| Kokuyo Camlin Limited | ||||||
| Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1' | ||||||
| Rating Action | ||||||
| ||||||
| 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 reaffirmed its 'CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of Kokuyo Camlin Limited (KCL).
The ratings continue to reflect the established brand of the company in the stationery industry in India, its improving profitability and a healthy financial risk profile. The ratings also factor in significant benefits derived from the business and financial linkages with the parent, Kokuyo & Co Ltd, Japan (Kokuyo). These strengths are partially offset by susceptibility to intense competition and to volatility in input prices, leading to pressure on profitability.
Operating income rose 52% in fiscal 2023 to Rs 775 crore led by revival in sales following Covid-19 related disruptions and increased penetration in the domestic market. In fiscal 2023, operating margin moved closer to pre-Covid level around 7%. The operating income is expected to increase in fiscal 2024 and operating margin is likely to be sustained. |
Analytical Approach The ratings of KCL factor in support expected from its parent, Kokuyo. CRISIL Ratings believes KCL will, in case of exigencies, receive distress support from its parent for timely servicing of debt, considering the parent’s holding of 74.44%, as well as operational, technical and financial support |
Key Rating Drivers & Detailed Description Strengths:
Kokuyo is a leading player in office stationery and furniture products industry in Japan, particularly in notebooks, office supplies and office furniture. Technical collaboration for new product development with the parent has widened the product offerings of KCL. Strong financial support from the parent is reflected in the rights issue of Rs 103 crore in fiscal 2014, primarily for expansion.
KCL has strong brands such as Camel, Camlin and Exam. The company has a diversified portfolio of over 2,000 products and pan-India presence. The Kokuyo group sells a wide variety of stationary products such as pencils, geometry boxes and scholastic colours. Its strong distribution network with more than 300,000 retail outlets and over 2,500 stock keeping units aids sales growth. The company is a market leader in geometry boxes as well as art and colour products.
Networth was healthy at Rs 260 crore as on March 31, 2023. Gearing is expected to be sustained around 0.2 time over the medium term in the absence of large, debt-funded capital expenditure (capex). Sustenance of profitability and return on capital employed (RoCE) will remain key monitorable.
Weaknesses:
In the stationery industry, cost of production and profit margin depend heavily on raw material prices, which account for a major portion of the production cost. Prices of key materials, such as plastic, paper and pigments, have been volatile in the past few years. Moreover, the company may not be able to fully pass on the increase in raw material prices to customers owing to intense competition.
The domestic stationery industry is highly fragmented with many unorganised players in the lower end of product segments, such as pens, pencils and adhesives. While brands in the stationery domain are limited, products face intense competition from cheap, non-branded variants, and Chinese stationery. |
Liquidity: Adequate Liquidity will remain adequate over the medium term supported by projected cash accrual of Rs 40-45 crore. Fund-based limit of Rs 167 crore was utilised 19% on average over the last 12 months. With nil term debt obligation and expected capex of Rs 30 crore over fiscal 24-25 along with sufficient cash accrual, KCL is unlikely to raise debt. Moreover, the parent will continue to provide ongoing and need-based support in case of exigencies. |
Outlook: Stable CRISIL Ratings believes KCL will continue to benefit from its established market position and distribution network, with demand returning to pre-Covid level. The financial risk profile will remain comfortable over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company KCL was set up in 1931 as Dandekar & Company by Mr Digambar Dandekar and Mr Govind Dandekar. The firm was reconstituted as a public limited company in 1946 and was listed in 1988. KCL manufactures a variety of stationery products at its plants in Tarapur, Taloja and Patalganga in Maharashtra, and in Jammu. After the rights issue in fiscal 2014, Kokuyo’s stake went up to 70.66% from 50.74%. Currently, Kokuyo holds 74.44% stake. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
* Fully interchangeable with vendor bill discounting ** Fully interchangeable with overdraft *** Fully interchangeable with overdraft & vendor bill discounting |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
|
** Fully interchangeable with overdraft
*** Fully interchangeable with overdraft & vendor bill discounting
Criteria Details
|