Rating Rationale
April 13, 2022 | Mumbai
Balkrishna Paper Mills Limited
Ratings reaffirmed at 'CRISIL BB / Stable / CRISIL A4+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.113 Crore
Long Term RatingCRISIL BB/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
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 Balkrishna Paper Mills Limited (BPML) at ‘CRISIL BB/Stable/CRISIL A4+’.

 

The ratings continue to reflect an extensive experience of promoters. The ratings also factor in benefits from being part of the Siyaram group, and timely financial support extended by the promoters group. These rating strengths are partially offset by continued losses leading to a weak financial risk profile and lower utilization of capacity.

Analytical Approach

Unsecured loan of Rs. 28.6 crores as on March 31st, 2021 has been treated as debt. Preference share capital of Rs. 84.1 crores as on March 31, 2021 has been treated as 25% debt and 75% equity.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters

The three-decade-long experience of the promoters, their healthy relationship with customers and suppliers, and the diversified end-user profile will continue to support the business risk profile.

 

  • Financial support from the promoters and group companies

The company is part of the Siyaram group, which includes Siyaram Silk Mills Ltd (Siyaram; ‘CRISIL AA-/Stable/CRISIL A1+’). Though operations are managed independently, group entities and promoters have extended funding support in a timely manner through unsecured loans and preference shares. This support for funding losses, and meeting working capital requirement and debt obligation is expected to continue over medium term.

 

Weaknesses:

  • Continuous losses leading to weak financial risk profile

The company has been incurring continuous losses since long period of time which have eroded the networth and the leverage is high. Funding support from the promoters through preference shares and unsecured loans has helped the financial risk profile, compensating for the losses. The debt protection metrics are poor on account of continued operating losses, however prompt support from promoters has helped timely repayment of debt obligations in the past. Timely support from promoters is expected to continue over medium term

 

  • Lower capacity utilization

The operating margin is adversely affected by lower utilization at one of the plants that was planned to produce duplex coated boards but could not do so on a commercial scale due to lower realizations. The management is evaluating the feasibility of producing other varieties of product in the same facility; till then the plant has been temporarily shut. However, the company is planning to utilize the other capacity fully and expecting operating profits in fiscal 2024.

Liquidity: Stretched

Net cash accrual are expected to be inadequate against significant repayment obligation towards a working capital term loan. However, Liquidity is aided by timely support from the promoters. As on March 31, 2021, promoters support in the form of preference share and unsecured loan stood at Rs. 84.1 crores and Rs. 28.6 crores respectively. And, promoters had infused ~Rs. 50 crores through preference shares through which unsecured loan of ~Rs. 23.6 crores is expected to repaid in fiscal 2021, balance funds will be used towards working capital requirements. Such support is expected to continue over the medium term and remains a key monitorable. The current ratio was inadequate at 0.61 time and the cash and cash equivalents was low at ~Rs. 0.04 crores as on September 30, 2021.

Outlook: Stable

The business and financial risk profiles should continue to benefit from the established market position, association with the Siyaram group and cost optimisation measures being undertaken.

Rating Sensitivity factors

Upward Factors:

  • Sustained revenue growth with the operating margin being maintained at above 10%, leading to adequate net cash accrual for meeting maturing debt obligation
  • Large equity infusion or significant reduction in debt, thus strengthening the financial risk profile, especially liquidity

 

Downward Factors:

  • Sustained dip in revenue by over 30% and lower than expected profitability, resulting in large cash losses against substantial repayment obligation
  • Change in stance of support from promoters to fund losses and other operational and financial requirements, resulting in reliance on external debt and hence sustained leverage levels

About the Company

BPML, incorporated in 1961, manufactures coated duplex/triplex paper boards out of recycled waste paper and pulp, at its facilities in Ambivili, Maharashtra.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

126.5

196.1

Reported profit after tax (PAT)

Rs crore

(25.9)

(34.6)

PAT margin

%

(20.4)

(17.6)

Adjusted debt/adjusted networth

Times

(4.0)

(21.3)

Interest coverage

Times

(0.5)

(1.0)

 

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)

ISIN

Name of instrument

Date of allotment

Coupon
Rate (%)

Maturity date

Issue size (Rs.Crore)

Complexity Levels

Rating assigned  with outlook

NA

Cash Credit

NA

NA

NA

19

NA

CRISIL BB/Stable

NA

Working Capital Term loan

NA

NA

Feb-25

43.5

NA

CRISIL BB/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

23.5

NA

CRISIL BB/Stable

NA

Letter of Credit

NA

NA

NA

27

NA

CRISIL A4+

 

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 86.0 CRISIL BB/Stable   -- 29-09-21 CRISIL BB/Stable   -- 03-10-19 CRISIL BB/Stable CRISIL BB/Stable
      --   -- 29-01-21 CRISIL BB/Stable   --   -- --
Non-Fund Based Facilities ST 27.0 CRISIL A4+   -- 29-09-21 CRISIL A4+   -- 03-10-19 CRISIL A4+ CRISIL A4+
      --   -- 29-01-21 CRISIL A4+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 14 Union Bank of India CRISIL BB/Stable
Cash Credit 5 Standard Chartered Bank Limited CRISIL BB/Stable
Letter of Credit 7 Union Bank of India CRISIL A4+
Letter of Credit 20 Standard Chartered Bank Limited CRISIL A4+
Proposed Long Term Bank Loan Facility 23.5 Union Bank of India CRISIL BB/Stable
Working Capital Term Loan 43.5 Standard Chartered Bank Limited CRISIL BB/Stable

This Annexure has been updated on 13-April-2022 in line with the lender-wise facility details as on 01-Aug-2021 received from the rated entity

Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt

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