| Ecoplast Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL BBB-/Stable/CRISIL A3' ratings on the bank facilities of Ecoplast Limited (Ecoplast; part of the Ecoplast group).
The ratings continue to reflect the established market position in manufacturing of multilayer extrusion films and diversification into industrial films, along with a comfortable financial risk profile. These strengths are partially offset by moderate scale of operations and exposure to intense competition and large working capital requirement. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has consolidated the business and financial risk profiles of Ecoplast, and its wholly owned subsidiary, Synergy Films Private Limited (SFPL), collectively referred to as the Ecoplast group. This is because of Ecoplast’s stake in SFPL of 100% and same 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 in manufacturing of multilayer extrusion films and diversification into industrial films: The group has been into manufacturing of multilayer extrusion films for more than 30 years, which has helped establish strong relationship with customers and suppliers, and develop products to meet customer demands. The Ecoplast group has introduced several variants of multi-layer coextruded films used for packaging and non-packaging applications. Ability to provide customised solutions has helped the group build strong relationships with key customers and sustain revenues.
* Comfortable financial risk profile: Moderate networth of Rs.31.76 crore as on March 31, 2021 and limited reliance on outside borrowings have led to a strong capital structure, as reflected in gearing and total outside liabilities to adjusted networth ratio of 0.25 time and 0.62 time, respectively. In the absence of any major debt-funded capital expenditure (capex), the capital structure is expected to remain strong over the medium term. Debt protection metrics were comfortable, indicated by interest coverage and net cash accrual to adjusted debt ratios of 3.57 times and 0.31 time, respectively, in fiscal 2021. Supported by a comfortable operating margin (5-8%), the metrics are expected to remain stable over the medium term.
Weaknesses * Moderate scale of operations and exposure to intense competition: The Ecoplast group is primarily engaged in manufacturing multilayer coextruded plastic films used for flexible packaging and other speciality applications. The plastic packaging industry is highly fragmented, marked by the presence of a large number of unorganised players with small capacities. These players mainly cater to regional demand because short-period service requirements of customers. This restricts the growth opportunities for players to expand in new geographies and consolidate their business as reflected in revenues of Rs.74 crore in fiscal 2021.
* Large working capital requirement: Gross current assets (GCAs) were 149 days as on March 31, 2021. Customers are offered credit of 60-75 days and inventory of 45-55 days. Higher in sales in Q4 of fiscal 2021, had led to increase in debtors as on March 31, 2021 and increase in overall GCA days. Working capital is partially managed through payables of 40-45 days. In the absence of any change in the company’s policies, GCAs are expected to remain high over the medium term. |
Liquidity Adequate Cash accrual is expected at Rs.4-5 crore per fiscal for fiscals 2022 and 2023, against repayment obligation of Rs.2.63 crore and Rs.2.23 respectively. The fund-based limit of Rs.14.00 crore has been utilised, at an average of around 12% during the 12 months through May 2021. The unencumbered cash and bank balance stood at Rs.0.44 crore as on March 31, 2021. Adequate cash accrual, unutilised bank lines, and the cash and bank balance should be adequate to support working capital requirement over the medium term. |
Outlook Stable CRISIL Ratings believes the Ecoplast group will continue to benefit from its established presence and above average financial risk profile. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the group Incorporated in 1981, Ecoplast manufactures multi-layer extrusion films used in flexible packaging. It also produces industrial films, such as aluminium composite and surface protection films, which are widely used in the construction and durable goods industries. The company is listed on the Bombay Stock Exchange. Mr Jaymin B Desai is the promoter of the company.
Incorporated in 2007, SFPL undertakes trading activity. Manufacturing operations of this entity 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: 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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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