| Kokuyo Camlin Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 Kokuyo Camlin Limited (Camlin) at 'CRISIL A/Stable/CRISIL A1'.
The ratings continue to reflect the significant benefits derived from business and financial linkages with the parent, Kokuyo & Co Ltd, Japan (Kokuyo). The ratings also factor in a strong brand in the stationery segment and an adequate financial risk profile. These strengths are partially offset by susceptibility to intense competition and to volatility in input prices, leading to pressure on profitability.
Performance in Q1FY21 was significantly impacted given the strict nationwide lockdowns and closure of schools and colleges, performance has gradually improved from Q2FY21 onwards, in line with gradual relaxation in lockdown restrictions – both in terms of revenues and profitability For the nine months ended in fiscal 2021 operating profitability margin was -0.8% as compared to 6.2% for the same period a year before; fiscal 2021 is expected to close with positive EBIDTA. . The fall in operating margins is mainly due to significant operating loss during the first quarter.. Revenue are expected to grow by ~20% in current fiscal on lower base of last year also cost saving initiatives taken by the company will reflect in operating margins and are expected to be moderate around 5-6%. While business will be susceptible to intense competition, the financial risk profile should remain adequate over this period because of modest capital expenditure (capex) plans, steady cash accrual, and prudent working capital management. The uncertainty and scale of Covid pandemic may impact the company’s operating plans for FY 22. |
Analytical Approach The ratings of Camlin factor in support expected from its parent Kokuyo Company Limited (KCL). CRISIL believes that KCL will, in case of exigencies, receive distress support from its parent for timely repayment of debt obligations, considering parent holding of 74.44%, operational, technical and financial support. |
Key Rating Drivers & Detailed Description Strengths:
Kokuyo is a leading company in office stationery products in Japan, particularly in notebooks and office supplies and office furniture. Product offerings of the Camlin have widened as a result of technical collaboration for new product development with the parent. Strong financial support from the parent is reflected in the rights issue of Rs 103 crore in fiscal 2014, primarily for expansion.
Camlin is one of India’s strongest brands across stationery products. The group has a wide variety of stationery products such as pencils, geometry boxes, and scholastic colours. The strong distribution network with more than 300,000 retail outlets and over 2500 stock-keeping units aids sales growth. Camlin continues to be the market leader in geometry boxes, artistic and color products.
The networth was healthy, at Rs 234 crore, as on September 30, 2020. The gearing is likely to be sustained at ~0.4 time’s level in the absence of any large, debt-funded capex over medium term. Sustenance of profitability and return on capital employed (RoCE) will remain key rating monitorables.
Weakness:
Intense competition from both organized and unorganized players leads to pricing and margin pressures. However, the operating margin is expected to sustain over the medium term supported by cost and operational efficiencies. The margin is also vulnerable to volatility in raw material prices. |
Liquidity: Adequate Liquidity is likely to remain adequate over the medium term. Cash accrual is projected at Rs 25-35 crore per annum in fiscals 2022 -2023 which is expected to be sufficient for yearly maturing debt of around Rs 6 crore and annual capex of Rs 10 crore. Any additional working capital requirement will be additionally supported by average unutilized fund-based limits of approx Rs 70 crore. |
Outlook: Stable The business risk profile is expected to be constrained by moderate growth in revenues due to intense competition in the segments and steady profitability over the medium term. The financial risk profile is expected to benefit by healthy capital structure due to steady accretion to reserve and steady reduction in debt levels |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Camlin was set up as Dandekar & Company in 1931 by Mr Digambar Dandekar and Mr Govind Dandekar and was reconstituted as a public limited company in 1946 and was listed in 1988. The Camlin group manufactures a variety of stationery products at its plants in Tarapur and Taloja, in Maharashtra, and in Jammu. It has set up a new unit in Patalganga, Maharashtra. 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
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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)
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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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