Rating Rationale
May 31, 2019 | Mumbai
Ruchira Papers Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.110 Crore (Enhanced from Rs.20 Crore)
Long Term Rating CRISIL BBB+/Stable (Reaffirmed)
Short Term Rating CRISIL A2 (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its rating on the long term bank facilities of Ruchira Papers Ltd (Ruchira) at 'CRISIL BBB+/Stable' and assigned its 'CRISIL A2' rating to the short term bank facility.

The ratings continue to reflect the established presence of Ruchira in the paper industry, the company's high profitability on account of integrated operations, and comfortable financial risk profile. These strengths are partially offset by exposure to cyclicality in the paper industry.

CRISIL had on May 21,2019, assigned its 'CRISIL BBB+/Stable' rating to the long term bank facilities of Ruchira.

Key Rating Drivers & Detailed Description
* Established presence and diversified product profile: The promoters' experience of over 40 years in the industrial paper industry has given them an understanding of the dynamics of the market, and enabled them to establish relationships with suppliers and customers. The company is present in the kraft as well as writing and printing paper (WPP) segments. It has manufacturing capacity of 400 tonne per day (tpd) - 250 tpd of kraft paper and 150 tpd of WPP. It has established its presence in the paper industry and has a strong countrywide marketing and distribution network, which helped grow sales to Rs 450.3 crore in fiscal 2018 and an estimated Rs 480-500 crore in fiscal 2019.

* Comfortable financial risk profile: Capital structure has been healthy due to low reliance on external funds leading to low total outside liabilities to tangible networth (TOLTNW) ratio during the three fiscals ended March 31, 2018. Gearing and TOLTNW ratio were at 0.46 times and 0.91 times, respectively, as on March 31, 2018 and are estimated at similar levels as on March 31, 2019. Debt protection metrics were above average, reflected in interest coverage and net cash accrual to total debt ratio of 9.8 times and 0.5 times, respectively, in fiscal 2018, on account of low debt and healthy operating profitability.
The company does not plan any major, debt-funded capital expenditure (capex) in fiscal 19-2020, apart from capex of 40-50 crore, which will be funded through 50% debt and the remaining through internal accrual. Any large, debt-funded capex that weakens the capital structure and has significant repayments will remain a key rating sensitivity factor.
* High profitability due to integrated operations: The company has integrated operations with an 8.1-megawatt captive power plant and a caustic soda recovery plant, and benefits from integrated operations. Ruchira had high operating margin of 16.9% for fiscal 2018. For the first nine months of fiscal 2019, the margin was 16.8%.

* Exposure to cyclicality in the paper industry: The price of paper, which is a commoditised product, tends to fluctuate sharply, affecting the profitability of paper manufacturers. Demand for paper is also linked to the level of economic activity. Hence, cyclical downturns or adverse change in the demand-supply balance may result in lower realisations.

Liquidity is adequate, indicated by low utilisation of the bank limit of Rs 57 crore, at an average of 68% over the 11 months through February 2019. Net cash accrual is expected at Rs 50-55 crore per annum against debt obligation of Rs 12-13 over the medium term. Current ratio was comfortable at 1.3 times as on March 31, 2018, and is expected to remain comfortable over the medium term.

Outlook: Stable

CRISIL believes Ruchira will continue to benefit from the established presence in the industry, and established relationships with clients. The outlook may be revised to 'Positive' if ramp-up in operations and stable profitability strengthen the financial risk profile. The outlook may be revised to 'Negative' if a decline in profitability, or a stretch in the working capital cycle, or large, debt-funded capex weakens the capital structure.

About the Company

Incorporated in 1980, Ruchira manufactures kraft paper and WPP. It is promoted and managed by Mr Jatinder Singh and Mr Umesh Chander Garg. Its manufacturing facility is in Sirmaur, Himachal Pradesh.

Key Financial Indicators
As on/for the period ended March 31 Unit 2018 2017
Operating income Rs crore 450.64 427.09
Reported profit after tax Rs crore 38.01 32.49
PAT margin % 8.43 7.60
Adjusted Debt/Adjusted Networth Times 0.46 0.46
Interest coverage Times 9.86 7.99

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)
ISIN Name of instrument Date of allotment Coupon
Rate (%)
Maturity date Issue
Rating assigned with outlook
NA Cash Credit NA NA NA 57.0 CRISIL BBB+/Stable
NA Letter of credit & Bank Guarantee NA NA NA 9.75 CRISIL A2
NA Term Loan NA NA Dec-2021 16.79 CRISIL BBB+/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 26.46 CRISIL BBB+/Stable
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  100.25  CRISIL BBB+/Stable  21-05-19  CRISIL BBB+/Stable    --    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  9.75  CRISIL A2    --    --    --    --  -- 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 57 CRISIL BBB+/Stable Cash Credit 20 CRISIL BBB+/Stable
Term Loan 16.79 CRISIL BBB+/Stable -- 0 --
Proposed Long Term Bank Loan Facility 26.46 CRISIL BBB+/Stable -- 0 --
Letter of credit & Bank Guarantee 9.75 CRISIL A2 -- 0 --
Total 110 -- Total 20 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Paper Industry
CRISILs Approach to Recognising Default
CRISILs Criteria for rating short term debt
Mapping global scale ratings onto CRISIL scale

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