| Mangalam Organics Limited | ||||||
| Rating outlook revised to 'Positive'; 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 revised its outlook on the long term bank facilities of Mangalam Organics Ltd (MOL) to ‘Positive’ from ‘Stable’; while reaffirming its rating at ‘CRISIL A-‘. Short term rating has been reaffirmed at ‘CRISIL A2+’
The revision in outlook reflects, expectation of sustained improvement in business risk profile along with improved financial risk profile. While the pandemic related disruptions in H1 led to slight moderation in revenue for fiscal 2021, revenue has seen revival and is expected to improve in fiscal 2022 and onwards. Operating profitability on the other hand is estimated to be materially higher in fiscal 2021 than earlier expectations on back of supply shortage and is likely to remain above earlier expectations in current fiscal as well, supported by increased market share of the company and higher demand scenario. Further, significant reduction in debt (on back of repayment of term loans); which is likely to be sustained over medium term, has strengthened the financial risk profile.
The ratings continue to reflect the extensive experience of the promoters, established market position in the camphor industry and a healthy financial risk profile. These strengths are partially offset by susceptibility to volatility in raw material prices and exposure to intense competition from domestic and foreign manufacturers. |
Key Rating Drivers & Detailed Description Strengths Promoters’ extensive experience and established market position: MOL benefits from its promoters’ extensive experience in the camphor industry, and its position as a leading player in the domestic market. The Dujodwala family has experience of around five decades and healthy relationships with customers and suppliers. Furthermore, India’s camphor industry benefits from lower import from China and healthy domestic demand. The company has the ability to manufacture high quality camphor backed by efficient manufacturing facilities. Being a large player in India, MOL will likely continue to benefit from the favourable market conditions and enhanced capacity.
Healthy financial risk profile: The financial risk profile is supported by comfortable networth and debt protection metrics. As on March 31, 2020, networth improved to Rs 167.9 crore from Rs 121.6 crore in the previous year, backed by increased accrual. Despite the capex in the past, leverage remains low, with total outside liabilities to adjusted networth ratio at 0.3 time as on March 31, 2020, and expected around 0.1-0.2 times over the medium term. Debt protection metrics are healthy with interest coverage and net cash accrual to total debt ratio at 16.7 times and 2.8 times, respectively, during fiscal 2020, and are likely to improve because of healthy profitability.
Weaknesses Susceptibility to volatility in raw material and camphor prices: Operating margin is susceptible to fluctuations in raw materials prices and camphor prices. Alpha pine and gum turpentine, which account for 60-70% of total raw material, are largely imported from Indonesia, Brazil, Russia, and Europe, and their availability and prices are subject to demand and supply situation. Camphor prices are also volatile and impacts realisation and profitability. Business risk profile will continues to be susceptible to changes in input and camphor prices and will remain a major rating sensitivity factor.
Intense competition from domestic manufacturers as well as revival of import from China: The camphor industry is an intensely competitive business, with presence of many domestic players as well as foreign players. Due to favourable market conditions, players are expanding capacity, thereby increasing supply and intensifying competition, which will likely moderate realisation. Revival of import from China may also have an adverse impact on the domestic industry. |
Liquidity: Strong Net cash accrual was Rs 55.9 crore in fiscal 2020 and likely to be around Rs 70-90 crore per fiscal over the medium term against absence of any debt obligations over the medium term. There are no material capital expenditures planned over the medium term. Bank limit was utilised at 7% on average over the 12 months through December 2020. Current ratio was 3.3 times as on March 31, 2020, and should remain comfortable over the medium term. Cash and bank balance of around Rs 30-35 crore also supports liquidity. |
Outlook: Positive CRISIL Ratings believes MOL’s business risk profile is expected to further strengthen supported by the promoters experience, enhanced capacities and favourable market conditions |
Rating sensitivity factors: Upwards factors:
Downward factors:
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About the company Incorporated in 1981, MOL (formerly, Allied Collides Pvt Ltd), is based in Mumbai, and manufactures and trades in fine specialty chemicals, including camphor, resins, and dipentene. Operations are managed by Mr Kamal Kumar Dujodwala.
MOL is listed on the Bombay Stock Exchange, since 2013. |
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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