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
Strengths:
* 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%.

Weakness
* 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

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
size
(Rs.Cr)
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

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Vinay Rajani
Media Relations
CRISIL Limited
D: +91 22 3342 1835
M: +91 91 676 42913
B: +91 22 3342 3000
vinay.rajani@ext-crisil.com

Nitin Kansal
Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Himank Sharma
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com


Kishan Gupta
Rating Analyst - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
Kishan.Gupta@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL