Rating Rationale
July 02, 2019 | Mumbai
Jasch Industries Limited
Rating outlook revised to 'Positive'; ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.46.04 Crore (Enhanced from Rs.35.57 Crore)
Long Term Rating CRISIL BBB/Positive (Outlook revised from 'Stable' and rating reaffirmed)
Short Term Rating CRISIL A3+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has revised the outlook on the bank facilities of Jasch Industries Limited (JIL; part of the JIL group) to 'Positive' from 'Stable' while reaffirming the ratings at 'CRISIL BBB/CRISIL A3+'.

CRISIL believes JIL's business risk profile will continue to improve over the medium term as reflected in the increase in group's sales to Rs 178 crore in fiscal 2019 from Rs 156 crore in fiscal 2018 and operating margin to 9.0% from 8.4%. Entry into new product lines in existing segments is expected to benefit the business. Financial risk profile remains healthy as reflected in a comfortable capital structure: networth was Rs 49 crore, gearing at less than 1 time and total outside liabilities to tangible networth (TOL/TNW) 1.3 times as on March 31, 2019. Additionally, liquidity was comfortable with average bank limit utilisation of 93% and healthy cushion between accruals and repayments. Unencumbered fixed deposits stood at Rs 15 crore as on March 31, 2019, supporting liquidity.
 
The ratings continue to reflect JIL's diversified revenue and product profiles (comprising synthetic leather and electronic gauges) and a comfortable financial risk profile. These strengths are partially offset by the modest scale of operations and exposure to intense competition.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of JIL, its wholly-owned subsidiary, Jasch North America Company (JNAC; electronic gauge business), and JNAC's subsidiary. This is because all these entities, collectively referred to as the JIL group, have common ownership and management and significant business 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
* Diversified revenue profile
The group expanded operations from manufacturing synthetic leather to industrial gauges in 2000. The synthetic leather division accounted for 61% of the total revenue of Rs 177 crore in fiscal 2019, while the industrial gauge segment accounted for the remaining. In the synthetic leather division, the polyvinyl chloride (PVC) and polyurethane (PU) segments accounted for almost 50% each, of the total income.
 
* Comfortable financial risk profile
Strong operational performance over the past five fiscals and prudent funding of capital expenditure through debt and equity have helped to strengthen the balance sheet. TOL/TNW ratio has remained at 1.3-1.60 times and gearing less than 1 time over the three fiscals ended March 31, 2019. Interest coverage and net cash accrual to adjusted debt ratios were 5-6 times and 0.3-0.45 time, respectively, during that period. Financial risk profile is expected to remain steady over the medium term.
 
Weaknesses
* Modest scale of operations
Several unorganised players and imports from China and Taiwan cater to majority of demand in the synthetic leather industry. Hence, despite operating income increasing to Rs 177 crore in fiscal 2019, scale of operations remains modest. This is mitigated by the fact that, unlike Chinese players in this segment, the JIL group manufactures durable and high-quality fabric used by premium footwear brands such as Nike, Reebok, Adidas, Bata, Liberty, and Lakhani.
 
* Exposure to volatility in raw material prices and foreign exchange rate fluctuations
Commoditised product makes demand sensitive to price fluctuations. Since key raw materials (PU, PVC) are derivatives of crude oil, their prices vary with the fluctuation in international crude oil prices.

Operating margin also remains susceptible to volatility in the value of the Indian rupee as the group is a net importer. While around 50% of total raw material requirement is imported, only 15-20% of the revenue from the industrial gauge unit is from exports.
Liquidity

Liquidity is adequate with cash accruals expected at Rs 13-14 crore over the medium term against repayment obligations of Rs 2.0-2.5 crore each year. Bank limit utilisation was 93% over the last 12 months through March 2019. Unencumbered cash and cash equivalents stood at Rs 16.6 crore as on March 31, 2019, of which fixed deposits were Rs 15 crore, aiding liquidity.

Outlook: Positive

CRISIL believes JIL will continue to benefit from its established market position and diversified product profile. The ratings may be upgraded if revenue and profitability increase while stable capital structure and working capital cycle lead to lower bank limit utilisation. The outlook may be revised to 'Stable' if operating margin and revenue remain stagnant, or if higher reliance on external debt weakens financial risk profile.

About the Group

JIL, incorporated as Jasch Polymers Ltd in 1985, got its current name in 1993. The company manufactures PU resin and PU/PVC-coated fabric, also known as synthetic leather. In 2000, it opened an industrial gauge division that specialises in online measurement and control systems for flat sheet products, including instruments such as thickness gauge, coating thickness gauge, paint thickness gauge, and basis weight/ash/moisture measurement gauges. These are used by players in the paper, plastic films, and steel industries. Manufacturing unit is in Sonepat, Haryana. JIL, through its wholly-owned subsidiary, JNAC, purchased a US-based industrial gauge unit, Indev Gauging System Inc, in January 2012. JIL is listed on the Bombay Stock Exchange.

Key Financial Indicators (Consolidated) 
As on/for the period ended March 31 Unit 2019 2018
Operating income Rs crore 178 156.64
Reported profit after tax Rs crore 7.98 4.4
PAT margin % 4.48 2.80
Adjusted debt/Adjusted networth Times 0.53 0.65
Interest coverage Times 6.2 5.04

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of instrument Date of Allotment Coupon rate (%) Maturity date Amount
(Rs crore)
Rating assigned with outlook
NA Bank guarantee NA NA NA 4.0 CRISIL A3+
NA Cash credit NA NA NA 20.0 CRISIL BBB/Positive
NA Letter of credit NA NA NA 14.0 CRISIL A3+
NA Term loan NA NA Nov2024 5.71 CRISIL BBB/Positive
NA Proposed long term bank loan facility NA NA NA 2.33 CRISIL BBB/Positive
 
Annexure - List of Entities Consolidated  
Entities consolidated
Jasch North America Company
Indev Gauging Systems, Inc (USA)
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  28.04  CRISIL BBB/Positive      31-08-18  CRISIL BBB/Stable  08-08-17  CRISIL BBB/Stable  23-08-16  CRISIL BBB/Watch Developing  CRISIL BBB/Stable 
                15-03-17  CRISIL BBB/Watch Developing       
Non Fund-based Bank Facilities  LT/ST  18.00  CRISIL A3+      31-08-18  CRISIL A3+  08-08-17  CRISIL A3+  23-08-16  CRISIL A3+/Watch Developing  CRISIL A3+ 
                15-03-17  CRISIL A3+/Watch Developing       
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 4 CRISIL A3+ Bank Guarantee 4 CRISIL A3+
Cash Credit 20 CRISIL BBB/Positive Cash Credit 16 CRISIL BBB/Stable
Letter of Credit 14 CRISIL A3+ Letter of Credit 12 CRISIL A3+
Proposed Long Term Bank Loan Facility 2.33 CRISIL BBB/Positive Term Loan 3.57 CRISIL BBB/Stable
Term Loan 5.71 CRISIL BBB/Positive -- 0 --
Total 46.04 -- Total 35.57 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Engineering Sector
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Vinay Rajani
Media Relations
CRISIL Limited
D: +91 22 3342 1835
M: +91 91 676 42913
B: +91 22 3342 3000
vinay.rajani@ext-crisil.com

Nitin Kansal
Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Himank Sharma
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com


Tanya Kapoor
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2192
Tanya.Kapoor@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL