Rating Rationale
June 06, 2024 | Mumbai
Rajshree Polypack Limited
Rating reaffirmed at 'CRISIL BBB+/Stable'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.86.48 Crore (Enhanced from Rs.84.38 Crore)
Long Term RatingCRISIL BBB+/Stable (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 BBB+/Stable’ rating on the long term bank facilities of Rajshree Polypack Ltd (RPPL).

 

The ratings continue to reflect the extensive experience of the promoters in the plastic packaging industry, diversified product profile catering to reputed clientele across multiple industries and the strong financial risk profile of RPPL. These strengths are partially offset by increasing yet average scale of operations amid intense competition and exposure to volatility in input cost.

Analytical Approach:

CRISIL Ratings has treated the corporate guarantee extended for Olive Ecopak Private Limited of Rs. 112 crore as debt.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters and established customer base: The two-decade long experience of the promoters, their strong understanding of the local market dynamics and healthy relationships with suppliers and customers will continue to support the business. The clientele comprises reputed players, such as Nourishco Beverages Ltd, Huhtamaki PPL Ltd and Amcor Flexibles. The company has a diversified clientele, with the top 10 customers contributing ~64% to the revenue in fiscal 2023.This has resulted in an increase in revenue over the years to Rs 270-275 crores in fiscal 2024 as compared with Rs 252 crore in fiscal 2023. The revenues are further expected to increase driven by healthy demand from customers, long-standing relationships with them and planned capacity additions.

 

  • Diversified product profile catering to multiple industries: RPPL has a diversified product profile that includes plastic rigid sheets, various types of packaging products and varied sizes of containers, cups made of 100% food grade materials. The products find application in various end-user industries, such as fast-moving consumer goods and food and beverages. Moreover, it has presence across India as well as the European market. The company has further planned to increase its exposure to the US. Exports revenues have increased and contribute around 15% of the total sales in fiscal 2024 (as compared to 5.5% in fiscal 2023), which is further expected to increase over the medium term. A diversified product profile, reputable clientele and wide geographical presence de-risk the business to a large extent.

 

  • Comfortable financial risk profile: Net worth was strong at around Rs 150-155 crore as on March 31, 2024 as compared to Rs 129 Crores as on March 31, 2023. The growth in networth is driven by steady accretion to reserves as well as equity infusion in fiscal 2024. Gearing and total outside liabilities to adjusted networth was low at around 0.45-0.5 time and 0.8-0.9 times respectively as on March 31, 2024 (0.57 and 1.03 times as on March 31, 2023).  Debt protection metrics were adequate, indicated by interest coverage and net cash accrual to adjusted debt ratios of around 4.2-4.3 times and net cash accruals to adjusted debt of 0.12-0.13 times in fiscal 2024. The financial risk profile is expected to remain stable despite debt-funded capital expenditure (capex) over the medium term.

 

Weaknesses:

  • Average scale of operations amid intense competition and exposure to regulatory risks: Though increasing, scale of operations continues to remain average, as indicated by revenue of Rs 270-275 crore in fiscal 2024. The plastic packaging industry is highly fragmented, and the consequent intense competition from various players may continue to constrain scalability, pricing power and profitability. The company is exposed to regulatory risks which can impact the company’s performance Increase in scale of operations would remain a key monitorable over the medium term.

 

  • Exposure to volatility in input cost: Major raw materials include high-density polyethylene, low-density polyethylene and polypropylene for manufacturing industrial plastics, which are crude oil derivatives, and hence their prices witness fluctuations. Since raw material prices account for bulk of the total production cost, even a slight variation in the prices may drastically impact profitability. Although raw material costs are revised periodically, operating margin will remain susceptible to sharp fluctuations in input cost.

Liquidity: Adequate

Cash accrual, expected at Rs 25-30 crore per annum, will sufficiently cover yearly debt obligation of Rs 6-12 crore over the medium term. Bank limit was utilised at 46% on average over the 12 months through March 2024. Cash and bank balance stood at around Rs 3-4 crores as on March 31, 2024. Current ratio is 1.29 times as on March 31, 2023. Low gearing and moderate networth support its financial flexibility and provides the financial cushion required in case of any adverse conditions or downturn in the business

Outlook: Stable

RPPL will continue to benefit from healthy revenue visibility backed by healthy relationship with regular customers  and the promoters’ extensive experience.

Rating Sensitivity factors

Upward factors:

  • Increase in revenue and profitability leading to cash accrual of more than Rs 35 crore, aided by timely ramp-up of operations at the newly installed facilities
  • Efficient working capital management and stable financial risk profile and liquidity

 

Downward factors:

  • Steep decline in revenue and profitability to ~10%, leading to significant decline in cash accrual.
  • Larger-than-expected debt-funded capex and stretch in the working capital cycle weakening the capital structure.

About the Company

RPPL, originally established as a partnership firm in 2003, was reconstituted as a limited company in 2018. It manufactures plastic packaging products, such as rigid plastic sheets and thermoformed packaging containers, cups, bowls punnets, lids and trays for food packaging. It has two manufacturing units at Daman in Daman and Diu and at Sarigam in Gujarat. Mr Ramswaroop Radheshyam Thard and Mr Naresh Thard are the promoters of the company. It is listed on the National Stock Exchange.

Key Financial Indicators

As on / for the period ended March 31

 

12M 2024

2023

2022

Operating income

Rs crore

274.4

252.2

198.6

Reported profit after tax (PAT)

Rs crore

8.6

10.9

9.6

PAT margin

%

3.1

4.3

4.8

Adjusted debt/adjusted net worth

Times

0.48

0.57

0.33

Interest coverage

Times

4.27

5.02

8.70

Status of non cooperation with previous CRA:

RPPL has not cooperated with Credit Analysis & Research Ltd, which has classified it as issuer not cooperative vide release dated March 20, 2020. The reason provided by Credit Analysis & Research Ltd.is non-furnishing of information for monitoring of ratings.

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 Cash credit NA NA NA 65.5 NA CRISIL BBB+/Stable
NA Term loan NA NA Mar-2026 20.98 NA CRISIL BBB+/Stable
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 86.48 CRISIL BBB+/Stable   -- 04-08-23 CRISIL BBB+/Stable 04-10-22 CRISIL BBB+/Stable 25-06-21 CRISIL BBB+/Stable CRISIL BBB+/Stable
      --   --   -- 14-09-22 CRISIL BBB+/Stable   -- CRISIL A2
Non-Fund Based Facilities ST   --   --   --   -- 25-06-21 CRISIL A2 CRISIL A2
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 2.1 Axis Bank Limited CRISIL BBB+/Stable
Cash Credit 25 HDFC Bank Limited CRISIL BBB+/Stable
Cash Credit 30 Citi Bank CRISIL BBB+/Stable
Cash Credit 5 SVC Co-Operative Bank Limited CRISIL BBB+/Stable
Cash Credit 3.4 Axis Bank Limited CRISIL BBB+/Stable
Term Loan 2.29 HDFC Bank Limited CRISIL BBB+/Stable
Term Loan 10.36 SVC Co-Operative Bank Limited CRISIL BBB+/Stable
Term Loan 8.33 Citi Bank CRISIL BBB+/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt

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