| TPL Plastech Limited | ||||||
| Ratings reaffirmed at 'CRISIL A+ / Stable / CRISIL A1 ' | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank facilities of TPL Plastech Ltd (TPL) at ‘CRISIL A+/Stable/CRISIL A1’.
The operating income for fiscal 2022 is estimated to grow by more than 30% and operating margin is expected to remain around 12% due to healthy demand from end-user industry and low base effect. Over the medium term as well, healthy growth is expected due to healthy demand from end-user industries. The financial risk profile is expected to remain comfortable due to regular repayment of term debt, prudent funding of capex with debt and equity and healthy debt protection metrics.
Revenue and operating margin for the nine months through December 31, 2021, were Rs 167 crore and 12.1%, compared with Rs 115 crore and 11.7%, respectively, for the corresponding period previous fiscal.
For fiscal 2021, revenue and operating margin were Rs 167 crore and 12.0% against Rs 209 crore and 11.4% respectively, for the previous fiscal. Revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) were impacted in the first quarter of fiscal 2021 on account of the pandemic.
The ratings continue to reflect the strong managerial and financial support that TPL receives from its parent, Time Technoplast Limited (TTL), which holds 75% stake in the company; and established market position in the rigid industrial packaging segment. These strengths are partially offset by average financial risk profile because of modest networth and cash accrual, large working capital requirement, and susceptibility to fluctuations in polymer prices and foreign exchange (forex) rates. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the support from TTL to TPL. |
Key Rating Drivers & Detailed Description
The parent has a strong market position in the rigid industrial packaging segment. This enables TPL to procure raw materials in bulk and benefit from favourable purchasing terms with suppliers. The company also benefits from the common treasury function and management overview by TTL. Being in the same business, TPL is of strategic interest to the parent and is, therefore, expected to continue to receive strong support from TTL.
The plastic-based industrial packaging industry comprises few organised players (including TPL, TTL, Balmer Lawrie) and some unorganised players. The units of TPL are in Silvassa (Dadra and Nagar Haveli), Jammu (Jammu and Kashmir), Pantnagar (Uttarakhand), Ratlam (Madhya Pradesh), Visakhapatnam (Andhra Pradesh) and Bhuj (Gujarat); and have combined installed capacity of 24,200 tonne per annum (tpa).
Weakness
TPL follows sound procurement and hedging strategies under the guidance of its parent. Key raw materials, high density polyethylene (HDPE) and polypropylene that are commonly known as polymers, account for 75-80% of operating income and 85-90% of cost of sales. The company does not enter into long-term, index-linked contracts with customers and hence remains exposed to the risk of sharp fluctuations in polymer prices. However, TPL is able to pass on variations in polymer prices to its customers with a lag of maximum one month through monthly price revisions for regular clients. Furthermore, as it imports part of its raw material requirement, it is exposed to forex fluctuation risk. In last couple of years, the company is meeting majority of raw material requirement indigenously. Hence, the share of imports in total purchases reduced to 30% from 70% earlier.
Net worth and gearing were at Rs 96 crore and ~0.3 time, respectively, as on September 30, 2021. Gearing is expected to remain at similar levels over the medium term due to prudent funding of capex through equity and debt and healthy accretion to reserves. Interest coverage ratio was at a healthy level of around 6 times for the 9 months period ending December 31, 2021. Over the medium term as well, interest cover is expected to remain above 5 times. |
Liquidity: Adequate Internal accrual of around Rs 15 crore per annum is expected to be sufficient to meet yearly debt obligation of Rs 3-6 crore. In fiscal 2023, capex of around Rs 20 crore would be funded through debt of Rs 15 crore and remaining through internal means. Additional working capital requirement is expected to be funded through internal accrual and available working capital limits. Cash and equivalent stood at about Rs 4 crore as on September 30, 2021. Average utilisation of fund-based bank limits of Rs 46 crore was 30% for the 12 months ended February 28, 2022. |
Outlook Stable CRISIL Ratings believes TPL will continue to benefit from its established market position and synergies of operating in the same business as the parent. |
Rating Sensitivity factors Upward factors:
Downward factors:
|
About the Company TPL was incorporated in 1992 as Tainwala Polycontainers Ltd. In July 2006, the original promoters exited the business and TTL acquired 75% stake and renamed the company.
TPL manufactures HDPE drum containers and pipes with capacity of 20-250 litres, primarily used in bulk packaging of speciality chemicals, paints and inks, pharmaceutical products, and fast-moving consumer goods. It has manufacturing facilities in Silvassa, Jammu, Pantnagar, Ratlam, Visakhapatnam and Bhuj, with total capacity of 24,200 tpa.
For the 9 months ended December 31, 2021; revenue was Rs 167 crore |
Key Financial Indicators
|
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
*Interchgeable from Cash Credit to Letter of Credit/SBLC fully #Interchangeability from Fund Based to Non Fund based to the extent of 50% of Fund based limit i.e Rs 14.25 Crores ##Includes sub-limit of Bank Guarantee/SBLC amounting to Rs 5 crore **Includes sub-limit of Bank Guarantee amounting to Rs 3 crore and SBLC for buyer's credit Rs 20 crs @Emergency credit line guarantee scheme ' long-term loan - guaranteed by National Credit Guarantee Trustee Company Ltd |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 29-Mar-2022 in line with the lender-wise facility details as on 14-Aug-2021 received from the rated entity.
Criteria Details
|