| Prima Plastics Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings on the bank facilities of Prima Plastics Ltd (Prima; part of the Prima group).
The ratings continue to reflect the group's healthy financial risk profile, promoters’ extensive experience in the plastic-moulded furniture industry and healthy relationships with customers and suppliers. These strengths are partially offset by large working capital requirements and susceptibility to volatility in raw material prices and to intense competition in the domestic market. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of Prima and Prima Union Plasticos SA (PUPS) as the entities, together referred to as the Prima group, are in the same business, and have common promoters and fungible cash flow. Furthermore, Prima owns 90% stake in PUPS.
Please refer Annexure – List of Entities Consolidaed, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Healthy financial risk profile: The financial risk profile is supported by comfortable total outside liabilities to adjusted networth ratio of 0.6 times as on March 31, 2022 (0.3 times as on March 31, 2021), the increase is on account of debt funded capex and increase in bank limit utilisation on account increase in working capital cycle. Leverage levels are expected to improve over medium term. Interest coverage and net cash accrual to total debt ratios were 7.6 and 0.3 times respectively in fiscal 2022 and are expected to be sustained, over the medium term. Overall financial flexibility is also supported by dividend receipt from its group entity based in Cameroon and repayment of unsecured loans provided to its subsidiary in PUPs.
Promoters' extensive experience in the plastic-moulded furniture industry: The Prima group was set up by Mr Manohar Parekh and his sons in 1993 (listed in 1995). Mr Parekh was also the co-founder of National Plastics Industries Ltd (NPIL) in the 1950s. The promoters’ experience of over 3 decades and healthy relationships with a diversified clientele and supplier base should continue to support the business risk profile.
Weakness: Susceptibility to volatility in raw material prices and to intense competition in the domestic market: The key raw material for moulded furniture is polypropylene (PP). As it is a petroleum-derived product, the price of PP is highly volatile, constraining profitability. Further, the plastic-moulded furniture industry is largely unorganised and intensely competitive and high transportation cost makes it difficult for Prima to expand its geographic presence.
Large working capital requirement: Working capital requirements are large as reflected in gross current assets (GCAs) of 243 days as on March 31, 2022 driven by debtors and inventory of 104 & 80 days respectively. Receivable days were elongated due to delay in realisation from some of the government sector clients. The company has been able to receive major portion of these receivables in first quarter of current fiscal and debtor days are expected to moderate over medium term. The group has also decided to deal with this client only on receipt of 70-80% advance payments. Group maintains higher inventories to cater institutional orders and at its depots to ensure adequate SKU’s (Stock keeping units) to cater to its furniture business. Overall working capital cycle is expected to moderate with debtor and inventory of 80-90 days over the medium term. |
Liquidity: Adequate Net cash accrual was Rs 12.7 crore in fiscal 2022 and is expected at Rs 13-20 crore per fiscal over the medium term against debt obligation of Rs 4 crore per fiscal. The group does not have any large capex over the medium term. Bank limit utilisation averaged 84% over the past 12 months through June 2022 and is expected to remain at around 80-85% level over the medium term. Prima is also expecting dividends from its JV in the coming quarters and no additional funding support is expected to be provided to subsidiaries/JVs over the medium term. |
Outlook: Stable CRISIL Ratings believes the Prima group will continue to benefit from its established position in the plastic moulded furniture segment and scaling up of operations at its subsidiary. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Group Set up in 1993 by Mr Manohar Parekh and his sons, Mr Bhaskar Parekh and Mr Dilip Parekh, Prima manufactures moulded furniture. Its manufacturing facilities are in Daman, Andhra Pradesh, and Kerala. With a public issue in 1995, Prima is listed on the Bombay Stock Exchange.
It set up PUPS in Guatemala (Central America) in fiscal 2017. Prima also has an equal JV in Cameroon, Africa, with a local entity as its partner. PUPS and the JV manufacture plastic-moulded furniture and woven sacks, primarily catering to the local market. |
Key Financial Indicators (Consolidated)
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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)
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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 08-Jul-2022 in line with the lender-wise facility details as on 07-Jul-2022 received from the rated entity.
Criteria Details
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