Rating Rationale
May 06, 2021 | Mumbai
Centuary Fibre Plates Private Limited
Rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.22.05 Crore
Long Term RatingCRISIL BBB+/Stable (Reaffirmed)
Short Term RatingCRISIL A2 (Reassigned)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed rationale

CRISIL Ratings has reaffirmed its rating on the long term bank facilities of Centuary Fibre Plates Pvt Ltd (CFPPL) at 'CRISIL BBB+/Stable' and reassigned its 'CRISIL A2' rating to the short term bank facility.

 

The ratings reflect the extensive experience of the chief promoter of the company in the mattress industry. The ratings also factor in above-average financial risk profile, driven by comfortable networth, low gearing and robust debt protection metrics and efficient working capital cycle. These strengths are partially offset by modest scale of operations, exposure to intense competition, and susceptibility to volatility in raw material prices.

 

Operations were affected in the first half of fiscal 2021 on account of the lockdowns to prevent the spread of the Covid-19 pandemic in India and overseas. However, with gradual opening up of the economy from the second quarter, the operating performance of CFPPL has improved significantly. The company is likely to post 15% revenue growth in fiscal 2021 while sustaining its earnings before interest, tax, depreciation, and amortisation (Ebitda) margin. Its financial risk profile should remain robust over the medium term in the absence of significant debt-funded capital expenditure (capex).

Key rating drivers & detailed description

Strengths:

Extensive industry experience of the promoters and established distribution network

The promoters’ experience of over three decades in the organised mattress industry has helped the company establish a strong market position and wide distribution network.

 

Above average financial risk profile

The financial risk profile is supported by moderate networth, low gearing and robust debt protection metrics. Networth and gearing is estimated at Rs 68 crore and 0.05 time in fiscal 2020. Debt protection metrics is robust marked by estimated interest coverage and net cash accrual to total debt ratios of 21 times and 1 time, respectively, in fiscal 2021.

 

Efficient working capital cycle

Gross current assets (GCAs) of 100 days with receivables of 50 days and inventory of 50 days as on March 31, 2020, indicate the efficient working capital management. The working capital requirement will remain manageable with GCAs expected around 100 days over the medium term, and will be funded through internal accrual and bank lines.

 

Weaknesses:

Modest scale of operations and exposure to intense competition

Turnover is estimated to stand at Rs 215 crore in fiscal 2021 from Rs 187 crore in the previous fiscal, but the scale of operations remains modest in the fragmented industry with a large number of unorganised players. The company will remain susceptible to intensifying competition because of low entry barriers to the industry.

 

Susceptibility of profitability to volatility in raw material prices

Profitability is highly correlated with fluctuations in raw material prices. Moreover, significant competitive pressure restricts bargaining power with customers.

Liquidity: Adequate

Liquidity is supported by low bank limit utilisation, healthy accrual and minimal debt obligation. Bank limit utilisation averaged 4.7% for the 12 months through January 2021. Cash accrual is expected over Rs 12 crore in fiscal 2022 against term debt obligation of Rs 1.03 crore, and the surplus will cushion liquidity. Current ratio was healthy at 3.09 times on March 31, 2020. 

Outlook: Stable

CFPPL will continue to benefit from its promoters' extensive industry experience and its established distribution network.

Rating sensitivity factors

Upward factors

*  Sustained revenue growth of 30% and stable operating margin leading to increase in cash accrual

*  Sustenance of financial risk profile

 

Downward factors

*  Decline in revenue by 15% and in operating profitability below 6%, resulting in reduced cash accrual

*  Stretched working capital cycle or significant debt-funded capex weakening the financial risk profile or liquidity

About the company

Set up in 1988 by Mr Bhagwandas Malani and his family members, Hyderabad-based CFPPL manufactures rubberised coir mattresses, polyurethane foam, and spring mattresses. Products are sold under the Centuary and Sure-Rest brands. Mr Purshottam Malani is currently the key decision maker.

Key financial indicators

As on / for the period ended March 31

 

2020

2019

Operating income

Rs crore

187.25

209.20

Reported profit after tax

Rs crore

7.83

7.94

PAT margin

%

4.32

3.78

Adjusted debt/adjusted networth

Times

0.15

0.13

Interest coverage

Times

16.22

17.02

 

Status of non-cooperation with previous CRA

CFPPL has not cooperated with CARE Ltd which has classified the company as non-cooperative through a release dated July 2, 2020. The reason provided by CARE Ltd is non-furnishing of information required for monitoring of ratings.

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 level

Rating assigned with outlook

NA

Bank guarantee

NA

NA

NA

0.5

NA

CRISIL A2

NA

Cash credit

NA

NA

NA

1

NA

CRISIL BBB+/Stable

NA

Long term loan

NA

NA

May-2022

4

NA

CRISIL BBB+/Stable

NA

Proposed long-term bank loan facility

NA

NA

NA

4.55

NA

CRISIL BBB+/Stable

NA

Working capital demand loan

NA

NA

NA

0.5

NA

CRISIL BBB+/Stable

NA

Working capital facility

NA

NA

NA

11.5

NA

CRISIL BBB+/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 21.55 CRISIL BBB+/Stable   -- 17-04-20 CRISIL BBB+/Stable 22-02-19 CRISIL BBB+/Stable   -- CRISIL BBB+/Stable
Non-Fund Based Facilities ST 0.5 CRISIL A2   --   -- 22-02-19 CRISIL A2   -- CRISIL A2
All amounts are in Rs.Cr.
 
 
Annexure - Details of Bank Lenders & Facilities
Facility Name of Lender Amount (Rs.Crore) Rating
Bank Guarantee HDFC Bank Limited 0.5 CRISIL A2
Cash Credit HDFC Bank Limited 1 CRISIL BBB+/Stable
Long Term Loan Citibank N. A. 4 CRISIL BBB+/Stable
Proposed Long Term Bank Loan Facility HDFC Bank Limited 4.55 CRISIL BBB+/Stable
Working Capital Demand Loan HDFC Bank Limited 0.5 CRISIL BBB+/Stable
Working Capital Facility Citibank N. A. 11.5 CRISIL BBB+/Stable

This Annexure has been updated on 8-Sep-2021 in line with the lender-wise facility details as on 17-Aug-2021 received from the rated entity.

Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
Rating Criteria for Consumer Durable Industry
CRISILs Bank Loan Ratings

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