Rating Rationale
March 26, 2021 | Mumbai
Plastiblends India Limited
Ratings reaffirmed at 'CRISIL A+ / Stable / CRISIL A1 '
 
Rating Action
Total Bank Loan Facilities RatedRs.116 Crore
Long Term RatingCRISIL A+/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
 
Rs.15 Crore Commercial PaperCRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL A+/Stable/CRISIL A1' ratings on the bank facilities and commercial paper programme of Plastiblends India Ltd (PBIL).

 

In fiscal 2020, revenue declined 3% year-on-year due to subdued economic activity and lower demand during the fourth quarter of fiscal 2020, on account of disruptions caused by the Covid-19 pandemic. However, the earnings before interest, tax, depreciation and amortisation (EBITDA) margin improved to 11.5% from 9.6% in fiscal 2019, driven by lower raw material costs. Operating performance was impacted during the first nine months of fiscal 2021, due to the prolonged nationwide lockdown and supply chain disruptions during the period. However, while operating income declined 16% year-on-year during this period, EBIDTA margin sustained above 12%, led by efficient management of raw material price volatility.

 

The financial risk profile remains strong, backed by low debt level and healthy networth. Furthermore, PBIL repaid its outstanding term debt in February 2021, as per the debt repayment schedule. The ratings continue to reflect PBIL's strong market position in the masterbatch industry, diverse product portfolio and strong liquidity. These strengths are partially offset by susceptibility to volatility in raw material prices and intense competition in the industry.

Analytical Approach

CRISIL Ratings has evaluated the business and financial risk profile of PBIL on a standalone basis, as there are no subsidiaries, associate companies or joint ventures.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong market position in the masterbatch segment: PBIL is among the largest manufacturers of masterbatches in India, accounting for 10-12% of the organised domestic masterbatch industry. The company’s units manufacture a diverse product portfolio catering to domestic and overseas markets. PBIL has strong presence in the Middle East and African markets. Although the company’s products are in the nature of commodities, it has maintained better operating margin than its peers because of strong market position and ability to develop value-added products.

 

  • Strong financial risk profile: The financial risk profile is backed by low debt level and healthy networth. Low reliance on working capital borrowing, resulted in improvement in overall gearing to 0.17 time as on March 31, 2020, against 0.29 time a year earlier. Furthermore, PBIL has repaid its outstanding term debt in February 2021 as per the debt repayment schedule; and debt profile is now comprised of minimal working capital borrowing. The debt protection metrics remain robust, with interest coverage ratio over 19 times in the first nine months of fiscal 2021.

 

The financial risk profile should remain healthy over the medium term, backed by adequate cash accrual and absence of any large capital expenditure (capex).

 

Weaknesses

  • Exposure to volatility in raw material prices: Profitability is susceptible to prices of polymer, accounting for 50-60% of the total raw material cost. However, fluctuations in raw material prices are generally passed on to customers by the way of price revision. PBIL revises its pricing on frequent basis (fortnightly or monthly), which helps the company mitigate the impact of volatile raw material prices to some extent.

 

  • Exposure to intense competition: The masterbatch industry in India is characterised by the presence of a large, unorganised sector, accounting for almost 50% of the market share. This, coupled with the commoditised nature of the product, results in intense competition in the industry, limiting product differentiation and pricing power for companies such as PBIL.

Liquidity: Strong

Liquidity is backed by healthy cash accrual of Rs 37 crore for the nine months ending December 31, 2020, and cash equivalents of about Rs 8 crore. Liquidity is also supported by unutilised bank lines of around Rs 107 crore as of December 2020. Furthermore, PBIL has repaid its outstanding term debt of around Rs 9 crore in February 2021 as per the debt repayment schedule, and has no long-term debt as on date. Available liquidity and expected annual cash accrual of Rs 30-40 crore in fiscals 2021 and 2022, should suffice to cover moderate capex.

Outlook Stable

CRISIL Ratings believes PBIL will continue to benefit from its established market position in the masterbatch segment, while the financial risk profile is expected to remain comfortable, backed by adequate cash accrual.

Rating Sensitivity factors

Upward factors

  • Significant increase in scale of operations with strong compound annual growth rate (CAGR) of 15% or above in revenue, sustaining over the medium term
  • Sustained improvement in the operating margin, leading to significantly higher cash accrual

 

Downward factors

  • Weaker-than-expected operating performance, driven by low demand, leading to moderation in the business risk profile
  • Sustained decline in operating margin to less than 9% with stagnant revenue, leading to reduced cash accrual
  • Weakening of the financial risk profile due to any large, debt-funded capex

About the Company

Incorporated in 1991, PBIL is part of the Kolsite group of companies. It manufactures white, black and coloured masterbatches and compounds used primarily as colouring agents in plastics. The masterbatches are marketed under the trade names - Polyclear, Polynuc, Polyultra, Antimicrobial, Polyrodent, PolyFR and Anti-fibrillation. Its plants in Daman; Roorkee, Uttarakhand; and Surat, Gujarat; have combined manufacturing capacity of 125,000 tonne per annum.

 

For the nine months ended December 31, 2020, PBIL reported operating income and profit after tax (PAT) of Rs 406 crore and Rs 25 crore, respectively, against Rs 480 crore and Rs 32 crore, respectively, for the corresponding period of the previous fiscal.

Key Financial Indicators (CRISIL Ratings-adjusted numbers)

As on / for the period ended March 31,

Unit

2020

2019

Operating income

Rs crore

606

627

PAT

Rs crore

37

31

PAT margin

%

6.1

5.0

Adjusted debt/adjusted networth Nenetworth

Times

0.17

0.29

Adjusted interest coverage

Times

36.05

7.53

 

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs crore)

Complexity Level

Rating assigned with outlook

NA

Commercial paper

NA

NA

7-365 days

15.0

Simple

CRISIL A1

NA

Working capital facility*

NA

NA

NA

20.0

NA

CRISIL A+/Stable

NA

Working capital facility**

NA

NA

NA

40.0

NA

CRISIL A+/Stable

NA

Packing credit^

NA

NA

NA

50.0

NA

CRISIL A+/Stable

NA

Letter of credit and bank guarantee

NA

NA

NA

3.6

NA

CRISIL A1

NA

Proposed fund-based bank limits

NA

NA

NA

1.4

NA

CRISIL A+/Stable

NA

Proposed letter of credit and bank guarantee

NA

NA

NA

1.0

NA

CRISIL A1

*Interchangeable with packing credit, buyer's credit, post-shipment credit in foreign currency, working capital demand loan, and export bill discounting

** Interchangeable with packing credit, buyer's credit, post-shipment credit in foreign currency, working capital demand loan, export bill discounting , Letter of Credit & Bank Guarantee

^Interchangeable with cash credit, export bill discounting, buyer's credit, post-shipment in foreign currency, and working capital demand loan

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 111.4 CRISIL A+/Stable   -- 31-03-20 CRISIL A+/Stable 15-03-19 CRISIL A+/Stable 01-03-18 CRISIL A+/Stable CRISIL A+/Stable
Non-Fund Based Facilities ST 4.6 CRISIL A1   -- 31-03-20 CRISIL A1 15-03-19 CRISIL A1 01-03-18 CRISIL A1 CRISIL A1
      --   --   --   --   -- CRISIL A1
Commercial Paper ST 15.0 CRISIL A1   -- 31-03-20 CRISIL A1 15-03-19 CRISIL A1 01-03-18 CRISIL A1 CRISIL A1
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Letter of credit & Bank Guarantee 3.6 CRISIL A1 Letter of credit & Bank Guarantee 3.6 CRISIL A1
Packing Credit^ 50 CRISIL A+/Stable Packing Credit^ 50 CRISIL A+/Stable
Proposed Fund-Based Bank Limits 1.4 CRISIL A+/Stable Proposed Fund-Based Bank Limits 1.4 CRISIL A+/Stable
Proposed Letter of Credit & Bank Guarantee 1 CRISIL A1 Proposed Letter of Credit & Bank Guarantee 1 CRISIL A1
Working Capital Facility* 20 CRISIL A+/Stable Working Capital Facility* 20 CRISIL A+/Stable
Working Capital Facility** 40 CRISIL A+/Stable Working Capital Facility** 40 CRISIL A+/Stable
Total 116 - Total 116 -
* - Interchangeable with cash credit, export bill discounting, buyer's credit, post-shipment in foreign currency, and working capital demand loan
** - Interchangeable with packing credit, buyer's credit, post-shipment credit in foreign currency, working capital demand loan, and export bill discounting
^ - Interchangeable with packing credit, buyer's credit, post-shipment credit in foreign currency, working capital demand loan, export bill discounting , Letter of Credit & Bank Guarantee
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

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