| Roha Dyechem Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL A / Stable / CRISIL A1 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
CRISIL has reaffirmed its ‘CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of Roha Dyechem Private Limited (RDPL).
Operating performance is expected to remain stable in fiscal 2021 despite the slowdown induced by Covid-19. This is because of steady growth in the colours segment that caters to the fast-moving consumer goods (FMCG) and pharmaceutical industries. Consolidated revenue is expected to remain similar to fiscal 2020 level, at Rs 1,600 crore, while operating margin is likely to be stable at 21%. Margin will be supported by increased realisation as a result of price hikes undertaken by RDPL.
Business risk profile is expected to be supported over the medium term by contribution from new products, healthy demand for existing products, and high operating margin of 22-23% at a consolidated level due to strong operating efficiency and improvement in backward integration expected from the undergoing capital expenditure (capex). Stable performance of the solar projects in Gujarat, Maharashtra and Rajasthan, with an average plant load factor (PLF) of 20% for fiscal 2020, will provide significant stability to operating performance. Financial risk profile remains comfortable on account of healthy increase in cash accrual. Net cash accrual to total debt (NCATD) and interest coverage ratios were estimated at 33% and 5.9 times, respectively, for fiscal 2020 against 26% and 5.2 times, respectively, for fiscal 2019. Completion of the capacity expansion project by March 2021 will improve net cash accrual to Rs 250-300 crore per annum over the medium term. Debt of Rs 270 crore is expected against the capex over fiscals 2020 and 2021. However, with gradual debt repayment, gross debt to EBITDA (earnings before interest, taxes, depreciation, and amortisation) ratio is expected to improve below 2 times over the medium term, against the estimated 2.3 times for fiscal 2020. The company is also expected to support the Roha group's housing finance business through extension of corporate guarantee of up to Rs 100 crore. Its earlier exposure to real estate has been reduced to nil with the demerger that happened in July 2019. However, current exposure to group companies remains at Rs 111 crore through loans and advances, and will continue to be a key monitorable. Any increase in exposure to the housing finance business, and renewed exposure to real estate will remain key rating sensitivity factors. The ratings continue to reflect RDPL’s established market position in the food colour business, stable solar energy business backed by consistent PLF and regular payments from off-takers. These strengths are partially offset by working capital-intensive operations and exposure to counterparty risks associated with receivables from the power segment, especially for wind power, as well as to risks related to the upcoming industrial dyes project. |
Analytical Approach For arriving at its ratings, CRISIL has combined the business and financial risk profiles of RDPL and its subsidiaries, associates and joint ventures. This is because all these companies, together referred to as RDPL, have common promoters and management, and business and financial 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 RDPL is the leader in the domestic food colour industry with an 80% share; and an established clientele. It also has a sizeable global presence with 27 group companies in 20 countries. It has longstanding relationships with major domestic and global FMCG players and meets their stringent norms and certifications, which are incidental to the food colour business. Exports account for over 80% of the total revenue. Adjusted networth and total outside liabilities to adjusted networth ratio stood at Rs 699 crore and 1.83 times, respectively, as on March 31, 2019, and were estimated at Rs 860 crore and 1.4 times, respectively, as on March 31, 2020, on a consolidated basis. The NCATD and interest coverage ratios were 26% and above 5 times, respectively, for fiscal 2019 and were estimated at 33% and above 5 times, respectively, for fiscal 2020. Financial risk profile is expected to remain healthy over the medium term with strong cash accrual, gradual reduction in external borrowings, and limited debt-funded capex.
* Sound operational capabilities in the solar energy business The company has 63.5 megawatt (MW) solar power capacity in Gujarat, Rajasthan and Maharashtra. It has been able to commission the projects within scheduled timelines. The 25-MW solar power plant in Gujarat and 27.5 MW plant in Rajasthan have reported stable performance in the 12 months through August 2020, at an average PLF of 22% and 18%, respectively; operating margin was around 89%.
The company has entered into power purchase agreements with state utilities for the power generated from its renewable energy projects. Accordingly, it remains exposed to counterparty risks such as delays in payments. While payments for the solar energy receivables are regular, a delay of up to 6 months is being faced in the wind energy segment. However, the contribution of this segment to the total revenue is just 2.0%. Stable cash flows from its major revenue sources (food colour and solar energy) mitigate the risk.
Gross current assets (GCAs) have been 170-210 days in the past four fiscals. On March 31, 2019, GCAs were relatively higher at around 238 days because of inventory of 138 days and receivables of 90 days. The GCAs were estimated at 220-240 days in fiscal 2020. The company has to maintain large inventory, being in a relatively niche category of products as well as dealing in a large variety. The debtor days are higher due to longer approval process for the products from the customers.
* Susceptibility to project risk RDPL is expanding capacity to manufacture industrial pigments and food dyes, which is expected to be completed by March 2021. For this greenfield expansion, the company will spend Rs 300 crore that is largely funded through debt of Rs 270 crore; the remaining will be met through internal accrual. The plant is expected to start commercial production in fiscal 2022. Considering RDPL’s market position and longstanding presence in the food colour business, demand risk is expected to be low. Nevertheless, since the project is large and majority of it is yet to be completed, the company remains exposed to project implementation and stabilisation risks. |
Liquidity: Adequate Cash accrual is expected to be more than Rs 250-300 crore per annum during fiscals 2020-22 against yearly term debt repayment of Rs 50-70 crore over the medium term. The company also maintains cash and equivalents of over Rs 100 crore. Fund-based working capital limit of Rs 200 crore was utilised at 55% on average over the 6 months through November 2020. The company has already tied up debt of Rs 270 crore for the capacity expansion project. |
Outlook Stable CRISIL believes RDPL will continue to benefit from its established market position in the food colour business and the stable operating performance of its solar power projects. |
Rating Sensitivity factors Upward factors * Steady enhancement in debt protection metrics such as sustained improvement in debt/EBIDTA below 2.0 times at consolidated level |
About the Company Established in 1972 and promoted by Mr Ramakant Tibrewala, RDPL manufactures dyes and colours that are used in food and beverages, drugs, and cosmetics. It has a wide global network with group companies across 20 countries. RDPL also owns and operates three solar energy projects of 63.5 MW in Gujarat, Rajasthan and Maharashtra; and three wind energy projects of 31.5 MW in Maharashtra, Madhya Pradesh and Rajasthan. The energy generated from the solar plant in Maharashtra shall be used for captive purposes. For fiscal 2020, at a standalone level, the company posted revenue degrowth of 2% but improved operating margin of 34%.7% against 31.0% in fiscal 2019. At a consolidated level, revenue was around Rs 1,590 crore in fiscal 2020 with steady operating margin of around 21%. During the first six months of fiscal 2021, the company, on a standalone basis, reported revenue degrowth of 7.7% year-on-year for the corresponding period previous fiscal and margin of 36.6%. |
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 – 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 | Name of Lender | Amount (Rs.Crore) | Rating |
| Cash Credit* | Axis Bank Limited | 30 | CRISIL A/Stable |
| Cash Credit* | HDFC Bank Limited | 65 | CRISIL A/Stable |
| Cash Credit* | ICICI Bank Limited | 20 | CRISIL A/Stable |
| Cash Credit* | IndusInd Bank Limited | 45 | CRISIL A/Stable |
| Cash Credit* | RBL Bank Limited | 40 | CRISIL A/Stable |
| Foreign Currency Term Loan | Bank of Baroda | 135 | CRISIL A/Stable |
| Foreign Currency Term Loan | HDFC Bank Limited | 135 | CRISIL A/Stable |
| Letter of credit & Bank Guarantee | Axis Bank Limited | 20 | CRISIL A1 |
| Letter of credit & Bank Guarantee | Bank of India | 20 | CRISIL A1 |
| Letter of credit & Bank Guarantee | IndusInd Bank Limited | 5 | CRISIL A1 |
| Long Term Loan | Aditya Birla Finance Limited | 26.62 | CRISIL A/Stable |
| Long Term Loan | Axis Bank Limited | 55.39 | CRISIL A/Stable |
| Long Term Loan | Exim Bank | 40.29 | CRISIL A/Stable |
| Long Term Loan | HDFC Bank Limited | 26.62 | CRISIL A/Stable |
| Long Term Loan | ICICI Bank Limited | 57.75 | CRISIL A/Stable |
| Proposed Long Term Bank Loan Facility | Not Applicable | 55.33 | CRISIL A/Stable |
This Annexure has been updated on 8-Sep-2021 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity.
Criteria Details
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