| Manugraph India Limited | ||||||
| Long-term rating downgraded to 'CRISIL B-/Stable' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has downgraded its ratings on the long term bank facilities of Manugraph India Limited (Manugraph) to ‘CRISIL B-/Stable’ from ‘CRISIL B/Negative’, while short term rating and commercial paper programme reaffirmed at 'CRISIL A4'.
The downgrade reflects weak operating performance of the company in the first nine months of fiscal 2022. While revenue has improved by 50% in first nine months of fiscal year 2022 as compared to corresponding period of previous fiscal, operating margins were negative on account of high operating expenses, especially employee expenses. Operating margins have remained negative since fiscal 2018, leading to negative cash accruals and erosion of net worth. Consequently, financial risk profile has weakened, leading to increase in gearing and stretch in liquidity.
The ratings reflect the company’s susceptibility to cyclicality inherent in the end-user industry, weak capital structure and poor liquidity. These weaknesses are partially offset by its established position in the printing machinery industry in India. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has taken a consolidated view of Manugraph and its wholly owned subsidiary, i.e., Manugraph Americas Inc.
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 Weaknesses:
Demand for newspaper printing machinery is linked to the capex plans of print media houses and macroeconomic scenario. The newspaper industry is moving from the traditional print format to the more user-friendly digital format. As a result, demand for newsprint is expected to remain low owing to decline in the circulation of newspapers and preference for digitized content. The situation has been further accentuated by the pandemic, significantly impacting revenue and profitability and resulting in the erosion of net worth despite the management’s efforts to control cost, such as reduction in employee base. Scaling up of operations and improvement in profitability will remain key monitorables.
The company diversified into the plastic packaging industry in March 2018 to counter volatility in performance. Although the company receives inquiries, only a few have converted to work orders. The company has also started manufacturing components used in the engineering industry by taking orders from vendors as company already has capacity to manufacture such components. The performance is expected to remain subdued over the medium term because of low demand and absence of new orders.
The company doesn’t have any long-term debt and utilizes only fund-based facilities to fund its working capital requirements. Weak revenue profile and continued losses have increased dependence on debt and led to deterioration in net worth. Consequently, gearing is expected to increase in fiscal 2022
Strength:
The company has been operating in the domestic single- and double-width web offset printing machine segment for 50 years. It uses superior technology, acquired through tie-ups with leading European printing machine manufacturers, such as VEB Polygraph and Manroland AG. It also has a strong research and development (R&D) team, which has facilitated the creation of new products such as the Smartline 4X1 machine (double-width) for high-end applications, and M360 Bookline press and folder for low-end applications, resulting in a large product portfolio. |
Liquidity: Poor Liquidity has been constrained due to negative cash accrual since the past few fiscals. Unencumbered cash and equivalent reduced to around Rs 10 crore as on Sep 30, 2021, from Rs 12 crore as on March 31, 2021. Fund-based limit has also reduced marginally to Rs 22 crore, as compared to Rs 23 crore as on March 31, 2021. Higher working capital requirements as compared to lower limits, has resulted in high utilisation of around 80% currently |
Outlook: Stable CRISIL Ratings believes the business risk profile will remain constrained over the medium term given high outflows towards employees. Financial risk profile is marked by weakening liquidity. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company Incorporated in 1971 and promoted by Mr Sanat Shah, Manugraph manufactures single- and double-width web offset printing machines. The manufacturing facility is in Kolhapur, Maharashtra. The company has been recognized as an R&D house by the Department of Scientific and Industrial Research. Its strong R&D capability has facilitated the development of products such as the Smartline 4X1 machine (double-width) with a speed of 70,000 copies per hour (cph), Dreamline 4X1 machine (double-width) with a speed of 50,000 cph, and Ecoline 2X1 machine (single width) with a speed of 25,000 cph.
In fiscal 2018, the company entered the plastic packing industry by manufacturing flexo-machines, used for printing food packaging. It has partnered with Carraro Srl, Italy, and delivered its first order in March 2018.
Revenue and net loss were Rs 34 crore and Rs 12 crore, respectively, in the first nine months of fiscal 2022, as against Rs 14 crore and Rs 27 crore, respectively, in 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: 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)
**Cash credit facility is completely fungible with letter of credit and bank guarantee |
Annexure – List of entities consolidated
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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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Criteria Details
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