Rating Rationale
December 02, 2024 | Mumbai
Poddar Pigments Limited
Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.38.15 Crore
Long Term RatingCRISIL A/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
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 reaffirmed its 'CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of Poddar Pigments Ltd (PPL).

 

The ratings factor in the stable business risk profile of the company, supported by expected revenue growth of 6-8% on-year in fiscal 2025 owing to volumetric growth (company reported revenue of Rs 369 crores in fiscal 2024). Revenue is derived from two segments in the masterbatch industry: one is the fibre segment (wherein the end user is the textile industry) and the other is the plastic segment (end user: plastic bottles, engineering compounds, luggage, cables etc.). The majority of the revenue is derived from the fibre segment. The operating margin remained stable at 11.00-11.25% over the two fiscals through 2024 and is expected to be at similar levels in the near term, driven by ability of the company to pass on any increase in input cost.

 

The ratings continue to reflect the company’s established presence in the masterbatch industry and robust financial risk profile. These strengths are partially offset by moderate scale of operations and exposure to intense competition.

Analytical approach

CRISIL Ratings has evaluated the standalone business and financial risk profiles of PPL.

Key rating drivers and detailed description

Strengths:

  • Established presence in the masterbatch industry: The promoter has three decades of experience in the masterbatches industry; his strong understanding of market dynamics and healthy relationships with customers and suppliers should continue to support the business. The company has established presence in masterbatches for dope dyeing synthetic fibres. Improved technology and an equipped research and development division helped diversification into manufacturing specialty masterbatches for the synthetic fibre industry and general-purpose applications such as automotive, carpets, home furnishings, apparel, nonwoven fabrics and technical fibres. Furthermore, the company has flexible manufacturing facilities that enable switching between producing masterbatches for textiles and plastic.

 

  • Robust financial risk profile: Networth is projected at Rs 370-375 crore as on March 31, 2025 (against Rs 348.3 crore a year ago), with stable operating margin leading to healthy cash accrual and steady accretion to reserve. Gearing is expected to remain nil as on 31st March 2025 driven by limited reliance on externa debt. Debt protection metrics may remain comfortable, with interest coverage expected at around 100 times in fiscal 2025 (against 88.7 times in fiscal 2024). The financial risk profile is expected to remain strong, backed by negligible reliance on external debt to meet the incremental working capital requirement and regular capital expenditure over the medium term.

 

Weaknesses:

  • Moderate scale of operations: Revenue growth was around 8% to Rs 369 crores in fiscal 2024 (from Rs 341 crores in fiscal 2023), however the scale continues to remain moderate. The company is expected to achieve revenue growth of 6-8% on-year in fiscal 2025 owing to volumetric growth. Further, sales to the top five clients contributed around 20-22% to the turnover in fiscal 2024, indicating moderate concentration in the customer profile. Furthermore, as exports accounted for 18% of the revenue, the business remains exposed to any fluctuation in foreign exchange rates.

 

  • Exposure to intense competition: Large and organised players such as PPL, which offer superior quality products at competitive prices because of economies of scale and access to advanced technology, face competition from numerous players catering to local customers. This restricts profitability and scalability.

Liquidity: Strong

In the absence of any yearly debt obligation over the medium term, the net cash accrual after dividend payout is expected at Rs 30-35 crore per annum -- will aid liquidity. Bank limit utilisation was almost nil during the 12 months through October 2024. Liquidity is also supported by a healthy current ratio of 6.3 times, cash and bank balance of Rs 30.9 crore, investment in mutual funds worth ~Rs 10 crore and equity shares of Rs 14.39 crore as on March 31, 2024.

Outlook: Stable

PPL will continue to benefit from its established presence in the masterbatch industry and will sustain its healthy cash accrual and strong financial risk profile.

Rating sensitivity factors

Upward factors

  • Revenue increasing to more than Rs 500 crore and operating margin sustaining at 12%, leading to higher-than-expected cash accrual
  • Improvement in the working capital cycle

 

Downward factors

  • Revenue declining by more than 20% or a substantial fall in profitability, resulting in lower-than-expected cash accrual
  • Stretch in the working capital cycle, with significant increase in gross current assets

About the company

Incorporated in 1991, PPL manufactures colour and additive masterbatches for the dope dyeing of synthetic fibres. Its facility in Jaipur (Rajasthan) has installed capacity of 18,000 tonne per annum of specialty masterbatches. Mr S S Poddar is the promoter.

Key financial Indicators*

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

369.12

340.73

Reported profit after tax (PAT)

Rs crore

28.82

27.34

PAT margin

%

7.81

8.02

Adjusted debt/adjusted networth

Times

0.00

0.00

Interest coverage

Times

88.78

80.1

*CRISIL Ratings adjusted financials

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. Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 15.00 NA CRISIL A/Stable
NA Letter of credit & Bank Guarantee& NA NA NA 4.63 NA CRISIL A1
NA Letter of credit & Bank Guarantee& NA NA NA 4.63 NA CRISIL A1
NA Letter of credit & Bank Guarantee% NA NA NA 9.26 NA CRISIL A1
NA Letter of credit & Bank Guarantee& NA NA NA 4.63 NA CRISIL A1

 & - Includes foreign exchange forward of Rs 0.08 crore
% - Includes foreign exchange forward of Rs 0.16 crore

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 15.0 CRISIL A/Stable   -- 07-09-23 CRISIL A/Stable 29-06-22 CRISIL A/Stable 08-09-21 CRISIL A1 / CRISIL A/Stable CRISIL A1 / CRISIL A/Stable
      --   --   --   -- 12-04-21 CRISIL A1 / CRISIL A/Stable --
      --   --   --   -- 23-03-21 CRISIL A1 / CRISIL A/Stable --
Non-Fund Based Facilities ST 23.15 CRISIL A1   -- 07-09-23 CRISIL A1 29-06-22 CRISIL A1 08-09-21 CRISIL A1 CRISIL A1
      --   --   --   -- 12-04-21 CRISIL A1 --
      --   --   --   -- 23-03-21 CRISIL A1 --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 3 ICICI Bank Limited CRISIL A/Stable
Cash Credit 6 State Bank of India CRISIL A/Stable
Cash Credit 3 HDFC Bank Limited CRISIL A/Stable
Cash Credit 3 Punjab National Bank CRISIL A/Stable
Letter of credit & Bank Guarantee& 4.63 HDFC Bank Limited CRISIL A1
Letter of credit & Bank Guarantee& 4.63 ICICI Bank Limited CRISIL A1
Letter of credit & Bank Guarantee% 9.26 State Bank of India CRISIL A1
Letter of credit & Bank Guarantee& 4.63 Punjab National Bank CRISIL A1
& - Includes foreign exchange forward of Rs. 0.08 cr.
% - Includes foreign exchange forward of Rs. 0.16 cr
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies

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