Rating Rationale
September 20, 2024 | Mumbai
Hygienic Research Institute Private Limited
Ratings upgraded to 'CRISIL A/Stable/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.65.9 Crore
Long Term RatingCRISIL A/Stable (Upgraded from 'CRISIL A-/Positive' )
Short Term RatingCRISIL A1 (Upgraded from 'CRISIL A2+')
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 upgraded its ratings on the bank loan facilities of Hygienic Research Institute Private Limited (HRIPL) to 'CRISIL A/Stable/CRISIL A1’ from 'CRISIL A-/Positive/CRISIL A2+’.

 

The upgrade reflects a sustained improvement in the business risk profile backed by revenue diversification and improved operating margins. The company’s financial risk profile continues to remain healthy.

 

The company’s Streax brand has grown at a compounded annual growth rate of around 30% over the last 4 years through fiscal 2024. This has resulted in the company’s revenue growth along with reducing reliance on the Vasmol brand. The Company reported revenue of Rs 735 crore in fiscal 2024, a year-on-year growth of 11%. Furthermore, the company’s operating margin has steadily improved to 12.9% in fiscal 2024 backed by better cost absorption with increasing scale and effective cost management. Cash and cash equivalents of Rs 128.74 crore as on March 31, 2024 along with nil debt indicated healthy financial flexibility.

 

The rating continues to reflect the strong distribution network, established brands and healthy financial risk profile. These strengths are partially offset by intense competition amongst players and volatile operating margins.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong brand and distribution network and well-established product portfolio:The company has an established presence of nearly five decades in manufacturing and trading of hair care products such as hair dyes, oils and serums. It’s well-established product portfolio consist of brands like as Super Vasmol 33 Kesh Kala, Streax Hair Colour, Streax Professional range products, Vasmol Kali Mehandi, Vasmol Aamla Shakti, Jasmine Hair Oil, Yogiraaj Thanda Tel, and Brahmol Hair Oil.

 

Steady increase of revenue from Streax and Streax professional division has led to reduction in revenue concentration from Vasmol brand. The company earns roughly 1/3rd of its total revenue from each of these three brands. It also has a strong distribution with reach over 3,60,000-380,000 retail outlets and presence across 40,000 salons.

 

  • Healthy Financial Risk Profile: HRIPL has a robust capital structure with a healthy networth base of Rs 339.7 Cr as on March 31, 2024. Low reliance on debt has led the gearing ratio to be sub 0.20 time for the past five fiscals through fiscal year 2024. Company does not have any outstanding debt as on March 31, 2024.

    Debt protections metrics of the company are also robust with interest coverage ratio at 59.28 times which is estimated to improve further.

 

Weaknesses:

  • Volatile Operating Margins:The operating margins of the company have remained volatile over the past fiscals ranging from 6.05%-13.37% for the past five fiscal years through fiscal 2024. The operating margins of the company have improved in fiscal year 2024 to 12.93% as against 10.23% in fiscal year 2023. The improvement of operating margins was driven by the increased scale of operations, reduction in raw material prices and cost optimization methods undertaken by the company. Sustenance of improvement in operating margins will remain a key monitorable.

 

  • Intense competition with presence of established players:HRIPL faces intense competition from other well know brands od established players like Godrej Consumer Products Limited, L'Oréal India, Procter and Gamble, Unilever. Retaining market share amongst intense competition between established brands while sustaining current profitability remains a key rating sensitivity factor.

Liquidity: Strong

Liquidity position is strong marked by estimated net cash accruals over Rs 57 Cr against nil repayment obligations. Bank limit utilization averaged at 1% for the last twelve months ending March 2024. Company paid dividend of Rs 30.52 crore in fiscal 2024.

 

HRIPL has no major capex apart from routine capex planned over the medium term and the company had a cash and cash equivalent balance of Rs 129 Cr as of March 2024 which is estimated to increase further over the medium term.

Outlook: Stable

CRISIL Ratings believes HRIPL will continue to benefit from its strong market position in the hair care segment in India, supported by its strong brand and distribution network and experienced management team along with healthy financial risk profile

Rating sensitivity factors

Upward factors:

  • Improved market share resulting in sustained increase in revenue by over 25% while maintaining operating profits resulting in higher-than-expected cash accruals
  • Sustenance of financial risk profile and improvement in working capital cycle

 

Downward factors:

  • Decline in revenue or dip in operating profitability below 10% leading to lower net cash accruals
  • Any major debt-funded capital expenditure or higher than expected dividend payout weakening the financial risk profile

About the Company

Established as a proprietorship firm by late Dr Shanti Sarup Nishat in 1953, HRIPL was reconstituted as a partnership firm in 1981, when Mr Subhash Nishat, Mr Kailash Chhabra, and Mr Rajesh Chhabra joined as partners. In June 2008, the firm was reconstituted as a private limited company with its current name. In fiscal 2022, Premji Invest acquired majority stake in HRIPL. HRIPL manufactures and trades in hair dyes, hair colours, hair oil, skin care, hair care and other cosmetic products. It also trades in ayurvedic oil.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

734.22

669.86

Reported profit after tax

Rs crore

69.51

46.54

PAT margins

%

9.35

6.95

Adjusted Debt/Adjusted Net worth

Times

0.00

0.14

Interest coverage

Times

59.28

25.37

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA  Fund-Based Facilities  NA  NA  NA  45 NA  CRISIL A/Stable 
NA  Proposed Fund-Based Bank Limits  NA  NA  NA  10.9 NA  CRISIL A/Stable 
NA  Proposed Short Term Bank Loan Facility  NA  NA  NA  10 NA  CRISIL A1 
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 65.9 CRISIL A1 / CRISIL A/Stable   -- 14-07-23 CRISIL A-/Positive 18-10-22 CRISIL A2+ / CRISIL A-/Stable 30-07-21 CRISIL A2+ / CRISIL A-/Stable CRISIL A2+ / CRISIL A-/Stable
      --   -- 07-07-23 CRISIL A-/Positive   --   -- --
Non-Fund Based Facilities ST   --   -- 14-07-23 CRISIL A2+ 18-10-22 CRISIL A2+ 30-07-21 CRISIL A2+ CRISIL A2+
      --   -- 07-07-23 CRISIL A2+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities 45 Kotak Mahindra Bank Limited CRISIL A/Stable
Proposed Fund-Based Bank Limits 10.9 Not Applicable CRISIL A/Stable
Proposed Short Term Bank Loan Facility 10 Not Applicable CRISIL A1
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Criteria for rating short term debt

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