| Resinova Chemie Limited | ||||||
| Ratings placed on ‘Watch Positive’ | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has placed the ratings on the bank facilities of Resinova Chemie Ltd (Resinova) on ‘Rating Watch with Positive Implications’.
The rating action follows the announcement by Astral Ltd (Astral; ‘CRISIL AA-/Positive/CRISIL A1+’) of amalgamation of Resinova with Astral. On June 7, 2021, Astral announced amalgamation of Resinova and Astral Biochem Pvt Ltd with itself. The merger will be effective from April 1, 2021 and is subject to receipt of regulatory and other approvals inter-alia approval from stock exchange, shareholders, creditors, NCLT among other.
The action reflects expected improvement in credit profile of the company post completion of the transaction. Post amalgamation of Resinova with Astral, its credit profile will improve commensurate with credit profile of Astral. CRISIL will continue to monitor the the transaction and will take appropriate rating action basis the progress in same. The ratings factor in Resinova’s significant synergies with, and financial and managerial support received from Astral.
Further, the ratings take into account Resinova’s strong financial risk profile and longstanding industry presence. These strengths are partially offset by average scale of operations in the intensely competitive adhesives industry, and the exposure to volatility in raw material prices and in foreign exchange (forex) rates. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has applied the parent notch-up framework to factor in the intensity of distress support available from Astral. |
Key Rating Drivers & Detailed Description Strengths * Significant synergies with, and financial and managerial support from, Astral Benefits derived from Astral’s financial and managerial support, healthy distribution network, and well-diversified geographical reach should continue to support the business. The company is further backed by an established track record in the industry.
* Healthy financial risk profile The financial risk profile should continue to be healthy, supported by adequate cash accrual. The tangible networth was moderate at Rs 281 crore, with the gearing low at 0.11 time, as on March 31, 2020. Debt protection metrics have also been robust, with interest coverage and net cash accrual to total debt ratios of 19.5 times and 1.6 times, respectively, in fiscal 2020. The financial profile is estimated to have remained healthy in fiscal 2021.
* Longstanding presence in the industry The company has a long track record in the adhesives industry and has built a portfolio of around 45 brands and 90 variants of adhesives. It has a wide dealer-distribution network and an established presence. Its brands are reputed, mainly for industrial and construction applications.
Weaknesses * Average scale of operations The adhesives industry in India is dominated by a few large players such as Pidilite Industries Ltd (‘CRISIL AAA/Stable/CRISIL A1+’) and Jubilant Organosys Ltd. Although Resinova manufactures products that cater to diverse applications, it has a limited market share in an intensely competitive industry. Net sales was Rs 377 crore with an operating margin of 14.1% in fiscal 2020.
* Exposure to volatility in raw material prices and forex rates Profitability is vulnerable to adverse movements in raw material prices and fluctuations in forex rates. |
Liquidity: Strong Liquidity is supported by healthy cash accrual, moderate bank limit utilisation, a moderate working capital cycle, and healthy financial flexibility. Cash accrual is expected at Rs 55-60 crore per fiscal against which it does not have any major term debt obligation, over the medium term. The bank limit of Rs 70 crore is rarely utilised. The working capital cycle is moderate at around five months. The low gearing further translates into high financial flexibility to raise funds in case of any exigency. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Resinova was established as a proprietorship firm, Parikh Resins and Polymers, which was reconstituted as a limited company, Parikh Resins and Polymers Ltd, in 1995. The company got its current name in 2000.
Resinova manufactures adhesives that are used in construction, engineering, automobile, insulation, household and stationary applications. The company sells the products under 45 brands including Bondtite, Bondset, Resiquick, Resiwood, Resibond, Resigrip, Resitape and Vetra.
In November 2014, Astral acquired 76% stake in Resinova for a consideration of Rs 212.8 crore. In November 2015, it acquired the balance 24% for Rs 73 crore. Subsequently, in the same year, Resinova was amalgamated with Advanced Adhesives Ltd (AAL) with effect from November 21, 2014. As per the scheme of amalgamation, the name of AAL was changed to Resinova. The merger added cement-solvent solutions for joining pipes to Resinova’s product portfolio. |
Key Financial Indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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