Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A-/Positive’ rating to the long-term bank facility of Kisan Mouldings Ltd (KML).
The rating reflects the expected improvement in the business risk profile of the company, driven by revenue growth and recovery in operating profitability backed by its acquisition by Apollo Pipes Ltd (APL; 'CRISIL A/Positive/CRISIL A1').
APL acquired 54% stake in KML, a polyvinyl chloride (PVC) pipes company with capacity of ~60,000 TPA, having an extensive network of over 500 dealers and 15,000 retailers spread across west and central India. The acquisition amount of Rs 118 crore was used to settle debt (as part of one-time settlement) and the company had no outstanding debt as on March 31, 2024.
The rating also factors in the vintage of the company in the pipe and fittings industry along with wide product range, which includes unplasticised PVC and chlorinated PVC plumbing pipes and fittings, drainage and irrigation pipes.
The financial risk profile has also improved with equity infusion of Rs 158 crore in fiscal 2024 post acquisition and consequently repayment of debt. The debt protection metrics are expected to remain healthy in the medium term with increase in revenue and recovery in operating margin along with no major, debt-funded capital expenditure (capex).
In the past, KML has reported weak operating performance owing to under-utilised capacity given working capital constraints, leading to lower fixed cost absorption. However, post acquisition, the company has access to working capital limits which will leverage its strong production capabilities. In the first quarter of fiscal 2025, the company reported revenue of Rs 68 crore and operating margin of 6.8%, compared with operating losses in the past, due to better price negotiation with suppliers and fixed cost absorption. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin is expected to improve to 6-7% over the medium term.
The rating further considers the support provided by the parent, increasing the financial flexibility. APL has provided a shortfall undertaking for the debt facilities of KML and is likely to provide financial support in case of exigencies.
These strengths are partially offset by susceptibility of profitability to fluctuations in raw material prices and exposure to intense competition. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework and factored in the operational, managerial and need-based financial support expected from the parent, APL.
Also, CRISIL Ratings has combined the business and financial risk profiles of KML and its wholly owned subsidiary, KML Tradelinks Private Limited, on account of their operational and financial linkages.
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:
KML is critical to APL as it is in the same business and has operational synergies with the latter. Moreover, the parent has provided a shortfall undertaking for the debt facilities of KML and will bear any scheduled and unforeseen expenditure. KML will continue to benefit from the healthy business prospects of APL over the medium term.
Weaknesses:
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Liquidity: Adequate Liquidity will remain healthy supported by the shortfall undertaking from APL, which is likely to provide financial support in case of an exigency. At standalone level, liquidity remains adequate with the company having liquid surplus of Rs 36 crore as on March 31, 2024. The company is expected to generate net cash accrual of Rs 15-25 crore, which will be sufficient to fund regular maintenance capex of ~Rs 10 crore per annum in the absence of debt obligation over the medium term. Working capital limit of Rs 50 crore was utilised 40-50% over the three months through August 2024. |
Outlook: Positive The outlook on KML is based on the positive outlook on the parent. The ratings will remain sensitive to any change in CRISIL Ratings’ rating on APL. CRISIL Ratings believes KML will benefit from the operational and technical support from APL while improving its business performance over the medium term. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in 1989 as a private limited company named Sanwaria Synthetics Pvt Ltd, KML was reconstituted as a public limited company under the current name in 1993. It manufactures moulded and plastic pipes and fittings, irrigation systems, moulded furniture, solvent cement and rubber lubricants. It has manufacturing facilities in Silvassa, Dadra and Nagar Haveli, Tarapur, Maharashtra, Baddi, Himachal Pradesh, Dewas, Madhya Pradesh, Raipur, Chhattisgarh, and Tumkur, Karanataka. The company is listed on the Bombay Stock Exchange. |
About the Group Apollo Pipes Ltd was incorporated in 2000 as Apollo Poly Pipes Pvt Ltd by Mr Sameer Gupta and Mr Vinay Gupta. The company was reconstituted as a public limited company with the current name in April 2009. APL manufactures pressure pipes (PVC, ring-fit and self-fit pipes), column pipes, casing pipes, plumbing pipes, soil-waste-rainwater pipes, fittings, and water tanks. It is a part of the Sudesh group. Through a reverse merger with its holding company in November 2017, APL got listed on the Bombay Stock Exchange and the National Stock Exchange.
For the three months ended June 30, 2024, net profit was Rs 14 crore on income of Rs 308 crore, compared with Rs 14 crore and Rs 260 crore, respectively, for the corresponding period of the previous fiscal. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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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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