| RSPL LIMITED | ||||||
| Ratings reaffirmed at 'CRISIL AA- / Stable / CRISIL A1+' | ||||||
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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 AA-/Stable/CRISIL A1+’ ratings on the bank facilities and debt instruments of RSPL Limited (RSPL).
CRISIL Ratings has withdrawn its rating on bank facilities totalling Rs.800 crores and non-convertible debentures (NCDs) of Rs 200 crore basis confirmation from lenders and debenture trustee respectively that these instruments are fully repaid. Simultaneously, CRISIL Ratings has also reduced the rated quantum of commercial paper by Rs.200 Crore, as there is no outstanding against the same, basis request from the company. The withdrawal of ratings on bank facilities, NCDs and reduction in rated quantum of commercial paper is in line with CRISIL Ratings policy of withdrawal.
CRISIL’s ratings on RSPL continue to reflect the company's strong market position with leadership of its 'Ghadi' brand in detergent industry coupled with improving financial risk profile of the company. These rating strengths are partially offset by brand concentration, susceptibility of operating margins to volatility in input cost and exposure to competitive nature of the industry.
During fiscal 2021, the company posted healthy 17% growth in the revenues as the overall focus on hygiene during the pandemic coupled with healthy performance of the newly launched products and increased penetration in the relatively underpenetrated markets aided the revenue growth, while the operating margins too saw improvement to over 21% in fiscal 2021 from ~14% in fiscal 2020, owing to lower prices of linear alkyl benzene (LAB, a crude derivative and key raw material) as well as higher business levels. The soda ash project at Dwarka for backward integration, commissioned in October 2019, also operated at over 90% utilization during the fiscal and met the captive requirement of soda ash of the company.
The revenue growth is expected to be moderate in fiscal 2022, as the second wave of the pandemic is likely to have a higher impact compared to the first wave, in the hinterland, which contributes significantly to RSPL’s revenues. Also operating margins too are expected to moderate as the crude prices have surged and are back to pre-pandemic levels over past few months, leading to higher raw material costs (mainly LAB). Additionally, the removal of anti-dumping duty on soda ash in fiscal 2020 is also expected to keep the contribution from soda ash project to overall profitability lower. Furthermore, RSPL has recently taken marginal price cuts recently to pass on lower raw material costs to consumers. Nevertheless, the operating margins are expected at over 15% over medium term.
The debt levels, which had earlier peaked at Rs 3198 crore as on March 31, 2020, mainly owing to ~Rs 2400 crore debt availed for the soda ash project, have reduced by ~Rs 700 crore during fiscal 2021, owing to scheduled repayments and pre-payments of term debt, as well as lower working capital borrowings. Earlier, the company had planned an equity raise of upto Rs.1500 crore, and this may now happen in fiscal 2023. While future capital spending is expected to be moderate, existing debt levels still remain sizeable, and sizable reduction in the same through internal accruals or raising of equity over next couple of fiscals will remain monitorable.
RSPL's debt metrics such as total debt to earnings before interest, tax, depreciation and amortisation (EBIDTA) was at elevated levels at 5.2 times in fiscal 2020, and improved to ~2.1 times in fiscal 2021 owing to higher operating profitability and reduction in debt. Same is expected to range between 2-3 times, over medium term, unless debt is reduced through equity raise. Also, owing to the large capital expenditure on the soda ash project, the RoCE (Return on capital employed) is moderate at ~12%. Better contribution from the soda ash project can help improve the RoCE.
Financial flexibility continues to be healthy, with the project debt repayments well-spaced out over 11 years till 2031 and ballooning in nature. The liquidity also remains comfortable with cash and equivalents of over Rs 150 crore presently and unutilized working capital limits of over Rs 400 crore. The scheduled term debt repayments are ~Rs 200-240 crore p.a. over medium term as against expected cash accrual of over Rs 500 crore. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has consolidated RSPL and its wholly owned subsidiary - RSPL Health Private Ltd, as these companies have common management and financial and operational linkages.
Please refer Annexure - Details of consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: * Leadership position in the economy segment of detergent industry, especially in North and Central India RSPL has a leadership position in the economy detergent segment through its flagship brand, Ghadi, especially in North and Central India. RSPL has established a strong network of distributors and dealers. Its revenues registered compound annual growth rate of around 6% over the past 5 fiscals through fiscal 2021. During fiscal 2021, revenues registered a healthy 17% growth, supported by overall focus on hygiene during the pandemic, healthy performance of the newly launched products and increased penetration in the relatively underpenetrated markets.
CRISIL believes that RSPL will continue to benefit from the strong brand equity of its flagship brand, Ghadi, and focus on penetrating into new geographies gradually over the medium term. In the absence of material capacity additions, revenue growth will continue at modest levels, depending on end-product prices. Operating profitability remains healthy, and will be less volatile, due to captive sourcing of soda ash.
* Healthy financial risk profile, marked by strong debt protection metrics and steady cash accruals RSPL has a healthy financial risk profile, marked by steady cash accruals and strong debt protection metrics. The company has set up a 0.5 million tonne per annum (mtpa) soda ash plant to integrate backwards and secure its raw material supply. RSPL's financial risk profile had moderated between fiscals 2018 to 2020 due to contraction of large project debt of ~Rs. 2400 crore. Post project completion, and supported by a strong performance in fiscal 2021, debt levels have reduced by ~Rs.700 crores, leading to good improvement in debt metrics, such as interest cover (~5.3 times in 2021 from 2.5 times in 2020) as well as debt/EBITDA.
The financial flexibility continues to be comfortable with well-spaced out debt repayments over 11 years, commencing from fiscal 2021. The liquidity of the company is supported by cash and equivalents of around Rs 150 crore and unutilized bank lines of over Rs 400 crore.
The company's working capital requirements are low owing to its cash nature of business. The debtor days have remained between 2-4 days over past 10 years, while inventory days are matched with payable days. RSPL had dues from the government of over Rs. 500 crore as on March 31, 2020, in the form of GST receivables and capital subsidy receivables, the recovery of the same will also help accelerated improvement in the financial profile.
Weaknesses * High dependence on Ghadi brand and competitive nature of the industry RSPL has high dependence on the Ghadi brand, which contributes to over 90% of its revenue and profits. The company has expanded its product and brand portfolio with new products such as Uniwash (mid-premium category detergent), Xpert (dish washing soaps), and Venus (bathing soaps), and Pro-ease (sanitary pads) as well as Glori (bathing soaps) which was launched in the fourth quarter of fiscal 2020. The company intends to diversify its product offerings further over the medium to long term; in the interim it will continue to extensively depend on the Ghadi brand. |
Liquidity Strong RSPL has healthy liquidity driven by expected cash accruals of more than Rs 500 crore per annum over medium term, as against term debt repayments of Rs. 200-240 crore over similar period. The liquidity is also supported by cash and cash equivalents of around Rs 150 crore as on and availability of unutilized bank lines of over Rs 400 crore. The company will undertake modest capex over medium term. CRISIL Ratings expects RSPL’s internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations, as well as incremental capex and working capital requirements. |
Outlook Stable CRISIL Ratings believes that RSPL will continue to benefit from its established market position, and improving operating efficiencies due to backward integration in soda ash project. Also the financial profile is also expected to continue to benefit from progressive repayment of debt with improved cash accruals, and modest capex spend over the medium term. A possible equity raise over medium term could further help deleverage the balance sheet significantly resulting in stronger debt metrics. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company RSPL was incorporated in 1988 as a manufacturer of detergents. The company sells detergent powders and cakes through Ghadi, its flagship brand. RSPL has also launched other brands such as Uniwash, Xpert, Venus and Pro-ease.
RSPL has set up 0.5 MTPA soda ash plant in Dwarka district of Gujarat. The company has commenced operations of one stream of the project in March 2019 while second stream commenced operations in October 2019. RSPL also set up a cogeneration steam and power plant to produce 300 tonne per hour of steam and 50 megawatt of power. The overall project cost was ~Rs. 4250 crore, and involved sizeable debt funding. |
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)
#Yet to be issued *Including sublimit of 90 Crore for NFB
Annexure - Details of Rating Withdrawn
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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 Bank Lenders & Facilities | ||
| Facility | Amount (Rs.Crore) | Rating |
| Cash Credit | 160 | CRISIL AA-/Stable |
| Cash Credit | 40 | CRISIL AA-/Stable |
| Cash Credit& | 90 | CRISIL AA-/Stable |
| Foreign Currency Term Loan | 113.4 | CRISIL AA-/Stable |
| Fund-Based Facilities | 150 | CRISIL AA-/Stable |
| Fund-Based Facilities | 59 | CRISIL AA-/Stable |
| Long Term Loan | 1424.5 | CRISIL AA-/Stable |
| Long Term Loan | 491 | CRISIL AA-/Stable |
| Long Term Loan | 100 | CRISIL AA-/Stable |
| Long Term Loan | 276 | CRISIL AA-/Stable |
| Long Term Loan | 84.7 | Withdrawn |
| Long Term Loan | 500 | Withdrawn |
| Long Term Loan | 34.3 | Withdrawn |
| Long Term Loan | 181 | Withdrawn |
| Non-Fund Based Limit | 145.4 | CRISIL A1+ |
| Non-Fund Based Limit | 65 | CRISIL A1+ |
| Non-Fund Based Limit | 30 | CRISIL A1+ |
| Non-Fund Based Limit | 50 | CRISIL A1+ |
| Proposed Working Capital Facility | 71.1 | CRISIL A1+ |
Criteria Details
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