Detailed Rationale

CRISIL Ratings has upgraded its ratings on the bank loan facilities of Pudumjee Paper Products Limited (PPPL) to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Positive/CRISIL A2+’.

CRISIL Ratings has also migrated its rating on the fixed deposit programme of PPPL from ‘FA/Positive’ to ‘CRISIL A-/Positive’ and then simultaneously upgraded to 'CRISIL A/Stable' from ‘CRISIL A-/Positive’.

The upgrade reflects sustained improvement in business risk profile supported by recovery in demand and increased realizations during FY22 and continuation of enhanced operating margin during FY22. Revenue improved to Rs 555.4 crore during FY22 as against revenue of Rs 436.9 crore during FY21 and this is backed by steady demand (~7% y-o-y growth) and improved realization (~17% y-o-y growth). Operating margin has continued to remain comfortable at 12.7% during FY22, despite increase in raw material prices, driven by higher sales from better margin products such as print base, opaque laminating base, glassine tissue and other miscellaneous paper, and also by company’s focus on tailor-made products. Going ahead, the volumetric sales are expected to improve driven by steady demand for the products. Realization is expected to remain at comfortable level going ahead and this is expected to support the overall revenue growth over the medium term. Supported by comfortable margins, healthy accretion to reserves and limited reliance on external debt, the financial risk profile metrics are expected to remain at healthy level.

The rating migration on the FD programme follows the revision in CRISIL Ratings’ rating scale for fixed deposit (FD) programmes, which is now aligned with the SEBI-standardised 20-point long term scale. Previously, CRISIL Ratings used a 14-point scale for assigning ratings to the FD programmes of issuers. This alignment is in compliance with the regulatory guidelines as per circular issued by the Securities and Exchange Board of India (SEBI) on July 16, 2021 and the subsequent SEBI circular dated April 1, 2022, for standardizing the rating scales used by the Credit Rating Agencies.  

This migration represents only a recalibration of the rating from one scale to another and does not reflect any change in the credit risk profile of the fixed deposit programme. It is neither an upgrade nor a downgrade of the underlying credit risk profile of the FD programme.  (Please refer to CRISIL’s criteria for rating fixed deposit programmes for further details).

The ratings reflect PPPL’s established market position in the specialty paper segment supported by extensive experience of the promoters and its wide product portfolio. The rating also factors in its healthy financial risk profile. These strengths are partially offset by exposure to intense competition in the paper industry, and susceptibility of profitability to volatility in raw material prices.

Key Financial Indicators

Annexure - Details of Instrument(s)

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