| Ecoplast Limited | ||||||
| Ratings placed on 'Watch Developing' | ||||||
| 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 placed its ratings on the bank facilities of Ecoplast Limited (EPL, part of Ecoplast group) on ‘Rating Watch with Developing Implications’.
The rating has been placed on watch following the announcement made by EPL regarding the proposed scheme of amalgamation of Propack Industries (Kunal Plastics Private Limited, KPPL) into EPL. While EPL has received Board approval other requisite approvals from shareholders, BSE and NCLT are pending. CRISIL Ratings will continue to monitor the progress of the amalgamation and will resolve the watch with appropriate rating action post completion of the same.
The ratings continue to reflect the company’s established market position and comfortable financial risk profile. These strengths are partially offset by the modest scale of operations amid intense competition and susceptibility to volatility in raw material prices. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Ecoplast and its wholly owned subsidiary, Synergy Films Pvt Ltd (SFPL). The two companies, together referred to as the Ecoplast group, have a common management team.
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 diversification into industrial films: The Ecoplast group has been manufacturing multilayer extrusion films for more than 40 years. It produces industrial films, such as aluminium composite and surface protection films, which are widely used in the construction and durable goods industries. It has also introduced several variants of multilayer co-extruded films used for packaging and non-packaging applications. Ability to provide customised solutions has enabled the group to build strong relationships with key customers and sustain revenue. Revenues has grown at CAGR of 14% for the last three fiscals ended FY 2024 driven by the steady growth in the volumes and price realization led by the steady order flow from the key customers.
Comfortable financial risk profile: The Ecoplast group’s financial risk profile is marked with moderate net worth of Rs 41 crores as on March 31, 2024 led by steady accretion to the reserves. The capital structure of the company is comfortable as reflected in the gearing and total outside liability to adjusted net worth ratio of 0.01 times and 0.30 times as on March 31, 2024 (0.03 times and 0.32 times a year ago) largely on account of limited reliance on the outside debt for its working capital requirements. Furthermore, in absence of any large debt funded capex, the capital structure is expected to remain strong over the medium term. Debt protection measures also remain at robust on account of moderate interest expenditure in absence of any large debt and healthy operating profitability. It is reflected in the interest cover of more than 10 times for the last two fiscal ended FY 2024, it is expected to remain at similar levels over the medium term. The overall financial risk profile is expected to remain at comfortable levels driven by the steady growth in scale and steady accretion to the reserves.
Weaknesses: Modest scale of operations amid intense competition: The Ecoplast group primarily manufactures multilayer coextruded plastic films used for flexible packaging and other speciality applications. The plastic packaging industry is highly fragmented, with several unorganised players catering to regional demand. Intense competition restricts growth opportunities to expand into new geographies and scalability, as reflected in revenues of Rs 113 crore in fiscal 2024 with H1FY25 revenues of Rs 60 crores. A steady growth in the scale of operations driven by the higher volume sales will remain a key monitorable.
Susceptibility to volatility in raw material prices: The key raw material, polymer resin, being a crude derivative, its price is volatile. The operating margin of the Ecoplast group ranged from 1.3% to 11.9 % over the three fiscals through 2024 because of volatility in the raw material prices. While the company is able to pass on the increase in RM prices to the customers, the same happens with a lag. Operating margins has moderated to 9% in first half of fiscal 2025, any sharp fluctuation in the RM prices may impact the operating profitability and hence the sustenance of the operating margin remains a key monitorable |
Liquidity: Adequate Bank limit utilization was nil on average for the 12 months through Aug 2024. Cash accrual is expected to be over Rs 9 crores against negligible term debt obligation and will cushion liquidity. The current ratio was healthy at 3.45 times as on March 31, 2024, and the group had moderate cash and bank balance of Rs 3.4 crore as on Sep 2024 (10.2 crores as on March 31, 2024). Low gearing and moderate net worth provide financial flexibility to withstand adverse conditions or a downturn in the business. |
Rating Sensitivity Factors Upward factors
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About the Group Incorporated in 1981, Ecoplast manufactures multilayer extrusion films used in flexible packaging, and industrial films, such as aluminium composite and surface protection films, which are used widely in the construction and durable goods industries. It is listed on the Bombay Stock Exchange and is promoted by Mr Jaymin B Desai.
Incorporated in 2007, SFPL is engaged in trading. Its manufacturing operations were discontinued in December 2019. |
Key Financial Indicators
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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 | ||||||||||||||||||||
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Criteria Details
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