-17  CRISIL A4+    --    --  -- 
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 7.5 CRISIL BBB-/Stable Bank Guarantee .05 CRISIL A4+
Letter of credit & Bank Guarantee 2.5 CRISIL A3 Cash Credit 6.5 CRISIL BB+/Stable
Proposed Long Term Bank Loan Facility .55 CRISIL BBB-/Stable Letter of Credit 4 CRISIL A4+
Total 10.55 -- Total 10.55 --
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

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@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
CRISIL Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Himank Sharma
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com


Ojaswini Gupta
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2181
Ojaswini.Gupta@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. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are 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

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets 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 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY
 
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 forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of 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 providing or intending to provide any services in jurisdictions where CRISIL 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 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 or otherwise 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 Rating 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 assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL 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.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL 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 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 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. CRISIL’s public ratings and analysis 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 web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING 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 a prior written consent of CRISIL.

All rights reserved @ CRISIL