Rating Rationale
January 04, 2023 | Mumbai
Oricon Enterprises Limited
Ratings placed on 'Watch Developing'
 
Rating Action
Total Bank Loan Facilities RatedRs.195 Crore
Long Term RatingCRISIL A-/Watch Developing (Placed on 'Rating Watch with Developing Implications')
Short Term RatingCRISIL A2+/Watch Developing (Placed on 'Rating Watch with Developing Implications')
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 placed its ratings on the bank facilities of Oricon Enterprises Limited (OEL) on 'Rating Watch with Developing Implications'.

 

The rating action follows announcement by OEL for acquisition of equity shares of United Shippers Limited, a subsidiary, by purchase of 69,896 Equity Shares from its existing shareholder(s) which would result in increase in Company's holding in United Shippers Limited from 35,16,849 Equity Shares i.e. 98.05% to 35,86,745 i.e. 100.00% and USL will become wholly-owned subsidiary. CRISIL Ratings is currently in discussions with OEL’s management, to ascertain the impact of the acquisition of equity shares of United Shippers Limited on OEL's credit risk profile. CRISIL Ratings will remove the ratings from watch and take a final rating action once it has clarity on the issue.

 

CRISIL Ratings on the bank facilities of OEL continues to reflect the company's established market position as the leading closure (metal and plastic) manufacturer in India, and its strong financial risk profile because of healthy networth, comfortable gearing and healthy debt protection metrics. These strengths are partially offset by susceptibility to volatility in raw material prices, forex risk and exposure to risks related to product substitution.

Key Rating Drivers & Detailed Description

Strengths:

Established market position as the leading closure (metal and plastic) manufacturer in India: Company has an established market position as the leading manufacturer of closures in India catering to established brands such as Pepsi, Bisleri, and Coca Cola. Company has established relations with these brands backed by a sizeable installed capacity of 1900 crore closures. CRISIL believes company will continue to benefit from its promoters' experience and sustain its position as the leader in the domestic crowns and closures business backed by its strong clientele.

 

Strong financial risk profile: Low gearing of 0.16 time on a healthy networth base of Rs 801 crore as on March 31, 2021 represents comfortable capital structure. The total outside liabilities to adjusted networth ratio was around 0.31 time as on March 31, 2022. Debt protection metrics are comfortable, as reflected in interest coverage ratio and net cash accrual to total debt ratio of 5.27 times and 0.1.43 time, respectively, for fiscal 2022 and likely to remain comfortable over the medium term; sustaining overall financial risk profile.

 

Weaknesses:

Exposure to risks related to product substitution: Company manufactures closures, such as crown caps and plastic caps for bottles and containers for beverages, liquor, food products, and pharmaceuticals. Company's scale of operations may witness a decline, if there is a significant shift towards newer packaging products, such as tetra packs, sachets, strips, and other flexible packaging, by end-user industries.

 

Susceptibility to volatility in raw material prices and forex risk: Major revenue being generated form the packaging segment, company's primary raw materials include aluminum, tin-free steel, polyethylene terephthalate (PET) chip which are commodity products, and hence, their prices are volatile. While, the group is able to revise product price, its margins will remain vulnerable to the extent of time lag between change in raw material prices and revision in product prices. Further, company is also exposed to forex risk.

Liquidity: Strong

Company’s liquidity position is strong with liquid investments of more than Rs. 170 crores as on March 31, 2022. Proceeds from sale of real estate inventory during current fiscal and over medium term adds to net cash accruals from operations and strengthens liquidity profile.  Capital expenditure of Rs 50-60 crore planned over medium term is adequately funded by net cash accruals and receipts on sale of real estate inventory.

Rating Sensitivity Factors

Upward Factors

  • Substantial and sustained ramp up in scale of operations, with improved operating margins above 11% strengthens net cash accruals
  • Improved in working capital cycle, material reduction in debt levels, sustained strong capital structure and improved debt protection metrics strengthens financial risk profile

 

Downward Factors

  • Subdued revenue growth or operating profits resulting in accruals below Rs 30 crore
  • Stretch in working capital cycle, significant debt-funded capex, or any change in existing risk management policies, weakening key credit metrics.

About the Company

Oricon, is primarily engaged in manufacturing of plastic closure, PET preform, roll-on pilfer-proof caps, chamfered closures, crowns, aluminum collapsible tubes, twist caps, and printed metal sheets. The company also manufactures mixed pentane, a petrochemical with industrial applications, and trades in metals and chemicals. Further, the company has majority ownership in United Shippers Limited (rated ‘CRISIL A+/Stable/CRISIL A1’) while Shinrai Auto Services Ltd and Oriental Containers Limited have been amalgamated with Oricon. The company is part of Parijat Group. Mr Rajendra Somani is the Managing Director of Oricon.

Key Financial Indicators

Particulars

Unit

2022

2021

Revenue

Rs.Crore

505.56

377.72

Profit After Tax (PAT)

Rs.Crore

156.82

8.97

PAT Margin

%

31.02

2.37

Adjusted debt/Adjusted networth

Times

0.16

0.32

Interest coverage

Times

5.27

2.88

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of Instrument

Date of Allotment

Coupon
Rate (%)

Maturity

Date

Issue Size
(Rs.Cr)

Complexity

Level

Rating Assigned

with Outlook

NA

Cash Credit

NA

NA

NA

95

NA

CRISIL A-/Watch Developing

NA

Letter of Credit

NA

NA

NA

89.56

NA

CRISIL A2+/Watch Developing

NA

Proposed Long Term

Bank Loan Facility

NA

NA

NA

10.44

NA

CRISIL A-/Watch Developing
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 105.44 CRISIL A-/Watch Developing   --   -- 08-11-21 CRISIL A-/Stable 30-07-20 CRISIL A-/Stable CRISIL A-/Stable
      --   --   -- 29-10-21 CRISIL A-/Stable   -- --
Non-Fund Based Facilities ST 89.56 CRISIL A2+/Watch Developing   --   -- 08-11-21 CRISIL A2+ 30-07-20 CRISIL A2+ CRISIL A2+
      --   --   -- 29-10-21 CRISIL A2+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 45 Central Bank Of India CRISIL A-/Watch Developing
Cash Credit 10 Kotak Mahindra Bank Limited CRISIL A-/Watch Developing
Cash Credit 10 Punjab National Bank CRISIL A-/Watch Developing
Cash Credit 30 RBL Bank Limited CRISIL A-/Watch Developing
Letter of Credit 39.56 Central Bank Of India CRISIL A2+/Watch Developing
Letter of Credit 15 Kotak Mahindra Bank Limited CRISIL A2+/Watch Developing
Letter of Credit 35 RBL Bank Limited CRISIL A2+/Watch Developing
Proposed Long Term Bank Loan Facility 10.44 Not Applicable CRISIL A-/Watch Developing

This Annexure has been updated on 13-Mar-2023 in line with the lender-wise facility details as on 27-Feb-2023 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Chemical Industry
CRISILs Criteria for rating short term debt

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Jaya Mirpuri
Director
CRISIL Ratings Limited
B:+91 22 3342 3000
jaya.mirpuri@crisil.com

Rushabh Pramod Borkar
Team Leader
CRISIL Ratings Limited
B:+91 22 3342 3000
rushabh.borkar@crisil.com

Raj Kumar Inani
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 22 3342 3000
Raj.Inani@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html