| Oricon Enterprises Limited | ||||||
| Short term rating upgraded to 'CRISIL A1'; Ratings removed from 'Watch Developing' | ||||||
| Rating Action | ||||||
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| 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 removed its ratings on the bank facilities of Oricon Enterprises Ltd (OEL; part of the Oricon group) from 'Rating Watch with Developing Implications', and has upgraded its rating on the short-term bank facility to 'CRISIL A1' from 'CRISIL A2+', while reaffirming its rating on the long-term bank facility at 'CRISIL A-' assigning a 'Stable' outlook to the long-term rating.
CRISIL Ratings had placed the ratings on watch following an announcement by OEL for acquisition of equity shares of United Shippers Limited (USL), a subsidiary, by purchase of 69,896 Equity Shares from its existing shareholder(s) which would result in increase in OEL's holding in USL 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.
The watch resolution and upgrade in short term ratings reflect CRISIL Rating's belief that group’s financial risk profile, especially liquidity, will remain robust backed by increasing cash generation and continued high unencumbered cash and mutual fund investments. Steady increase in revenues and healthy operating margin will ensure cash generation for the group is expected over the medium term. Further, the group is also expected to maintain about Rs. 115-120 crores of surplus liquidity over the medium term.
The Ratings 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. |
Analytical Approach CRISIL Ratings has now combined the business and financial risk profiles of OEL and its subsidiaries Reay Road Iron & Metal Warehousing Private Limited (RRIMWPL), Oriental Containers Limited (OCL) and United Shippers Limited (USL), together referred to as the Oricon group. This is on account of the financial fungibility between the entities. This revision in analytical approach from earlier standalone approach for OEL is due to the recent revision in stance of management in terms of management control of the subsidiaries.
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 Strengths:
Weaknesses:
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Liquidity: Strong Group’s liquidity position is strong with liquid investments of more than Rs. 115 crores as on December 31, 2022. Net cash accruals are expected over Rs. 50 crores against term debt obligations of ~Rs. 15 crores per annum. Proceeds from sale of real estate inventory during current fiscal and over medium term can further adds to net cash accruals from operations and strengthens liquidity profile. No major capital expenditure is expected over medium term. Company's fund based working capital limits have been utilized at around 6% for last 12 months ended September 2022 and provides adequate cushion to meet incremental working capital requirements. |
Outlook: Stable CRISIL Ratings believes Oricon will continue benefit from its established market position in the packaging industry |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Group OEL, is primarily engaged in manufacturing of plastic closure, PET preform, roll-on pilfer-proof caps, chamfered closures, aluminum collapsible tubes, and printed metal sheets. The company also manufactures mixed pentane, a petrochemical with industrial applications, and trades in metals and chemicals. The company is part of Parijat Group. Mr Adarsh Somani is the Managing Director of Oricon. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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This Annexure has been updated on 31-Mar-2023 in line with the lender-wise facility details as on 27-Feb-2023 received from the rated entity
Criteria Details
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