| Indian Phosphate Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+'; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
| ||||||
| 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 Indian Phosphate Limited (IPL; part of the IPL group).
Group’s revenue improved to over Rs.680 crore in fiscal 2022 from Rs.467 crore in previous year. healthy LABSA demand and higher realizations from fertilizer segment amidst increased government subsidy have aided group’s sharp revenue growth during the year. The group is expected to maintain revenue growth of around 5-8% in current fiscal. Group’s operating margin too improved to about 6,45% in fiscal 2022 vis-a-vis operating margin of around 3% historically. Sharp revenue growth and significant improvement in operating margin led to multifold rise in group’s cash accruals in fiscal 2022. Though the operating margin is expected to moderate, it is expected to remain much better than the historical levels.
IPL Group plans for CAPEX of around Rs.50 crore in next 2 years primarily for sulfuric acid production unit as a backward integration and setting up a new fertilizer unit at Dhule (Maharashtra). The capex is expected to commence during next financial year and shall be debt funded to the tune of around 60%. Nonetheless, group’s current low leverage meant that despite the planned capex, the capital structure should remain comfortable over medium term too. Further the capex is expected to help group scaling up its operations and improving its cost efficiency.
The rating continues to reflect the benefits that group receives from experienced promoters and their funding support, moderately diversified stream of revenues and a comfortable financial risk profile. These strengths are partially offset by exposure to fluctuations in the prices of LABSA and price volatility in rock phosphate and sulfuric acid which are raw material for SSP (fertilizers) and working capital intensive operations.
CRISIL Ratings had upgraded its ratings on the bank facilities of IPL to ‘CRISIL BBB/Stable/CRISIL A3+’ from 'CRISIL BBB-/Stable/CRISIL A3’ on September 07, 2022. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of IPL and its group company, Udaipur Poly Sacks Ltd (UPSL), as these entities, together referred to as the IPL group, have common management, similar businesses, and financial and operational fungibility.
Unsecured loan of Rs 19.84 crore as on March 31, 2022, from the promoter has been treated as neither debt nor equity as the loan is subordinate to external debt and will remain in the business over the medium term
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:
The groups manufacture and sells LABSA and SSP, which contributed around 66% and 34% in revenues estimated for fiscal 2022. These diversified streams of revenues would help group partially withstand any shocks in the one of the segments. Revenge grew by 40% and operating margin more than doubled in in fiscal 2022 with healthy demand for LABSA and improved fertilizer realization amidst hike in government subsidy.
Weaknesses:
|
Expected cash accrual of over Rs.20 crore is adequate against small repayment obligations. These accruals would support incremental working capital requirement, resulting in lower dependence on working capital debt. The combined cash credit limit of Rs 54 crore was utilized at an average of ~41% during the 12 months through March 2022, partly supported by faster realization of receivables. Also, the current ratio is adequate estimated at 1.82 times, as on March 31, 2022. Nonetheless, any stretch in subsidy payments or undertaking significantly larger debt funded CAPEX can impact the liquidity. |
CRISIL Ratings believes the IPL group will continue to benefit over the medium term from experienced Promoters. |
Upward factors
Downward factors
|
IPL, established in 1998, is involved in manufacturing and sales of fertilizers, SSP (Singular Super Phosphate) both granular and powdered. It is also manufacturing LABSA since 2004 (one of the raw materials used for manufacturing of detergent).
Udaipur Poly Sacks Ltd (UPSL), established in 1995, is involved in manufacturing of SSP since 2013. The company manufactured cement bags earlier till 2016, however they discontinued the same and now is manufacturing only SSP.
The group is promoted by Mr. S. Pritam Singh, Mr. Ravinder Singh and Mr. Devendra Singh and is based out of Umarda, Udaipur, Rajasthan. |
Key Financial Indicators
*Provisional
*Provisional |
| 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)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 26-Sep-2022 in line with the lender-wise facility details as on 05-Sep-2022 received from the rated entity.
Criteria Details
|