| Poddar Pigments Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 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 segment and the plastic segment. In fiscal 2023 the revenue has grown with ~15% from Rs.296 cr. to Rs.341 cr. supported by better realization. The revenue of the company is derived from two segment in the masterbatch industry one is fiber segment (End user textile industry) and plastic segment (End user: Luggage, cables etc.) Majority of the revenue of company is derived from fiber segment. The earnings before interest, taxes, depreciation and amortisation margin remained stable at 11.16% in fiscal 2023 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 and exposure to intense competition. |
Key Rating Drivers & Detailed Description Strengths: Robust financial risk profile The Company reported healthy Networth of Rs. 293 crores as on March 31, 2023, 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 2023. Despite capital expenditure (capex) of around Rs 85 crore for capacity enhancement in FY22 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 promoters have three decades of experience in the masterbatches industry, leading to strong understanding of market dynamics and healthy relationships with customers and suppliers, which 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 have helped diversify 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.
Efficient working capital management: Gross current assets (GCAs) are at 164 days as on March 31, 2023, driven by moderate inventory of 75 days and receivables of 51 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.
Weakness: Subdued revenue growth: In fiscal 2023, revenue grew ~15% to Rs 341 crore, supported by better realisation. Revenue is derived from two segments, the fibre segment and the commodity market. A large part of the revenue is derived from the fibre industry. The clientele is diversified, with sales to the top five clients contributing around 20-22% to the turnover in fiscal 2023. Export accounted for 28% of the revenue. The company mainly exports to the Middle East and countries in Southeast Asia and Africa, with Indonesia, Thailand and Iran being the top three export markets.
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 13% over the 12 months through July 2023. Current ratio was healthy at 5.2 times, cash and bank balance was Rs.35 crore and investment in mutual fund of ~Rs. 10 cr. and equity shares of Rs 14.39 crore as on March 31, 2023. |
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
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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
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Includes foreign exchange forward of Rs. 0.4 cr. |
| 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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&Includes foreign exchange forward of Rs. 0.08 cr.
^Includes foreign exchange forward of Rs. 0.08 cr.
%Includes foreign exchange forward of Rs. 0.16 cr
$Includes foreign exchange forward of Rs. 0.08 cr.
Criteria Details
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