Rating Rationale
October 08, 2018 | Mumbai
Transpek Industry Limited
Ratings Reaffirmed ; CP withdrawn 
Rating Action
Total Bank Loan Facilities Rated Rs.231.35 Crore
Long Term Rating CRISIL A-/Positive (Reaffirmed)
Short Term Rating CRISIL A2+ (Reaffirmed)
Rs.37.16 Crore Fixed Deposits Programme FA/Positive (Reaffirmed) 
Rs.20 Crore Commercial Paper Programme CRISIL A2+ (Withdrawn)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A-/FA/Positive/CRISIL A2+' ratings on the bank facilities and fixed deposit programme of Transpek Industry Limited (TIL). CRISIL has withdrawn its rating on TIL's commercial paper at the company's request as it has not raised any debt under the programme.

The ratings continue to reflect the TIL's established presence and diversified revenue in terms of end-user industries, customers, and geographic presence. The ratings also factor in healthy financial risk profile supported by strong networth and debt protection measures. These strengths are partially offset by working capital-intensive operations and exposure to risks inherent in the chemical industry.

Key Rating Drivers & Detailed Description
* Diversified revenue: The company caters to various industries, such as polymers, agrochemicals, plastics, performance materials, coatings, pharmaceuticals, personal care, and flavours and fragrances. Furthermore, overseas markets, including the US, South Korea, and Europe, contribute 70% to revenue. Long-term supply contract with risk mitigating clauses for terephthaloyl chloride (TPC) minimises uncertainty regarding revenue and recovery on investment cost.

* Healthy financial risk profile: Adjusted tangible networth and total outside liabilities to adjusted networth (TOANW) ratio stood at Rs 117 crore and 2.7 times, respectively, as on March 31, 2018. Gearing increased to 1.7 times as on March 31, 2018, from 0.8 time a year earlier, because of debt funding of incremental working capital. Net cash accrual to total debt and interest coverage ratios were healthy at 15% and 4.8 times, respectively, for fiscal 2018.

* Working capital intensity in operations: Operations remain working capital intensive, as reflected in gross current assets of 175 days as on March 31, 2018, increasing sharply from 136 days a year before, led by receivables and inventory of 94 and 54 days, respectively.

* Exposure to risks inherent in the chemical industry: Revenue and profitability are vulnerable to government policies related to pollution control, product toxicity, or import and export of raw materials. Turnover from the agrochemicals segment is susceptible to uneven monsoon, while fluctuating input cost can adversely impact profitability.
Outlook: Positive

CRISIL believes significant revenue growth and steady profitability, backed by long-term supply contract, will benefit the company over the medium term. While debt-funded capital expenditure (capex) and incremental working capital requirement increased leverage, the financial risk profile remains healthy. The ratings may be upgraded on stabilisation of operations following capacity expansion, steady operating profit margin, and sustainable recovery in working capital cycle leading to improvement in the capital structure. The outlook may be revised to 'Stable' if revenue or profitability is lower than expected, or if financial risk profile weakens due to stretched working capital cycle or large, debt-funded capex.

About the Company

TIL was set up by Mr Shroff and his family members in 1965. The Vadodara (Gujarat)-based company manufactures and exports chemicals, mainly acid and alkyl chlorides. Export contributes 70% to revenue, with the domestic market accounting for the balance. The company is listed on the Bombay Stock Exchange.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs.Crore 367 317
Profit After Tax (PAT) Rs.Crore 26 29
PAT Margin % 7.2% 9.3%
Adjusted debt/adjusted networth Times 1.7 0.8
Interest coverage Times 4.8 6.6

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
rate (%)
Maturity date Issue size
Rating assigned
with outlook
NA Bank Guarantee NA NA NA 0.64 CRISIL A2+
NA Cash Credit NA NA NA 44.75 CRISIL A-/Positive
NA Inland/Import Letter of Credit NA NA NA 19 CRISIL A2+
NA Letter of Credit NA NA NA 26 CRISIL A2+
NA Loan Equivalent Risk Limits NA NA NA 1.2 CRISIL A2+
NA Proposed Cash Credit Limit NA NA NA 45 CRISIL A-/Positive
NA Proposed Long Term Bank Loan Facility NA NA NA 10.75 CRISIL A-/Positive
NA Standby Letter of Credit NA NA NA 2 CRISIL A-/Positive
NA Term Loan NA NA Jun-2023 82.01 CRISIL A-/Positive
NA Fixed Deposit NA NA NA 37.16 FA/Positive
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  20.00  Withdrawn      10-11-17  CRISIL A2+  28-07-16  CRISIL A2  04-12-15  CRISIL A2  -- 
            09-10-17  CRISIL A2+      04-06-15  CRISIL A2   
            20-03-17  CRISIL A2+           
Fixed Deposits  FD  37.16  FA/Positive      10-11-17  FA/Positive  28-07-16  FA-/Stable  04-12-15  FA-/Stable  FA-/Stable 
            09-10-17  FA/Positive      04-06-15  FA-/Stable   
            20-03-17  FA/Stable           
Fund-based Bank Facilities  LT/ST  183.71  CRISIL A-/Positive/ CRISIL A2+      10-11-17  CRISIL A-/Positive/ CRISIL A2+  28-07-16  CRISIL BBB+/Stable  04-12-15  CRISIL BBB+/Stable  CRISIL BBB/Stable 
            09-10-17  CRISIL A-/Positive/ CRISIL A2+      04-06-15  CRISIL BBB+/Stable   
            20-03-17  CRISIL A-/Stable           
Non Fund-based Bank Facilities  LT/ST  47.64  CRISIL A-/Positive/ CRISIL A2+      10-11-17  CRISIL A-/Positive/ CRISIL A2+  28-07-16  CRISIL BBB+/Stable/ CRISIL A2  04-12-15  CRISIL A2  CRISIL A3+ 
            09-10-17  CRISIL A-/Positive/ CRISIL A2+      04-06-15  CRISIL A2   
            20-03-17  CRISIL A-/Stable/ 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
Bank Guarantee .64 CRISIL A2+ Bank Guarantee .64 CRISIL A2+
Cash Credit 44.75 CRISIL A-/Positive Cash Credit 44.75 CRISIL A-/Positive
Inland/Import Letter of Credit 19 CRISIL A2+ Inland/Import Letter of Credit 19 CRISIL A2+
Letter of Credit 26 CRISIL A2+ Letter of Credit 26 CRISIL A2+
Loan Equivalent Risk Limits 1.2 CRISIL A2+ Loan Equivalent Risk Limits 1.2 CRISIL A2+
Proposed Cash Credit Limit 45 CRISIL A-/Positive Proposed Cash Credit Limit 45 CRISIL A-/Positive
Proposed Long Term Bank Loan Facility 10.75 CRISIL A-/Positive Proposed Long Term Bank Loan Facility 10.75 CRISIL A-/Positive
Standby Letter of Credit 2 CRISIL A-/Positive Standby Letter of Credit 2 CRISIL A-/Positive
Term Loan 82.01 CRISIL A-/Positive Term Loan 82.01 CRISIL A-/Positive
Total 231.35 -- Total 231.35 --
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 Chemical Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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