Rating Rationale
October 30, 2019 | Mumbai
Transpek Industry Limited
Ratings upgraded to 'CRISIL A/FA+/Stable/CRISIL A1'
Rating Action
Total Bank Loan Facilities Rated Rs.231.35 Crore
Long Term Rating CRISIL A/Stable (Upgraded from 'CRISIL A-/Positive')
Short Term Rating CRISIL A1 (Upgraded from 'CRISIL A2+')
Rs.37.16 Crore Fixed Deposits FA+/Stable (Upgraded from FA/Positive)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank facilities and fixed deposit programme of Transpek Industry Limited (TIL) to 'CRISIL A/CRISIL FA+/Stable/CRISIL A1' from 'CRISIL A-/CRISIL FA/Positive/CRISIL A2+'.
The upgrade reflects the expected sustenance of TIL's improved business and financial risk profiles. In fiscal 2019, the company's revenue increased sharply to Rs 610 crore from Rs 367 crore, driven primarily by healthy contribution from a new product, terephthaloyl chloride (TPC). Simultaneously, TIL's operating margin improved sharply to 21.6%, along with better working capital management. Both were, in part, driven by TPC, which has healthier margin and better working capital terms. Over medium term, TPC is expected to maintain annual revenue contribution of around Rs.350 cr thus supporting TIL's business profile. TIL's other products maintain their steady performance.
TIL's financial risk profile improved, too, benefitting from sharp increase in accrual (which rose more than two fold to Rs 74 crore in fiscal 2019), improved working capital management, and capital expenditure (capex) requirement. The upgrade also factors in the absence of any immediate capex plans.
The ratings reflect TIL's diversified revenue in terms of end-user industries, customers, and geographic presence and the healthy financial risk profile. These strengths are partially offset by large working capital requirement, increased product and customer concentration risk, 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 80% to the revenue. In the first quarter of fiscal 2020, company clocked a turnover of Rs 118 crore and net profit at Rs 3.3 crore. The performance was constrained owing to shut down of a plant (1 of the 3 units) for 45 days in the first quarter. The plant became operational in Q2 and company is expected to maintain its full year performance similar to previous fiscal.
* Healthy financial risk profile: Adjusted tangible networth and total outside liabilities to adjusted networth ratio stood at Rs 181 crore and 1.58 times, respectively, as on March 31, 2019. Gearing improved to 0.79 time as on March 31, 2019, from 1.74 times a year earlier. Debt protection metrics are healthy, with net cash accrual to total debt and interest coverage ratios of 51% and 7.1 times, respectively, in fiscal 2019.
* Large working capital requirement: Operations are working capital intensive: gross current assets were 102 days as on March 31, 2019, driven by receivables and inventory of 58 and 43 days, respectively. However, operations are better managed than the previous fiscal on account of increased revenue contribution from TPC.
* Increased product and customer concentration risk:  With TPC contributing significantly to topline through sales to a single customer, TIL now faces more pronounced product and customer concentration risks. This is partly mitigated by a long-term 'take-or-pay' supply agreement with the customer and minimises uncertainty regarding revenue and recovery on investment cost.
* Exposure to risks inherent in the chemical industry: Revenue and profitability are exposed 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 monsoons, while fluctuating input cost can adversely impact profitability.
Liquidity: Strong
Liquidity is strong: cash accrual, expected at Rs 60-65 crore in fiscal 2020, should adequately cover maturing debt of less than Rs 20 crore. Subsequently, accrual is expected to increase to over Rs 80 crore, and debt obligations should come down. Bank limit utilisation averaged 51% over the 12 months through July 2019.
Outlook: Stable

CRISIL believes TIL should continue to benefit from its established presence and strong relations with customers.
Rating sensitivity factors
Upward factor
* Sustainable revenue growth of 20% and better product and client diversification
* Sharp improvement in margin and working capital cycle
Downward factor
* Decline in topline by over 20%, coupled with pressure on margin and working capital cycle
* Stretched working capital cycle or large capex

About the Company

Incorporated in 1965, Vadodara (Gujarat)-based TIL manufactures and exports chemicals, mainly acid and alkyl chlorides. Export contributes to over three quarters of the revenue, with the domestic market accounting for the remaining. The company is listed on the Bombay Stock Exchange. Mr Shroff and his family members are the promoters.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 610 367
Profit after tax (PAT) Rs crore 66 26
PAT margin % 10.8 7.2%
Adjusted debt/adjusted networth Times 0.79 1.7
Interest coverage Times 7.1 4.8

Status of non cooperation with previous CRA:
TIL has not cooperated with Brickwork Ratings India Private Limited which has classified it as issuer not cooperative vide release dated February 28, 2019. The reason provided by Brickwork Ratings India Private Limited is non-furnishing of information for monitoring of ratings.

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
(Rs crore)
Rating assigned
with outlook
NA Bank Guarantee NA NA NA 0.64 CRISIL A1
NA Cash Credit NA NA NA 44.75 CRISIL A/Stable
NA Inland/Import Letter of Credit NA NA NA 19 CRISIL A1
NA Letter of Credit NA NA NA 26 CRISIL A1
NA Loan Equivalent Risk Limit NA NA NA 1.2 CRISIL A1
NA Proposed Cash Credit Limit NA NA NA 45 CRISIL A/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 10.75 CRISIL A/Stable
NA Standby Letter of Credit NA NA NA 2 CRISIL A/Stable
NA Term Loan NA NA Jun-2023 82.01 CRISIL A/Stable
NA Fixed Deposit NA NA NA 37.16 FA+/Stable
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST    --    --  08-10-18  Withdrawal  10-11-17  CRISIL A2+  28-07-16  CRISIL A2  CRISIL A2 
                09-10-17  CRISIL A2+       
                20-03-17  CRISIL A2+       
Fixed Deposits  FD  47.86  FA+/Stable      08-10-18  FA/Positive  10-11-17  FA/Positive  28-07-16  FA-/Stable  FA-/Stable 
                09-10-17  FA/Positive       
                20-03-17  FA/Stable       
Fund-based Bank Facilities  LT/ST  195.71  CRISIL A/Stable/ CRISIL A1      08-10-18  CRISIL A-/Positive/ CRISIL A2+  10-11-17  CRISIL A-/Positive/ CRISIL A2+  28-07-16  CRISIL BBB+/Stable  CRISIL BBB+/Stable 
                09-10-17  CRISIL A-/Positive/ CRISIL A2+       
                20-03-17  CRISIL A-/Stable       
Non Fund-based Bank Facilities  LT/ST  47.64  CRISIL A/Stable/ CRISIL A1      08-10-18  CRISIL A-/Positive/ CRISIL A2+  10-11-17  CRISIL A-/Positive/ CRISIL A2+  28-07-16  CRISIL BBB+/Stable/ CRISIL A2  CRISIL A2 
                09-10-17  CRISIL A-/Positive/ 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 A1 Bank Guarantee .64 CRISIL A2+
Cash Credit 44.75 CRISIL A/Stable Cash Credit 44.75 CRISIL A-/Positive
Inland/Import Letter of Credit 19 CRISIL A1 Inland/Import Letter of Credit 19 CRISIL A2+
Letter of Credit 26 CRISIL A1 Letter of Credit 26 CRISIL A2+
Loan Equivalent Risk Limits 1.2 CRISIL A1 Loan Equivalent Risk Limits 1.2 CRISIL A2+
Proposed Cash Credit Limit 45 CRISIL A/Stable Proposed Cash Credit Limit 45 CRISIL A-/Positive
Proposed Long Term Bank Loan Facility 10.75 CRISIL A/Stable Proposed Long Term Bank Loan Facility 10.75 CRISIL A-/Positive
Standby Letter of Credit 2 CRISIL A/Stable Standby Letter of Credit 2 CRISIL A-/Positive
Term Loan 82.01 CRISIL A/Stable 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 Bank Loan Ratings
CRISILs Criteria for rating short term debt

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