| Kanpur Plastipack Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+ / CRISIL A2 '; outlook revised to 'Positive'; rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Rating has upgraded its rating on the bank facilities of Kanpur Plastipack Ltd (KPL) to ‘CRISIL BBB+/Positive/CRISIL A2’ and simultaneously revised the outlook to ‘Positive’ from ‘Stable.
The rating action reflects significant improvement in scale of operations and profitability of the company driven by optimal utilization levels of the increased installed capacity. The company has also benefited from recent rally in the prices across packaging industry as well as continued relationships with its geographically diversified customers and suppliers base owing to which it registered robust growth during Fiscal 2021 after a weaker Fiscal 2020 wherein both revenue and profitability were on lower side. The profitability has also been stable in the range of 11-13 over past few years (except Fiscal 2020 wherein profitability was on lower side at around 8%).
The revision in outlook reflects CRISIL Rating’s expectation of sustenance of growth in operations over medium term benefiting from the continued market position of the company and around 5 decades long experience of promoters of KPL.
CRISIL Ratings on the bank facilities of Kanpur Plastipack Ltd (KPL) continues to reflect KPL’s established market position, above-average operating efficiency and comfortable financial risk profile. These strengths are partially offset by exposure to intense competition in the packaging segment and limited diversification in revenue to few regions. |
Key Rating Drivers & Detailed Description Strengths: * Established market position because of growing overseas business: The company's market position is supported by a reputed clientele and repeat orders from them. This is further supported by extensive promoter experience of about 5 decades of the packaging Industry.
The overall revenue stood increased by an estimated 44% in fiscal 2021 to Rs. 459 crore as against Rs. 319 crore in Fiscal 2020 and Rs. 327 crore in Fiscal 2019, on account of better realisation and higher utilisation of the installed capacity. Since the company also benefit from recent rally in packaging material price and demand, the sustenance of volume sales with similar capacity utilisation levels would remain a key rating monitorable.
* Above-average financial risk profile and operating efficiency: Backed by strong accretion to networth and equity infusion from the promoter with limited dividend payouts over past few years, the overall gearing remained around 1 time over the four fiscals through 2021. Debt protection metrics were adequate, with net cash accrual to total debt and interest coverage ratios at 0.24 time and 6.80 times, respectively, in fiscal 2021 (as against 0.10 times and 2.38 times respectively for Fiscal 2020). Operating margin was moderate at an estimated 13.61% for Fiscal 2021, while Return on Capital Employed (RoCE) was adequate at estimated 18.59% for Fiscal 2021.
Weaknesses * Exposure to intense competition: Of the 25-30 players in the flexible intermediate bulk container (FIBC) industry in India, only 10 have large capacities. Apart from competing among themselves, players face competition from Turkey (which benefits from proximity to the European Union). Turkey continues to be one of the largest exporters to Europe.
KPL is on an expansion phase with total installed capacity increasing to 25,300 as on March 31, 2021 from 19,100 as on March 31, 2020. The current infrastructure support further expansion of capacities without major capital expenditure on the same. Going forward, sustainance of utilisation similar to last year at 95-98% levels would be a key rating monitorable.
* Limited diversification in revenue: The product-folio of the company is broadly across there segments: Flexible Intermediate Bulk Containers (FIBC), Fabrics and Multi-Filament Yarm. FIBC contributed for approx. 62% of Fiscal 2021 revenues, while around 77% of total revenues came from exports. Though the company has a wallet share of around 4-5% of India’s total export of FIBC from India.
The top 10 customers’ contributed around 77% of total revenues in Fiscal 2021 (around 74% in Fiscal 2020). Further, sales to clients in Europe account for 55-65% of revenue, while that from North and South America accounted for around 20-30% of revenues over past few years. Susceptibility to economic cyclicality in Europe & America continents and volatility in foreign exchange rates persists. |
Liquidity: Adequate Bank limit utilisation is moderate at around 55 percent for the past seven months ended May-21. Cash accrual are expected to be over Rs 40 crore which are sufficient against term debt obligation of Rs 12-14 crore over the medium term. Current ratio is estimated to be moderate at 1.47 times on March 31, 2021. |
Outlook Positive CRISIL Ratings believes KPL is likely to improve financial risk profile further while maintaining its market position over medium term backed by promoters’ extensive experience. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company KPL was incorporated in Kanpur in July 1971 as a private limited company by Mr Mahesh Swarup Agarwal. It began operations by manufacturing high-density polyethylene woven fabric and sacks and plastic packaging materials; installed capacity was 130 tonne per annum. The company was listed on the Bombay Stock Exchange in December 1985. In fiscal 2004, KPL shifted focus to FIBCs from woven fabric and sacks. |
Key Financial Indicators
*Provisional, CRISIL Adjusted |
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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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