Rating Rationale
May 31, 2024 | Mumbai
Innovative Tech Pack Limited
Rating outlook revised to 'Stable'; 'CRISIL A3' reassigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.17 Crore
Long Term RatingCRISIL BBB-/Stable (Outlook revised from ‘Negative’; Rating Reaffirmed)
Short Term RatingCRISIL A3 (Reassigned)
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 revised its outlook on the long-term bank facilities of Innovative Tech Pack Limited (ITPL) to ‘Stable’ from ‘Negative’ while reaffirming the rating at ‘CRISIL BBB-'. CRISIL Ratings has reassigned its ‘CRISIL A3’ rating to the short-term facilities of ITPL.

 

The revision in outlook reflects the improvement in the business risk profile of the company with operating margins expected around 9.5-10% in fiscal 2024 from 8% in fiscal 2023 driven by decline in employee cost as a % of revenue and company’s ability to pass on the increase in input prices to its customers. The company is expected to report net profit of around Rs 0.9 crore in fiscal 2024 supported by a decline in interest cost owing to a reduction in debt level. Operating income is expected to be around Rs 145 crores in fiscal 2024 (Rs 159.3 crores in fiscal 2023) due to decline in realization and muted volume growth. Increase in scale of operations driven by volumetric growth and sustenance of operating margins at around 9.5-10% will remain a key monitorable.

 

The rating continues to reflect the established presence of ITPL in the plastic packaging business and its above-average financial risk profile. These strengths are partially offset by exposure to intense competition and customer concentration risk.

Analytical Approach

Unsecured loans of Rs 13.69 crore (as on March 31, 2024) extended by the promoter have been treated as neither debt nor equity as these funds have been retained in the business for the last three fiscals and will sustain in the near term as well.

Key Rating Drivers & Detailed Description

Strengths:

Established market position in the packaging industry: The three-decade-long experience of the promoter in the packaging industry, his strong understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business risk profile. Revenue for the first three quarters of fiscal 2024 is estimated at Rs 108.21 crore and projected to be around Rs 145 crore for the full fiscal (Rs 159 crore in fiscal 2023), driven by decline in realization and muted growth volume sales.

Above-average financial risk profile: Net worth and gearing are expected to be around Rs 34-35 crores (Rs 33. 78 crores as on 31st March 2023) and around 0.6 time (0.71 times as on 31st March 2023) respectively as on 31st March 2024 driven by accretion to reserves and no debt funded capex. Debt protection metrics are adequate with interest coverage ratio expected around 2.7 times in fiscal 2024 (2 times in fiscal 2023) driven by improvement in operating profitability. Going forward, the financial risk profile is expected to improve with no debt funded capex plans and sustained accretion to reserves.

Weakness:

Susceptibility to high customer concentration risk: The company generates nearly half of its revenue from a single customer. Shift in the procurement philosophy of this customer significantly impacted profitability during fiscal 2022. Though the operating margin is expected to improve in fiscal 2024, the addition of new clients to diversify the customer base will be a key monitorable.

 

Exposure to intense competition leading to moderation in margin: 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 regional players catering to the local customers. This competitive pressure may continue to constrain scalability, pricing power and profitability. Operating margin dropped to 7.8% in fiscal 2022, from around 16.0% in fiscal 2022 and is expected to be in the range of 9.5-10% in fiscal 2024. Sustenance of profitability with the addition of new clients and products or foray into a new segment remain key monitorable.

Liquidity: Adequate

Net cash accruals are expected to be Rs 9-12 crores per annum against repayment obligations of 1.5-2 crores per annum in the near term. Utilization of the bank limit of Rs 9 crore was moderate, averaging around 82% for the 12 months through March 2024. The current ratio is expected to be around 1.3-1.4 times as on 31st March 2024.

Outlook: Stable

The business risk profile and liquidity are expected to remain stable driven by sustained profitability and extensive experience of the promoters in the plastic packaging business.

Rating Sensitivity factors

Upward factors:

  • Steady growth in revenue driven by volumetric growth with operating margin over 10%, leading to cash accrual of more than Rs 15 crore per annum.
  • Improvement in financial risk profile with interest coverage ratio exceeding 3 times.

 

Downward factors:

  • Decline in revenue and decline in operating margin (below 8%), leading to lower cash accrual.
  • Any large debt-funded capex plan thus weakening the financial risk profile.

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 beverages and pharmaceutical industries. Its 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 the Bombay Stock Exchange and National Stock Exchange.

Key Financial Indicators

As on/for the period ended

Unit 

31-Dec-2023

31-Mar-2023

31-Mar-2022

Operating income

Rs crore

108.2

159.34

158.4

Reported profit after tax (PAT)

Rs crore

1.62

-1.43

-7.45

PAT margin

%

1

-0.9

-4.7

Adjusted debt/adjusted networth

Times

-

0.71

0.66

Interest coverage

Times

2.87

2

1.46

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
instrument

Date of
allotment

Coupon
rate (%)

Maturity
date

Issue size
(Rs.Crore)

Complexity 
levels

Rating assigned
with outlook

NA

Cash credit

NA

NA

NA

9

NA

CRISIL BBB-/Stable

NA

Long-term loan

NA

NA

Mar-2026

5.3

NA

CRISIL BBB-/Stable

NA

Letter of credit

NA

NA

NA

2.7

NA

CRISIL A3
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 LT 14.3 CRISIL BBB-/Stable   -- 15-03-23 CRISIL BBB-/Negative 28-09-22 CRISIL BBB-/Negative 17-11-21 CRISIL BBB-/Negative CRISIL BB+ /Stable(Issuer Not Cooperating)*
      --   --   -- 12-04-22 CRISIL BBB-/Negative 11-01-21 CRISIL BBB-/Stable --
Non-Fund Based Facilities ST 2.7 CRISIL A3   --   --   -- 17-11-21 CRISIL A3 CRISIL A4+ (Issuer Not Cooperating)*
      --   --   --   -- 11-01-21 CRISIL A3 --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 5 Axis Bank Limited CRISIL BBB-/Stable
Cash Credit 4 YES Bank Limited CRISIL BBB-/Stable
Letter of Credit 2.7 YES Bank Limited CRISIL A3
Long Term Loan 5.3 Axis Bank Limited CRISIL BBB-/Stable
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

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