| Kanpur Plastipack Limited | ||||||
| Ratings reaffirmed at 'CRISIL A- / Stable / CRISIL A2+ '; 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 Ratings has reaffirmed its ratings on the bank facilities of Kanpur Plastipack Ltd (KPL) at ‘CRISIL A-/Stable/CRISIL A2+’.
The reflects the strong business risk profile of KPL supported by optimal utilisation of the increased installed capacity, geographically diversified customer and supplier portfolios, and the recent rally in prices across the packaging industry. In FY22 revenue of the company grew by 38% to Rs.627 cr. from Rs. 452 cr. in FY21. Export contributed around 71% of total sales in 2022 (77% in 2021 and 74% in 2020). The operating margin remained stable at 11-13%. . The financial risk profile should continue to be healthy, despite capital expenditure (capex) of Rs 96.78 crore planned for the medium term.
The ratings continue to consider established market position of KPL, 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:
The market position of KPL is supported by a reputed clientele and steady repeat orders from them. The five-decade experience of the promoter in the packaging industry, his strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business. Revenue reported a 38% growth to Rs.627 crore in fiscal 2022 (from Rs 452 crore in fiscal 2021). As more than 70% of revenue of the company coming from exports market and overseeing overall market situation and impact of war over the global economy the growth in FY23 is expected to remain muted. However, as the CPP plant is also expected to become operational by July 2023 hence the additional revenue from that plant also will start reflecting in the growth of company from FY24 onwards.
Gearing has remained around 1 time over the four fiscals through 2022, backed by strong accretion to networth with limited dividend payouts. Debt protection metrics were adequate, with net cash accrual to total debt and interest coverage ratios of 0.18 time and 4.30 times, respectively, in fiscal.
In FY22 the profits were affected due to extraordinary increase in the ocean freight and high volatility in raw material prices and increased competitive pressure from markets. As majority of revenue (more than ~70%) of company comes from exports market hence increase in ocean fright prices has severe impact over the margins of the company. The EBITDA margins of the company has declined from 13.5% to 9.71%. The margins have remained volatile in the past fiscals due to the volatility in the raw material prices.
Financial risk profile should remain comfortable, capex to set up a production line for manufacturing cast polypropylene film for which an additional term loan of Rs 62 crore is likely to be undertaken.
Weakness:
Out 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.
The product-folio of the company comprises three segments: FIBC, fabrics, and multi-filament yarn. FIBC contributed for approximately 46% of the revenue in fiscal 2022; around 71% of the revenue came from exports during the fiscal 2022.
The top 10 customers contributed around 40% of total revenue in fiscal 2022. Further, sales to clients in Europe account for 55-65% of revenue, while that from North and South America accounted for 20-30% of revenue. Susceptibility to economic cyclicality in Europe & America continents and volatility in foreign exchange rates persists. |
Liquidity: Strong: Cash accrual is projected at Rs 38-45 crore per annum, sufficient to meet the debt obligation of Rs 12-25 crore over the medium term. Bank limit utilisation was moderate, at 67% for the 12 months ending July 2022. Current ratio was 1.29 times on March 31, 2022. |
Outlook Stable CRISIL Ratings believes KPL will continue to benefit from the established market position and comfortable financial risk profile |
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
*CRISIL Adjusted numbers |
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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 03-Oct-2022 in line with the lender-wise facility details as on 03-Oct-2022 received from the rated entity.
Criteria Details
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