| Black Rose Industries Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2': Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its ratings on the bank facilities of Black Rose Industries Limited (BRIL) to 'CRISIL BBB+/Stable/CRISIL A2' from 'CRISIL BBB/Positive/CRISIL A3+'.
The upgrade reflects the improved business and financial risk profile driven by higher revenue which grew over by 28% year on year in fiscal 2022. Company has reported revenue of Rs 486 crore in fiscal 2022 against Rs 379 crore in fiscal 2021. Growth in revenue was driven by increased volume as well as better realization. Further, business risk profile is also supported by increasing contribution from the manufacturing segment which is expected to increase further backed by start manufacturing plant of Acrylamide solid. The upgrade also factors in a sustained strengthening of financial risk profile supported by improved capital structure and debt protection metrics, likely to improve further over the medium term.
The ratings continue to reflect the extensive experience of the promoters in the specialty chemicals industry and the company's above-average financial risk profile. These strengths are partially offset by low contribution from the manufacturing segment, exposure to foreign exchange (forex) fluctuations and product concentration. |
Analytical Approach CRISIL Ratings has consolidated the business and financial risk profiles of BRIL and BR Chemicals Co Ltd (BRCC). This is because BRCC is BRIL's 100% subsidiary and is in the same line of business.
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: Extensive experience of the promoters Mr Anup Jatia, the key promoter, has experience of close to two decades in the specialty chemicals industry. He is a chemical engineer from the California Institute of Technology, USA, and possess technical expertise in the chemicals industry. The extensive experience of the promoters has helped the company establish strong relations with its customers.
Above average financial risk profile Gearing and total outside liabilities to total networth ratios were healthy at 0.11 time and 0.44 times, respectively, as on March 31, 2022, The company is expected to carry out capital expenditure of around Rs 60 crore funded by internal accruals, promoter infusion for the new polyacrylamide solid plant. Debt protection metrics were comfortable, as reflected in interest coverage ratio of 33.52 times and net cash accrual to total debt ratio of 2.35 time in fiscal 2022. Revenue and profitability is expected improve over medium term, strengthening debt protection metrics. Overall financial risk profile is expected to be sustained over medium term
Weakness: Low contribution from the manufacturing segment and exposure to forex fluctuations Although on improving trend, currently contribution from manufacturing segment is low. BRIL currently generates about 70% of its revenue from the distribution business, largely imported from Japan, South Korea and Germany. The business is dependent on relationships with the suppliers (Mitsui Chemicals, Sumitomo Chemicals, Taoka Chemical in Japan and Lanxess in Germany) and is exposed to regulatory changes with respect to international trade. Profitability is also susceptible to fluctuations in forex rate because of large imports. However, longstanding relationships with the principals and partial hedging of forex exposure partially mitigate these risks.
Product concentration mainly in the manufacturing segment Currently, BRIL manufactures two products: acrylamide and polyacrylamide liquid. While acrylamide contributed to majority of its manufacturing revenue; polyacrylamide is expected to scale up over the medium term as company is also staring manufacturing of polyacrylamide solids. This exposes the company to any adverse impact of price movements, demand-supply dynamics and competition from domestic and foreign peers. However, acrylamide is used in multiple industries such as paints, emulsions, adhesive, textile, water & sewage treatment industries etc. which should partially mitigate this risk. Furthermore, company is in process of introducing new products to the market, this would bring diversification to its manufacturing product profile over medium term. |
Liquidity: Adequate Net cash accrual, expected to be above Rs 35 crore per fiscal, will sufficiently cover yearly debt obligation of Rs 0.6-2 crore per fiscal over the medium term. BRIL is expected to fund the capex of Rs 60 crore primarily through internal accruals and by raising equity; accordingly, no large debt funding is expected over the medium term. Bank limit utilisation averaged at 32% over the twelve months through March 2022. Current ratio was comfortable at over 2.8 times as on March 31, 2022 and cash and bank balance is 13.34 crore as on March 31, 2022. |
Outlook: Stable CRISIL Ratings believes BRIL's business risk profile will continue to benefit from the promoters' extensive experience |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Incorporated in 1990, BRIL, formerly known as Asia Fab Ltd, distributes specialty chemicals in India. It has also set up a unit in Jhagadia, Gujarat, wherein it manufactures acrylamide and polyacrylamide, which finds application in paints, emulsions and adhesives, water treatment etc, with installed capacity of 20000 and 40000 tonne per annum respectively.
BRIL derives a minor portion of its revenue from sale of wind power. The company has two wind power plants in Rajasthan and Gujarat.
Mr Anup Jatia, the promoter of the company, handles the day-to-day operations. |
Key Financial Indicators
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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 02-Aug-22 in line with the lender-wise facility details as on 02-Aug-22 received from the rated entity.
Criteria Details
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