| TCPL Packaging Limited | ||||||
| Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1'; Rated amount enhanced for Bank Debt | ||||||
| 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 A/Stable/CRISIL A1’ ratings on the long term bank facilities of TCPL Packaging Limited (TCPL).
The ratings reflect the comfortable financial risk profile, established position of TCPL in the domestic packaging industry, and diversified end-user industry base. These strengths are partially offset by exposure to intense competition, and large working capital requirement
CRISIL Ratings had upgraded its ratings on the long term bank facilities of TCPL to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Positive/CRISIL A2+’ on April 18, 2023. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has consolidated the business and financial risk profiles of TCPL Packaging Ltd,, its 3 subsidiaries- TCPL Innofilms Pvt Ltd, TCPL Middle East FZE and Creative Offset Printers Pvt Ltd, which are strategically important to, and have a significant degree of operational integration with TCPL Packaging Ltd. CRISIL Ratings considers these entities as being strategic to TCPL Packaging Ltd in view of their strong integration with TCPL’s operations.
Unsecured Loans: Unsecured loans of Rs 3.03 crores as on 31st March 2022 has been considered as debt.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Comfortable financial risk profile: Networth has increased to Rs 392 crore as on September 30, 2022, and is further expected to improve by March 31, 2023 backed by healthy accretion to reserves. Capital structure remains comfortable with gearing and total outside liabilities to adjusted networth (TOLANW) are expected to be moderate at around 1.1-1.15 times and 1.8-1.9 times as on March 31, 2023, which is expected to improve over the medium term. Debt protection metrics are also robust as reflected in interest coverage ratio of 5.25 times as of September 2022. Interest coverage and net cash accrual to total debt ratios are expected to remain robust at around 4.9-5 times and 0.3-0.35 times, respectively, in fiscal 2023. The metrics will remain stable over the medium term owing to healthy profitability.
Established position in the packaging industry: Presence of three decades in the folding cartons business has enabled the promoters to gain a strong understanding of market dynamics and build healthy relationships with customers and suppliers. Revenue registered robust growth to Rs 1,082 crore in the nine months of fiscal 2023 from Rs 698 crore in fiscal 2018. The company has pan-India presence with multi-location manufacturing units, and also exports to various countries. Moreover, it has diversified by recently setting up a unit to manufacture recyclable film used in flexible packaging products under TIPL.
Established customer relationships and wide end-user industry base: TCPL benefits from its long-standing relationships with its reputed clientele which supports steady growth and repeat business. The company has a wide customer base including some large players in the industry with no single customer accounting for more than 15% of its total sales. In addition, TCPL’s products are widely used for packaging by various end-user industries such as pharmaceuticals, food and beverages, cosmetics, toiletries, cigarettes, liquor and fast-moving consumer goods (FMCG). This further supports the business and allows the company to overcome the risk of slowdown in any particular industry.
Weaknesses: Exposure to intense competition: The packaging industry has many players in the market leading to intense competition. While large, organised players offer products at competitive rates because of economies of scale and access to advanced technology, small players cater to local, price-sensitive customers. Although high customisation partially limits threat from imports, intense competition may continue to constrain scalability, pricing power and profitability.
Large working capital requirement: Working capital requirement of the company is large as reflected in expected gross current assets of around 155-160 days as on March 31, 2022 and is expected to remain large as on March 31, 2023 as well. This is driven by debtors and inventory each of around 65-80 days for the past three fiscals. through fiscal 2022 and have remained in the similar range as on 30th September 2022.. The working capital requirement is partially supported by creditors of around 70-85 days while the rest through reliance on external debt leading to moderate bank limit utilization. With increasing scale of operations, working capital requirement is also expected to increase and will remain a key monitorable. |
Liquidity: Strong Expected annual cash accrual of over Rs 150 crore will be sufficient to meet debt obligation of Rs 66 crore and Rs 70 crore in fiscals 2024 and 2025, respectively. Fund-based limit was utilised 90% on average over the 12 months through February 2023. Cash and bank balance stood at Rs 20.68 crore as on March 31, 2022. CRISIL Ratings believe that internal accrual and unutilised bank limit will be sufficient to meet debt obligation as well as incremental working capital requirement. |
Outlook: Stable TCPL will continue to benefit from its strong market position and comfortable financial risk profile over the medium term. |
Rating Sensitivity factors Upward factors * Significant revenue growth and stable operating margin leading to higher cash accrual * Better financial performance with improvement in TOLANW ratio to less than 1.0 times
Downward factors * Decline in revenue or fall in operating margin below 12%, leading to lower-than-expected cash accrual * Stretched working capital cycle or large, debt-funded capex weakening liquidity |
About the Group TCPL was incorporated as Twenty First Century Printers Ltd in 1987 by Kanoria family and was renamed TCPL in 2008. It manufactures folding cartons, printed blanks and outers, litho lamination, blister packs and flexible packaging products used in the food, FMCG, cigarette, liquor, pharmaceutical, pesticide and stationery segments. It has four manufacturing units in Silvassa, two in Haridwar (Uttarakhand), and one each in Goa and Guwahati (Assam). The company is listed on the Bombay Stock Exchange and the National Stock Exchange.
TIPL was incorporated in February 2020 and is now a wholly owned subsidiary of TCPL. The company has set up an integrated unit in Silvassa to manufacture recyclable plastic blown film. It began generating revenue from the current fiscal.
Incorporated in 2002, COPPL was initially promoted by Mr Rohit Khanna and Mr Gazal Dhillon. On December 4, 2021, TCPL bought majority stake in COPPL and currently owns 83% stake in the company, while the remaining is with erstwhile promoters. COPPL manufactures printed rigid boxes and leaflets for the mobile phone and consumer electronics industries. It has a unit in Noida, Uttar Pradesh. |
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 – 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 31-May-2023 in line with the lender-wise facility details as on 24-Mar-2023 received from the rated entity
Criteria Details
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