| R C Plasto Tanks and Pipes Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable/CRISIL A2+’ ratings on the bank facilities of R C Plasto Tanks and Pipes Private Limited (RCPL).
The ratings continue to reflect established market position of RCPL in the water tanks and pipe and pipe fitting segment, efficient working capital management and a healthy financial risk profile andliquidity. These strengths are partially offset by exposure to intense and increasing competition and volatility in raw material prices.
RCPL recorded total operating income and operating profitability margin of Rs.884 crore and 11.6% in fiscal 2022 vis-à-vis Rs.784 crore and 14.6%. The revenue growth of around 14% in fiscal 2022 has been driven by higher realisations and modest volume growth. Operating profitability margin was impacted in fiscal 2022 in comparison to previous year because of intensified competition, especially in the water tank segment and rise in input costs. Revenue growth of over 20% is projected in fiscal 2023, backed by increasing geographical presence and healthy demand prospects for water solution products. The company also benefits from enhanced capacities and introduction of new products on regular basis.
Financial risk profile continues to be healthy, driven by limited reliance on external debt owing to strong cash flow from operations. Though the company has been regularly incurring capital expenditure (capex), reliance on debt has been minimal. Furthermore, working capital cycle is managed efficiently, reflected in negligible debtors and moderate inventory. |
Key Rating Drivers & Detailed Description Strengths:
Longstanding presence of the promoters in the plastic tanks and pipes segment helped the company establish its market position in the industry, as reflected in consistent revenue growth over the nine fiscals through 2022. The company has established a dominant position in the water tank segment, primarily in central India and built a strong brand, Plasto, in the region. The company has a wide network of over 1,500 distributors and has been continuously foraying into newer geographies such as Uttar Pradesh and Telangana, which should help the company grow and reduce geographical concentration. The promoters’ extensive industry experience and understanding of the market dynamics also support the overall business risk profile. RCPL’s manufacturing plants are in Nagpur, central India, which aids the company in reaching wider geographies while also benefiting from advantages of operating from a single location.
The company is able to drive its sales growth without any incremental reliance on debt, backed by efficient working capital management. The company has strict control over receivables (which remained low at 1-2 days) as majority sales to distributors is against advance. Overall gross current assets remained modest in the range of 75-81 days over the four fiscals ended March 31, 2022, driven by inventory of 38-54 days.
Financial risk profile is expected to remain healthy, supported by steady cash accrual and continued low debt. Networth and gearing were Rs 292.0 crore and 0.1 time, respectively, as on March 31, 2022. Debt protection metrics were robust, indicated by interest coverage ratio of over 48 times in fiscal 2022. Capex of Rs 100 crore was undertaken during the last two fiscals, majorly funded by internal accruals with limited reliance on term loan. Annual capex of around Rs 40-50 crore is expected to be majorly funded by accruals over medium term. Furthermore, acquisition of Vidarbha Iron & Steel Corporation Ltd (VISCO) in 2021 was funded by internal sources without any reliance on external debt. Driven by steady and healthy cash accruals and continued low debt levels, the financial risk profile is expected to remain healthy over medium term as well.
Weaknesses:
Intense competition may continue to constrain scalability, pricing power and profitability. Competitive pressure was high in the pipe and fittings segment, with foray of new payers in the water tanks segment. Profitability also remains susceptible to volatility in the prices of raw materials (crude oil derivatives). Furthermore, the company imports certain raw material and, hence, will continue to be exposed to foreign exchange risk.
The company derives over 70% of its revenue from the top three states and remains exposed to increasing competition from other players in the industry. Though the company is expanding geographically, cost of logistics is a critical component in the final price and maintaining cost competitiveness in new markets is essential. |
Liquidity: Adequate Net cash accrual, expected at Rs 90-100 crore per annum over medium term, sufficient to meet maturing debt obligation of Rs 3-4 crore and shall also support capex and incremental working capital requirements. Bank limit utilisation was 11% on average over the 12 months through June 2022. Current ratio was 1.4 times as on March 31, 2022. The company maintains surplus liquidity in the form of mutual funds and fixed deposits of Rs 15-20 crore; the company extends interest-bearing loans and advances from this surplus to known parties, the quantum of the same will be critically monitored. |
Outlook: Stable CRISIL Ratings expects RCPL will continue to benefit from extensive experience of its promoters and brand presence in key geographies. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in September 2010 by Mr Neelesh Agrawal and his family members, RCPL manufactures plastic products, such as roto-moulded/blow-moulded tanks, polyvinyl chloride/high-density polyethylene pipes and fittings and drip irrigation systems, at its facilities in Nagpur, Maharashtra. The company commenced commercial operations from April 2012 and sells products under the Plasto brand. In 2021, the company acquired VISCO, which currently has no business activity. |
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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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This Annexure has been updated on 18-Oct-22 in line with the lender-wise facility details as on 28-Aug-21 received from the rated entity.
Criteria Details
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