| Seshasayee Paper and Boards Limited | ||||||
| Ratings reaffirmed at 'CRISIL AA-/Stable/CRISIL A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+' ratings on the bank facilities of Seshasayee Paper and Boards Limited (SPBL).
The rating factors in a moderation in operating performance in fiscal 2024 owing to lower volumes and realization. Revenue is expected to degrow in the current fiscal after a growth of 54% in fiscal 2023. Volume sales in the W&P (writing and printing paper) segment and realisations have moderated due to significant increase in imports into India at cheaper prices, from China and ASEAN countries. During the nine months ended December 2023, revenue degrew by19.57% compared to same period last fiscal. The global paper industry witnessed an upsurge in paper prices by ~25% due to increase in demand and rise in input costs in fiscal 2023. However, fall in pulp and paper prices this fiscal will result in margins to compress from supernormal highs of 25.75% last fiscal. Despite the moderation, the margins will still remain healthy for SPBL with 85 percent of the pulp requirement, at a company level, being met through inhouse pulp. Nevertheless, the scale of operations and expected accruals would remain adequate for the rating category and would also remain key monitorables over the medium term.
The ratings continue to reflect the established position of SBPL in the writing and printing paper (WPP) segment, supported by extensive experience of its promoters, and the integrated operations and healthy operating efficiency. The ratings also factor in the robust financial risk profile of the company. These strengths are partially offset by susceptibility to volatility in raw material prices. |
Key Rating Drivers & Detailed Description Strengths:
The company, both units combined, meets about 80% of its power requirement in-house through its captive power plant (21 MW) in Erode equipped to use both coal and bio-fuels, Black-Liquor Dry Solids (BLDS) fueled captive power plant (16 MW) in Erode and captive power plant (6 MW) in Tirunelveli, wherein both Coal and bio-fuels can be used.
To enhance pulp and paper production capacities in phases in Erode, the management has announced project MDP-IV. The first phase, which would entail cost of Rs 700 crore, is likely to be funded entirely through internal accruals. Company is awaiting Environmental Clearance for Project MDP-IV.
The company has, in Sep 2022 via e-auction held under IBC Rules, acquired assets of M/s.Servalakshmi Paper Ltd (Corporate Debtor under liquidation), on a going-concern basis. This acquisition (funded through internal accrual) should add another 75,000 TPA of paper manufacturing capacity under SPBL. The Hon'ble NCLT, Chennai bench vide its order dated 12.05.2023 approved the e-auction sale of assets of M/s. Servalakshmi Paper Limited (Corporate Debtor in Liquidation) as a Going Concern, in favour of the company and consequently the company has received Sales Certificate and has taken possession of the Unit. A few appeals challenging Hon'ble NCLT's order have been filed in Hon'ble NCLAT, which are being contested by the company.
Weakness:
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Liquidity: Strong Liquidity will remain strong supported by strong cash accrual, nil bank limit utilisation and prudent working capital management. Company has cash credit limit of Rs.61 crore which has not been utilised in the past 12 months ending January 2024. Cash accruals are expected to be over Rs.250 crores per annum over the medium term against nil debt obligation. Current ratio was healthy at 3.02 times and unencumbered cash and bank balance stood at over Rs.675 crore as on December 31, 2023. |
Outlook: Stable CRISIL Ratings believes SPBL will continue to benefit from the extensive experience of its promoters and their established relationships with clients. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in 1960, SPBL manufactures pulp, WPP, packing and wrapping grade papers, and specialty grade papers. Products are sold under the brands Sprint, Sprint Plus, Swift and Success. The company has an integrated pulp, paper and paper board mill at Pallipayam (Erode, Tamil Nadu) and a paper manufacturing mill in Tirunelveli with aggregate capacity of 255,000 TPA. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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 Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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