| Archidply Industries Limited | ||||||
| 'CRISIL BBB/Stable/CRISIL A3+' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings to the bank facilities of Archidply Industries Limited (AIL).
The ratings reflect AIL's established market position in the plywood and laminates business supported by the extensive experience of the promoters, geographical diversity in revenue with an established dealership network and above-average financial risk profile. These strengths are partially offset by moderate working capital intensity of operation, susceptibility to volatility in raw material prices and intense competition and exposure to project related risks associated with the upcoming Medium Density Fiberboard project. |
Analytical approach CRISIL Ratings has combined the business and financial risk profiles of AIL and its newly set up subsidiary, Archidpanel Industries Pvt Ltd (AIPL) .
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key rating drivers and detailed description Strengths: Established market presence supported by the extensive experience of the promoters: Supported by promoter’s industry experience of over four decades, AIL has established itself as a leading player in the plywood and laminates industry. The promoter’s strong understanding of local market dynamics has helped the company to develop a comprehensive range of products and widen its geographical reach. The company will continue to benefit from the experience and expertise of its management team and leverage its customer relationships.
Geographical diversification in revenue and established network: AIL has branches across the country and a wide distribution network. The northern and southern regions contribute 60-65% of revenue, while exports account for over 10%. AIL also benefits from its wide distribution network and established clientele. AIL caters to clients in different sectors such as state government, hospitals, corporates and retail segment. It has over 5 years of relationship with many of its customers/distributors. The top ten customers accounted for around 15% of revenue in fiscal 2022. Wide geographic reach and robust clientele should continue to support the business risk profile over medium term.
Above-average financial profile, likely to moderate amidst greenfield project capital expenditure (capex): Capital structure remains healthy due to lower reliance on external funds. Gearing stood at 0.59 time and total outside liabilities to adjusted networth ratio at 1.16 time as on March 31, 2022. AIL debt protection measures have also been adequate due to low leverage and steady profitability. The interest coverage and net cash accrual to total debt ratios were 4.25 times and 0.23 time, respectively, for fiscal 2022. - AIL is undertaking Rs. 110 Crores greenfield project for setting up a Medium Density Fiberboard and allied products. The capex is expected to be debt-funded to the tune of 70%-75%. The debt funded capex and increasing working capital requirements meant the gearing should moderate in near term.
Weaknesses: Moderate working capital intensity of operation: Gross current assets were in the range of 172-200 days over the three fiscals ended March 31, 2022. AIL maintains inventory of around 60-70 days which can rise during seasons. Also, it extends credit of around 90 days to its customers. Working capital cycle is supported by credit of around 2 months extended by suppliers along with working capital bank lines.
Susceptibility to volatility in raw material prices and intense competition: Intense competition in the plywood and laminates industry may continue to constrain scalability, pricing power and profitability. Further, as cost of procuring the major raw material (kraft paper) accounts for bulk of total operating revenue, an adverse variation in rates may impact profitability as price revision happens with a lag.
Exposure to project implementation risk: AIL’s subsidiary AIPL is undertaking a greenfield project at a cost of Rs 110 crore, of which 70-75% will be funded through debt. The project is still in the initial stage and debt is being tied-up for the same. Further total project size is large in relation to AIL’s net worth. Tie-up of funds and timely implementation of project entail risks. Also, adequate and profitable ramp up in sales post commercialisation also remains a key monitorable. |
Liquidity: Adequate Expected annual cash accrual of Rs 15-20 crore should comfortably cover minimal debt obligations in fiscals 2023 and 2024 and support liquidity. Bank limit utilization is moderate at around 73 percent for the past twelve months ended August 2022. Current ratio was healthy at 1.44 times as on March 31, 2022. Low gearing and moderate networth support financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business |
Outlook: Stable CRISIL Ratings believes AIL will continue to benefit from the extensive experience of its promoter, and the company’s established presence in the industry. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company AIL was iIncorporated in 1995 and promoted by Mr Deen Dayal Daga and his family members. The company is engaged in manufacturing and exporting a comprehensive range of plywood and laminates. It has manufacturing unit located in Rudrapur-Uttarakhand, and having a network of branches, distributors and dealers across India. |
Archidpanel industries Pvt Ltd (AIPLwas formed as a 100% subsidiary of AIL in February 2022 to undertake a greenfield project (Medium Density Fiberbard), which is expected to commence commercial operations from the second half of fiscal 2024. |
Key Financial Indicators
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Status of non-cooperation with previous CRA AIL has not cooperated with Brickwork Ratings India Pvt Ltd (BRICKWORKS), which has classified the company as non-cooperative through release dated September 23, 2022. The reason provided by BRICKWORKS is non-furnishing of information for monitoring of ratings. |
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)
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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 13-Oct-2022 in line with the lender-wise facility details as on 13-Oct-2022 received from the rated entity.
Criteria Details
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