| Innovative Tech Pack Limited | ||||
| Rating reaffirmed at 'CRISIL BBB- / Negative' | ||||
| 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-/Negative’ rating on the long-term bank facilities of Innovative Tech Pack Ltd (ITPL).
The rating continues to reflect established presence of ITPL in the plastic packaging industry and above-average financial risk profile. These strengths are partially offset by exposure to risks of customer concentration and intense competition.
CRISIL Ratings had revised its rating outlook on the long-term bank facilities of ITPL to ‘Negative’ from 'Stable' while reaffirming the rating at ‘CRISIL BBB-’ and short term rating has been reaffirmed at 'CRISIL A3'.on November 17, 2021 |
Key rating drivers and detailed description Strengths:
The promoter has nearly three decades of experience in the packaging industry; his strong understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business. Revenue increased to an estimated Rs 150 crore in fiscal 2022 from Rs 144 crore in fiscal 2021.
Networth and gearing are estimated at around Rs 38.00 crore and below 1.00 time, respectively, as on March 31, 2022 (against Rs 46.00 crore and 1.08 times a year ago) despite expected profit after tax (PAT) losses. Debt protection metrics moderated owing to lower profitability; interest coverage and net cash accrual to total debt ratios were around 1.50 times and 0.15 time, respectively, in fiscal 2022 (against 1.80 times and 0.19 time in fiscal 2021) .
ITPL has been prepaying its financial obligation and hence, debt level came down to an estimated Rs 35 crore in fiscal 2022 from Rs 46 crore in fiscal 2021.
Although the company does not have any major, debt-funded capital expenditure (capex) planned for the medium term, any such capex -- that weakens the capital structure and has significant repayment -- will remain a key rating sensitivity factor.
Weaknesses:
Risk related to customer concentration will persist as the company generates nearly half of its revenue (during the first 10 months of fiscal 2022) from a single customer. Shift in procurement philosophy of the key customer significantly impacted profitability of ITPL in fiscal 2021. Acquisition of new clients to diversify the customer portfolio will remain a key monitorable.
Though large, organised players such as ITPL offer superior-quality products at competitive rates, backed by economies of scale and access to advanced technology, they face rivalry from numerous players catering to local customers. This competitive pressure may continue to constrain scalability, pricing power and profitability. Revenue dropped to 10% in fiscal 2021 from around 16% in fiscal 2020; it further declined to an estimated 8% in fiscal 2022. Improvement in profitability owing to addition of new clients or products shall remain a key monitorable. |
Liquidity: Adequate Cash accrual is projected at Rs 12-14 crore per annum, sufficient to meet the repayment obligation of just Rs 1-2 crore for fiscals 2023 and 2024; the surplus cash will aid financial flexibility. However, cash accrual was modest in fiscal 2022 owing to lower profitability, insufficient to meet the debt obligation of around Rs 8 crore; the cash mismatch will be met through debt. Bank limit was utilized at around 72% for the 12 months through January 2022. Free cash and bank balance were Rs 0.9 crore as on January 31, 2022. |
Outlook: Negative The business and liquidity risk profiles of ITPL will deteriorate over the medium term owing to declining operating margin. |
Rating sensitivity factors Upward Factors:
Downward Factors:
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About the company Incorporated in 1989 by Mr K Sayaji Rao, ITPL manufactures polyethylene terephthalate (PET) bottles, jars, caps and containers for the fast-moving consumer goods, food and beverage and pharmaceutical industries. Manufacturing facilities are in Rudrapur, Uttarakhand; Baddi, Himachal Pradesh; Manesar, Haryana; and Guwahati, Assam, with total PET products capacity of 12,500 tonne per annum (TPA) and polypropylene processing capacity of 1,200 TPA. The company is listed on Bombay Stock Exchange and National Stock Exchange. |
Key financials
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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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | |||||||||
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Criteria Details
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