Rating Rationale
July 31, 2024 | Mumbai
Purv Flexipack Limited
'CRISIL BB/Stable/CRISIL A4+' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.60 Crore
Long Term RatingCRISIL BB/Stable (Assigned)
Short Term RatingCRISIL A4+ (Assigned)
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 assigned its ‘CRISIL BB/Stable/CRISIL A4+’ ratings to the bank loan facilities of Purv Flexipack Ltd (PFL).

 

The ratings reflects the extensive experience of the promoters in the polymer and chemical trading industry, healthy product diversity, longstanding relations with principals and moderate capital structure of PFL. These rating strengths are partially offset by modest scale of operations and subdued debt protection metrics.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: PFL is a part of the Purv group, which has been supplying raw materials to flexible plastic packaging sector for the past three decades. The key promoters, Mr Rajeev Goenka and Mr Vanshay Goenka, manage the entire operations of PFL and have more than two decades of experience in the chemical and polymer trading industry. Their strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business risk, over the medium term.

 

  • Healthy product diversity and longstanding relations with principals: PFL is an established player in the chemical trading market and has been in the business for over two decades. The company is a del credere agent (DCA) of Indian Oil Corporation Ltd (IOCL; ‘CRISIL AAA/Stable/CRISIL A1+’), supplying low-density polyethylene (LDPE), high-density polyethylene (HDPE) and polypropylene (PP) to West Bengal and Bihar. It is also an authorised dealer of SRF Ltd (‘CRISIL AA+/Stable/CRISIL A1+’), supplying raw materials such as polyester film, metallised polyester film, biaxially oriented polypropylene (BOPP) film and holographic polyester film for manufacturing specialty chemicals. PFL has also taken distributorship of polyester and BOPP films of Jindal Poly Films Ltd (‘CRISIL AA-/Negative/CRISIL A1+’). Well-diversified product basket and end-user industries (such as packaging, speciality chemicals and plastics) enables the business to overcome the risk of slowdown in a particular industry and achieve higher growth.

 

  • Moderate capital structure: The capital structure should remain supported by healthy accretion to reserve and the absence of any large, debt-funded capital expenditure (capex). Networth is healthy at Rs 111.5 crore and gearing at 0.4 time as on March 31, 2024.

 

Weaknesses:

  • Modest scale of operations: The chemical trading industry is highly fragmented owing to low entry barriers such as small initial investment and the negligible complexity of operations. Although the consequent intense competition may constrain scalability and profitability, this risk is mitigated due to longstanding relation with the principals -- resulting in efficient pricing power and continuous supply of products. Operating income declined to Rs 112.5 in fiscal 2024, from Rs 159.6 crore in fiscal 2023, due to reduced trading of polymers and increased revenue contribution from the higher-margin del credere segment. However, revenue growth should be healthy over the medium term, with increased revenue contribution from DCA and imported product trades.

 

  • Subdued debt protection metrics: Increased working capital borrowing has led to rise in interest cost. This coupled with modest profitability resulted in interest coverage ratio of less than 1.5 times and net cash accrual to total debt ratio below 0.1 time for fiscal 2024. The metrics are likely to improve over the medium term, with better profitability and no major increase in external debt, and will remain monitorable.

Liquidity: Adequate

Bank limit utilisation is moderate at less than 80% during the 12 months through June 2024. Cash accrual is projected at more than Rs 5 crore per annum, against yearly debt obligation of less than Rs 2.7 crore over the medium term. Current ratio stood healthy at 2.2 times as on March 31, 2024. PFL has extended loans and advances worth more than Rs 30 crore to group companies as of June 2024; this was for business and operational requirements and is expected to gradually reduce. Exposure in group companies is not expected to increase significantly impacting the liquidity of PFL and will remain a key monitorable going forward. Need-based unsecured loan extended by the promoters provides additional cushion to liquidity.

Outlook: Stable

PFL will continue to benefit from its longstanding relationship with principals and experience of the management to mitigate the inherent risk in the trading business.

Rating Sensitivity factors

Upward factors:

  • Healthy revenue growth in line with expectations while sustaining moderate operating margin, leading to interest coverage ratio more than 1.6 times
  • Improvement in working capital cycle and no major, debt-funded capex

 

Downward factors:

  • Further decline in revenue or margin, resulting in net cash accrual less than Rs 3 crore
  • Further stretch in the working capital cycle, any large, debt-funded capex or significant increase in exposure to group companies

About the Company

PFL (previously known as Purv Flexipack Pvt Ltd) was incorporated in 2005. It distributes an extensive array of polymers and raw materials  such as polyester film, metallised polyester film, holographic polyester film and BOPP film essential for flexible plastic packaging. PFL is a DCA of IOCL supplying LDPE, HDPE and PP mainly in East India. It is also involved in trading of plastic granules, masterbatch/colorants, films, ink and adhesives, titanium dioxide and ethyl acetate. The company is based in Kolkata.

 

PFL is listed on National Stock Exchange – small-to-medium enterprise platform. The company is promoted and managed by Mr Rajeev Goenka (chairman and non-executive director) and Mr Vanshay Goenka (managing director) and Ms Poonam Goenka (whole-time director).

Key Financial Indicators (Standalone)

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

112.5

159.6

Reported profit after tax (PAT)

Rs crore

3.8

5.4

PAT margin

%

3.4

3.4

Adjusted debt/adjusted networth

Times

0.43

0.85

Interest coverage

Times

1.42

1.73

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 the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Bank Guarantee NA NA NA 7.4 NA CRISIL A4+
NA Cash Credit NA NA NA 10.1 NA CRISIL BB/Stable
NA Electronic Dealer Financing Scheme(e-DFS) NA NA NA 37 NA CRISIL BB/Stable
NA Letter of credit & Bank Guarantee NA NA NA 5.5 NA CRISIL A4+
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 47.1 CRISIL BB/Stable   --   --   --   -- --
Non-Fund Based Facilities ST 12.9 CRISIL A4+   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 7.4 Bank of Baroda CRISIL A4+
Cash Credit 10.1 HDFC Bank Limited CRISIL BB/Stable
Electronic Dealer Financing Scheme(e-DFS) 37 Bank of Baroda CRISIL BB/Stable
Letter of credit & Bank Guarantee 5.5 HDFC Bank Limited CRISIL A4+
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Criteria for rating trading companies
CRISILs Bank Loan Ratings - process, scale and default recognition

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