| GRP Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2' ratings on the bank facilities of GRP Limited (GRP; part of the GRP group).
Revenue grew 16.4% to Rs 355 crore in the first nine months of fiscal 2023 compared with the corresponding period previous fiscal, backed by recovery in demand and better price realisations in both the domestic and export markets. However, operating margin moderated to 5.4% from 6.2% in fiscal 2022 on account of higher power costs and limited scope to pass it on to customers; prices of most products were already hiked in fiscal 2022. Margin is expected to improve to 6-7% in the near term amid better cost efficiencies. Revenue is likely to increase to Rs 475 crore in fiscal 2023 with steady recovery in the reclaim rubber segment, along with rising demand for non-reclaim products, especially engineering plastic.
CRISIL Ratings has noted the fire incident which took place at one of the facilities in Solapur, Maharashtra, and believes the incident will not materially impact the credit risk profile of GRP as revenue loss from this is expected to be minimal at ~Rs 5 crore for fiscal 2023.
Financial risk profile is expected to remain adequate, with gearing below 0.75 time over the medium term. This, despite capital expenditure (capex) to set up a plant in Solapur to expand engineering plastic capacity, which is funded through a prudent mix of debt and equity. During fiscal 2023, the company sold its entire stake in Marangoni GRP and also successfully divested its stake in Grip Polymers Ltd.
The ratings continue to reflect the established market position of GRP in the reclaimed rubber industry and its adequate financial risk profile. These strengths are partially offset by susceptibility to fluctuations in raw material prices and exposure to the tyre industry concentration in revenue. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of GRP and its subsidiary, Gripsurya Recycling LLP. This is because all these entities, collectively referred to as the GRP group, are in the same business and have operational synergies.
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
Weaknesses
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Liquidity: Adequate Expected net cash accrual of Rs 20-25 crore in fiscal 2023 should suffice to meet debt obligation of Rs 7-8 crore per annum over the medium term. Bank limit utilisation averaged 65% for the 12 months through December 2022. The company shored up liquidity of about Rs 16 crore as on December 31, 2022. |
Outlook: Stable GRP will sustain its operating performance with steady revenue growth over the medium term, though the impact of subsequent pandemic waves remains a key monitorable. Financial risk profile will remain adequate, supported by strong gearing and debt protection metrics. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Company Established by Mr Rajendra V Gandhi in 1974, GRP manufactures reclaimed rubber (recycled rubber) from end-of-life tyres and tubes. Having commenced operations as a tyre recycling company, GRP has transformed into a sustainable materials company over the years. It also separates nylon from tyres to produce raw material for sale to engineering plastic component manufacturers for automotive and electrical applications. The residue rubber from the above businesses is used by yet another business to blend with recycled plastic waste and produce composite material, which replaces wood and concrete.
The company is a leader in the domestic tyre recycling industry, and among the top five manufacturers globally. GRP has total installed capacity of 75,000 tonne per annum across all business segments. |
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)
$Sublimit of EPC, EBD, WCDL, LC @Sublimit of EPC, EBD, WCDL, LC, BG |
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 13-Apr-23 in line with the lender-wise facility details as on 03-Feb-22 received from the rated entity
$Sublimit of EPC, EBD, WCDL, LC
@Sublimit of EPC, EBD, WCDL, LC, BG
Criteria Details
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