| Poddar Pigments Limited | ||||||
| Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1' | ||||||
| Rating Action | ||||||
| ||||||
| 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 Limited (PPL).
PPL has healthy business risk profile driven by its strong market position in two key business segments, the fibre industry and the commodity market. In fiscal 2022 the revenue has grown with 13.41% from Rs. 261 cr. to Rs. 296 cr. supported by better realization. Majority of the revenue of company is derived from fiber industry for which the demand was low due to the impact of Covid-19. PPL. The company commenced operations at its manufacturing facility in Chaksu district Jaipur on March 23, 2022. Successful ramp-up of operations from the enhanced capacities will remain a key monitorable.
The earnings before interest, taxes, depreciation and amortisation margin remained stable at 9.07% in fiscal 2022 despite increase in raw material prices and high freight cost. This reflects the ability of the company to pass on price increase to its customers. The margin is expected to sustain at 9-11% over the medium term.
The ratings continue to reflect the robust financial risk profile of the company, established presence in the masterbatch industry and longstanding relationships with customers, along with efficient working capital management. These strengths are partially offset by subdued revenue growth over the four fiscals through 2018 and exposure to intense competition. |
Key Rating Drivers & Detailed Description Strengths: Robust financial risk profile The Company reported healthy Networth as on March 31, 2022, with stable operating margin leading to healthy cash accrual and continuous accretion to reserve. Debt protection metrics remained comfortable in the absence of any debt obligation over the four fiscals through 2022. Despite capital expenditure (capex) of around Rs 85 crore for capacity enhancement, the company does not have any outstanding debt. The financial risk profile is expected to remain strong, backed by low reliance on external debt to meet the incremental working capital requirement and regular capex over the medium term.
Established presence in the masterbatch industry: The company has presence of more than three decades in masterbatches for dope dyeing synthetic fibres and has built longstanding relationships with key customers, resulting in a healthy business risk profile.
Efficient working capital management: Gross current assets (GCAs) are estimated at 150 days as on March 31, 2022, driven by moderate inventory of 85 days and receivables of 57 days. The working capital requirement is met through credit from suppliers and internal cash accrual. GCAs are expected to remain at 130-160 days over the medium term.
Weaknesses: Subdued revenue growth: In fiscal 2022, revenue grew 13.41% to Rs 296 crore, supported by better realisation. Revenue is derived from two segments, the fibre industry and the commodity market. A large part of the revenue is derived from the fibre industry, which Is facing low demand amid the impact of the Covid-19 pandemic, while the commodity market has normal demand. Business was impacted in the first quarter of fiscal 2022 because of the second wave of the pandemic. Revenue is expected to increase in fiscal 2023, supported by expected contribution from the new plant that became operational in March 2022.
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 Net cash accrual, expected at Rs 25-30 crore per annum, will support liquidity in the absence of any debt obligation over the medium term. Bank limit utilisation averaged 5% over the 12 months through March 2022. Current ratio was healthy at 5 times, cash and bank balance was Rs.1.04 crore and investment in mutual fund of ~Rs. 10 cr. and equity shares of Rs 14.39 crore as on March 31, 2022. |
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
Downward factors
|
About the Company Incorporated in 1991, PPL manufactures colour and additive masterbatches for the dope dyeing of synthetic fibres. The manufacturing facility in Jaipur has installed capacity of 18,000 tonne per annum of specialty masterbatches. Mr S S Poddar is the promoter of the company. |
Key Financial Indicators
|
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)
*Includes foreign exchange forward of Rs. 0.4 cr. |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
|
Criteria Details
|