Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of promoters

The promoters have over two decades of experience in the flexible packaging industry; their strong understanding of market dynamics and healthy relationships with suppliers and dealers should continue to support the business. The company has customers across domestic and international markets.

Healthy financial risk profile

Financial risk profile should remain supported by steady accretion to reserve and the absence of any large, debt-funded capital expenditure. Networth was moderate at about Rs 68.00 crore as on March 31, 2021, with gearing and total outside liabilities to tangible networth (TOL/TNW) ratios comfortable at 0.17 time and 0.60 time. Debt protection metrics were strong, with interest coverage and net cash accrual to total debt ratios of 21.00 times and 1.66 times, respectively, for fiscal 2021.

Weakness:

Modest scale of operations

The packaging industry is highly fragmented, and the consequent intense competitive pressure may continue to constrain scalability, pricing power and profitability. Ability to service price-sensitive domestic clients and quality-conscious overseas customers will be a key growth driver.

Exposure to volatility in raw material prices

Since the key input, polypropylene granule, is a crude oil derivate, its prices move in tandem with crude oil rates. In an adverse market scenario, the company might find it difficult to pass on the price hike to end-users. Hence, sustenance of the operating margin will remain a monitorable.

Key Financial Indicators

Annexure - Details of Instrument(s)

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