| Astral Limited | ||||||
| Ratings Reaffirmed; CP Withdrawn | ||||||
| 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its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of Astral Ltd (Astral; part of the Astral group) and withdrawn its rating on the company’s commercial paper of Rs 50 crore at the company’s request as there is no amount outstanding against the rated amount. The withdrawal is in line with the CRISIL Ratings' withdrawal policy.
The ratings continue to reflect the leadership position of the group in the chlorinated polyvinyl chloride (CPVC) pipes and fittings segment, supported by established brands and entrenched market presence, and the extensive experience of the promoters. The ratings also factor in a strong financial risk profile. These strengths are partially offset by exposure to intense competition and supplier concentration risk, and susceptibility to volatility in raw material prices and foreign exchange (forex) rates. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Astral and its subsidiaries, Astral Biochem Pvt Ltd (ABPL), Resinova Chemie Ltd (Resinova), Seal It Services Ltd (Seal It), Gem Paints Pvt Ltd (GPPL) and Astral’s Joint venture, Astral Pipes Limited, Kenya. These companies are collectively referred to as the Astral group. In September 2022, Astral received National Company Law Tribunal (NCLT) order sanctioning the amalgamation of Resinova and ABPL with Astral.
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: Established market position and comfortable operating efficiency The group is the market leader in the domestic niche market of CPVC (chlorinated polyvinyl chloride) segment and among the leading players in the PVC (polyvinyl chloride) segment (which together contribute around three fourth of revenue) with an installed capacity of 2.80 lakh tonne per annum across eight locations in India as on March 31, 2022. It enjoys the advantage of being a pioneer in introducing such products in the Indian market. The group complements its CPVC products with PVC products. It has diversified the product basket portfolio through adding adhesive and sealants, infrastructure, tank, sanitaryware & faucets and paints segment. The established and longstanding presence has paved the way for strong brand recall and an entrenched market presence.
The adhesives segment (around one-fourth of revenue) is likely to grow because of revenue addition from the paints segment backed by renewed and vast distribution network, and extensive advertisement and branding campaigns. The geographically distributed plants (leading to saving in logistics cost) and enlarging the addressable market, continued benefits from backward integration into CPVC, and better spread of cost on higher scale are likely to help sustain improvement in the operating margin over 15%.
Strong financial risk profile Networth and gearing were healthy at Rs 2,083 crore and 0.16 time, respectively, as on March 31, 2022. Interest coverage and net cash accrual to total debt ratios were comfortable at around 60 times and 1.7 times, respectively, in fiscal 2022.
Weakness: Exposure to intense competition and supplier concentration risk The pipes and fittings industry is highly competitive, especially in the commoditised products segment which has low differentiation. The segment is price-sensitive, which prevents prompt pass-through of increase in input cost to customers. The group procures CPVC resin mostly from Seikisui Chemical Co Ltd (Seikisui). For PVC too, it relies on a few suppliers.
Susceptibility to fluctuations in raw material prices and forex rates The group imports around a quarter of its raw material requirement. Any significant fluctuation in forex rates may impact profitability, which is also vulnerable to inherent volatility in the prices of raw materials (PVC and CPVC resins), which are dictated by global crude oil prices. Over the five fiscals through 2022, the operating margin was 14-21%. In fiscal 2022, the volatility in raw material prices led to marginal decline in operating margin around 17.8% against 20.8% in fiscal 2021. During Q1FY23, the operating margin of group estimated around 14.9% due to reporting of inventory loss, forex losses, and higher employee cost and new product launch for faucet division. |
Liquidity: Strong Liquidity is backed by healthy cash accrual against repayment obligations, moderate bank limit utilisation, a controlled working capital cycle, and a healthy cash and bank balance. The company had accruals of over Rs 572 crore in fiscal 2022 against the total outstanding debt around Rs 333 crore. The group is likely to maintain annual accruals of over Rs 500 crore over medium term. The working capital cycle is well managed with gross current assets at around three months. Average utilisation of secured, unsecured bank limits stood around 44% through 12 months to June 2022. Further, the group has cash and equivalents of around Rs 542 crore (including Rs 194 crore investment in form of OCD in GPPL) as on June 30, 2022. Healthy cash accrual, financial flexibility, and moderate capex cycle should ensure strong liquidity over the medium term. |
Outlook: Stable CRISIL Ratings believes the Astral group will continue to benefit from its established market position and strong financial risk profile. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group Astral (erstwhile Astral Poly Technik Ltd) was incorporated in 1996 as a private limited company, promoted by Mr Sandeep Engineer (Chairman & managing director), and was reconstituted as a public limited company in 2007, with the launch of its initial public offering. The company manufactures and trades in CPVC and lead-free PVC plumbing systems for residential, commercial, and industrial applications.
In April 2022, Astral acquired 51% controlling stakes in GPPL for consideration of Rs 194 crore and entered the paint business.
In November 2020, Astral acquired the assets of Shree Prabhu Petrochemicals Pvt Ltd for consideration of Rs 51 crore and forayed into tank manufacturing.
In July 2018, Astral acquired 51% stake in Rex Polyextrusion Pvt Ltd (RPPL) for cash consideration of Rs 75.225 crore. The balance stake was acquired through issuance of Astral’s shares and RPPL was merged into Astral. This acquisition added a portfolio of high-density polyethylene (HDPE) and PVC pipes. It now has plants in Gujarat, Tamil Nadu, Maharashtra, Uttarakhand and Rajasthan.
Resinova manufactures adhesives for construction, engineering, automobile, insulation, household and stationery applications. The company sells its products under 50 brands, including Bondtite, Bondset, Bondfit, Resigrip, Resicast, Zesta, Solvobond, Resibond and Vetra. In November 2014, Astral acquired 76% stake in Resinova for Rs 212.8 crore. In November 2015, it acquired the balance 24% for Rs 73 crore. Subsequently, Resinova was amalgamated with Advanced Adhesives Ltd (AAL) with effect from November 21, 2014. As per the scheme of amalgamation, AAL was renamed Resinova. The merger added cement-solvent solutions to Resinova’s product basket. In September 2022, Astral received NCLT order sanctioning amalgamation of Resinova and ABPL with Astral.
Currently, ABPL has no operations.
Formed in 2002, Seal It offers sealants, adhesives and other products under the brand Bond-it. Astral acquired 80% stake in this company in August 2014. |
Key Financial Indicators (Consolidated)
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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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Letter of Credit | 1 | HDFC Bank Limited | CRISIL A1+ |
| Working Capital Facility | 50 | Citibank N. A. | CRISIL AA/Stable |
| Working Capital Facility | 40 | DBS Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 14 | HDFC Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 25 | IndusInd Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 60 | Kotak Mahindra Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 20 | RBL Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 30 | Standard Chartered Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 40 | Standard Chartered Bank Limited | CRISIL AA/Stable |
| Working Capital Facility | 100 | The Hongkong and Shanghai Banking Corporation Limited | CRISIL AA/Stable |
This Annexure has been updated on 20-Apr-2023 in line with the lender-wise facility details as on 15-Apr-2023 received from the rated entity.
Criteria Details
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