Rating Rationale
October 20, 2021 | Mumbai
Rex Pipes And Cables Industries Limited
'CRISIL BB / Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.22 Crore
Long Term RatingCRISIL BB/Stable (Assigned)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its CRISIL BB/Stable ratings to the bank facilities of Rex Pipes And Cables Industries Ltd (RPCI).

 

The ratings reflect the extensive experience of the promoter in the pipe and pipe fittings industry and healthy debt protection metrics of the company. These strengths are partially offset by susceptibility to slowdown in end-user industries and to government policies, and large working capital requirement.

Key Rating Drivers & Detailed Description

Strengths

Extensive experience of the promoter:

The promoters experience of over 10 years in the pipe and pipe fittings industry, understanding of market dynamics and established relationships with suppliers and customers will continue to support the business.

 

Healthy debt protection metrics: 

Debt protection metrics were comfortable despite leverage owing to moderate profitability. Interest coverage and net cash accrual to total debt ratios were 2.75 times and 0.13 time, respectively, in fiscal 2021, and are expected to remain at similar levels over the medium term.

 

Weaknesses

Susceptibility to slowdown in end-user industries and to government policies:

The company derives majority of revenue from the real estate and infrastructure industries. Severe slowdown in the end-user industries will weaken demand for line pipes and impact performance. Furthermore, revenue is susceptible to government policies, local supply and trade duties.

 

Large working capital requirement:

Gross current assets were 150-170 days over the three fiscals ended March 31, 2021, and 150 days as on March 31, 2021, driven by large inventory and receivables of 86 and 60 days, respectively.

Liquidity: Stretched

Bank limit of Rs 12.5 crore was utilised 83.95% for the 15 months through August 2021. Expected cash accrual of Rs 3-4 crore per fiscal will comfortably cover yearly debt obligation of Rs 3 crore over the medium term. Cash and bank balance was Rs 0.62 crore, and current ratio was 1.33 times, as on March 31, 2021.

Outlook Stable

CRISIL Ratings believes RPCI will continue to benefit from the extensive experience of the promoter and established relationships with suppliers.

Rating Sensitivity factors

Upward factors:

* Growth in revenue and sustenance of operating margin

* Improvement in the financial risk profile, aided by nil major debt-funded capital expenditure

 

Downward factors:

* Decline in operating income and fall in operating margin below 6%

* Further stretch in the working capital cycle, weakening the financial risk profile and liquidity

About the Company

Incorporated in 2002 and promoted by Mr Shrawan Kaler, RPCI (erstwhile Kaler Electricals Pvt Ltd) trades in water pumps, flat cables and pipes. The company started manufacturing polyvinyl chloride (PVC) and high-density polyethylene (HDPE) pipes and electrical cables in June 2011. The manufacturing unit is in Sikar, Rajasthan. Before commencement of manufacturing operations, the company derived its entire revenue from trading.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

60.42

32.02

Reported profit after tax (PAT)

Rs crore

1.13

0.77

PAT margin

%

1.87

2.42

Adjusted debt / adjusted networth

Times

1.75

1.48

Interest coverage

Times

2.75

2.45

 

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 Instruments

ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs crore) Complexity Level Rating assigned with outlook
NA Term loan NA NA Sep-22 1.02 NA CRISIL BB/Stable
NA Term loan NA NA Mar-24 5.04 NA CRISIL BB/Stable
NA Working capital term loan NA NA Mar-24 3.44 NA CRISIL BB/Stable
NA Overdraft facility NA NA NA 12.5 NA CRISIL BB/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 22.0 CRISIL BB/Stable 07-09-21 Withdrawn (Issuer Not Cooperating)* 13-02-20 CRISIL B+ /Stable(Issuer Not Cooperating)*   -- 27-11-18 CRISIL B+ /Stable(Issuer Not Cooperating)* CRISIL B+/Stable
      -- 19-05-21 CRISIL B+ /Stable(Issuer Not Cooperating)*   --   --   -- --
Non-Fund Based Facilities ST   -- 19-05-21 CRISIL A4 (Issuer Not Cooperating)* 13-02-20 CRISIL A4 (Issuer Not Cooperating)*   -- 27-11-18 CRISIL A4 (Issuer Not Cooperating)* CRISIL A4
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
 
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Overdraft Facility 12.5 Baroda Rajasthan Kshetriya Gramin Bank CRISIL BB/Stable
Term Loan 1.02 Baroda Rajasthan Kshetriya Gramin Bank CRISIL BB/Stable
Term Loan 5.04 Baroda Rajasthan Kshetriya Gramin Bank CRISIL BB/Stable
Working Capital Term Loan 1.06 Baroda Rajasthan Kshetriya Gramin Bank CRISIL BB/Stable
Working Capital Term Loan 2.38 Baroda Rajasthan Kshetriya Gramin Bank CRISIL BB/Stable

This Annexure has been updated on 20-Oct-2021 in line with the lender-wise facility details as on 20-Oct-2021 received from the rated entity.

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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