| Raj Petro Specialities Private Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed; Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long term bank facilities of Raj Petro Specialities Private Limited (RPSPL) to ‘Positive’ from ‘Stable’ and has reaffirmed the rating at ‘CRISIL A+’. The short-term rating has been reaffirmed at ‘CRISIL A1’.
The revision in outlook reflects similar revision in the rating on the bank facilities of the parent, Brenntag AG (Brenntag; Rated S&P BBB Positive) along with expectation of sustained improvement in business risk profile and financial risk profile of RPSPL.
The company’s revenue is estimated at Rs 2114 crore in fiscal 2022 at an operating margin of 8.3%. Consequently, accruals were at above Rs 120 crore in fiscal 2022. Increased revenue was driven both by volume and higher realization. Products like transformer oil, process oil and waxes have seen healthy growth in volume on back of better demand. While revenue is expected to sustain at similar levels, sustenance of operating margin remains to be seen. Further, financial risk profile continues to remain healthy with moderate capital structure and comfortable debt protection metrics.
The ratings continue to reflect the benefit RPSPLs derives from being strategically important to its parent and accordingly, it is expected to get a strong support from the parent company. Rating also reflect RPSPL's established market position in the transformer oil and white oil segments, large product portfolio, and a moderate financial risk profile. These strengths are partially offset by exposure to volatility in raw material prices and foreign exchange (forex) rates and working capital-intensive operations. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has applied its parent notch-up criteria to factor in distress support available from Brenntag. |
Key Rating Drivers & Detailed Description Strengths: Strategic importance to, and strong expectation of support from, Brenntag: The rating is supported by the expectation of continued strong support from Brenntag owing to RPSPL’s strategic importance for increasing parent’s presence in India, 65% ownership (expected to be increased to 100% in five years from date of acquisition), and strong management control (with majority board representation and restructured professional senior management). Furthermore, Brenntag has provided corporate guarantee for the bank facilities availed of by RPSPL and provided Rs 183 crore loans by way of external commercial borrowing (ECB). Further, RSPL’s is also expected to derive benefits of improved efficiency in its international operations over the medium term, given Brenntag’s strong customer base and logistical efficiencies.
Established market position in the transformer and white oil segments and large product portfolio: RPSPL manufactures a variety of base oil derivatives widely used in the transformer, FMCG (fast-moving consumer goods), leather, tyre, rubber, and auto industries. The company has a dominant market position in the transformer and white/paraffin oil segments and is among the largest suppliers in India. The company also benefits from the locations of its manufacturing facilities in west and east coast (Silvassa and Chennai) with better logistical efficiency. The company has 450+ products customized to meet the requirement of both domestic and global markets. The products (transformer oil, white oil, and lubricants) cater to four major end-user segments: energy and power, fast-moving consumer goods (FMCG), rubber, automotive and industrial lubricants. These has resulted in healthy growth for fiscal 2022 with revenue estimated at Rs 2114 crore.
Moderate financial risk profile The financial risk profile for the company is marked by total outside liabilities to adjusted networth (TOLANW) ratio estimated at 1.75 times as on March 31, 2022, which is likely to improve further over the medium term on back of healthy accretion and repayments of ECBs. The company received loan of around Rs 183 crore (external commercial borrowing) from parent in the past three fiscals through FY 2021, mandated to be repaid after five years from the date of availing the first installment is due in fiscal 2024. Debt protection metrics improved in fiscal 2022, with estimated interest coverage and net cash accrual to adjusted debt estimated at 6.20 and 0.28 times respectively. Debt protection metrics is expected to remain comfortable.
Weaknesses: Operating margin susceptibility to volatility in raw material prices: The operating margins for the company have improved and are in the range of 8 to 9% over the past two fiscals through fiscal 2022 and is expected to be moderate over medium term. The improvement in margins in was backed by favorable input prices and management’s strategy to focus on high margin business. However, margins can moderate over the medium term. The operating margins are also susceptible to base oil price fluctuations as reflected in volatility in margins in the past. Profitability is expected to remain moderate and susceptible to volatility in input costs. However, this is partially offset by management focus on inventory management and index/forex-based price contracts with client.
Working capital-intensive operations The operations for the company are working capital intensive with gross current assets (GCA) estimated at 170 days in March 2022 driven by improvement in debtors and inventory of 90 & 80 days respectively. The GCA days for the company are expected to be moderate over medium term and be in the range of 160 to 170 days over medium term. |
Liquidity: Adequate The net cash accrual is estimated to be over Rs. 120 crore over the medium term. Company has no external term debt repayment obligation. However, company has around Rs 60 crore of repayment towards external commercial borrowing fiscal 2024 onwards. The company has an expected capital expenditure around Rs 10-15 crore over next three fiscals, funded by internal accruals. The bank limit was utilized at an average of 4 to 5% during the 12 months through March 2022. The Current ratio for the company has improved and is estimated to be comfortable at 1.89 times as on March 31, 2022 and is likely to be sustained over the medium term. The company currently has liquidity cash of around Rs 21 crore supporting liquidity profile. Support from parent is also available in case of any exigencies. |
Outlook: Positive CRISIL Ratings believes RPSPL should benefit from healthy demand on back of its established market position, large product profile, and strong support expected from Brenntag. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group RPSPL (formerly, Suryoday Blending Pvt Ltd) was established in 1955 by the Nanavati, Anjaria, Asher, and Porecha families. The company processes and formulates base oils with additives/chemicals to produce several diversified products widely used in the FMCG, automobiles, industrial, and energy and power industries. Brenntag acquired controlling stake in the company in 2019. Brenntag currently holds 65% stake in RPSPL.
About Brenntag Brenntag, a Frankfurt exchange-listed entity, is the one of the world’s largest chemical distributer company with revenue of over 11.7 billion euros (around Rs 102000 crore) with presence in all the major geographies in the world. It operates in more than 530 locations in 74 countries. |
Key Financial Indicators
*Provisional |
Status of non cooperation with previous CRA: RPSPL has not cooperated with Brickwork Ratings India Private Limited which has classified it as issuer not cooperative vide release dated March 30th, 2019. The reason provided by Brickwork Ratings India Private Limited is non-furnishing of information 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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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This Annexure has been updated on 24-Jun-2022 in line with the lender-wise facility details as on 24-Jun-2022 received from the rated entity.
Criteria Details
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