| Roha Dyechem Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 A/Stable/CRISIL A1’ ratings on the bank facilities of Roha Dyechem Private Limited (RDPL).
Operating performance of RDPL remained stable in fiscal 2021, with revenues showing a marginal decline of 3% year on year to Rs 1,708 crore . The revenue decline was largely on account of pandemic related slowdown in the end user segments of colour division and challenges on the logistical front which negatively impacted exports. The renewable segment comprising of solar power projects of 63.5 MW and wind power projects of 31.5MW exhibited stable performance. However, with normalcy returning, the performance for the first nine months of fiscal 2022 has shown an improvement with revenues recorded of around Rs 1,400 crore (colour segment: ~95%; renewable segment: ~5%) and operating margin of around 18%. The operating performance is expected to be stable over the medium term, with revenue growth expected at 5-6% and operating margin at 18-20%. Price hikes undertaken in the third quarter of fiscal 2022 to counter increase in raw material prices in the colour segment, which are linked to crude prices, should help sustain profitability.
The business risk profile is expected to be supported over the medium term by revenue contribution of new products, healthy demand for existing products, market leadership in the food colour business in both domestic and overseas markets and healthy operating margin of 18-20% at a consolidated level. The profitability will be supported by strong operating efficiency and improved backward integration expected from the capital expenditure (capex) of Rs 300 crore at the Dahej plant.. The business risk profile will continue to benefit from the company’s dominant position, established relationships with most large fast-moving consumer goods (FMCG)/consumer companies globally and sound operating efficiency. Stable performance of the solar projects in Gujarat, Maharashtra and Rajasthan, with an average plant load factor (PLF) of 20%, will provide significant stability to the operating performance.
The financial risk profile remains comfortable backed by a strong networth expected at over Rs.1,250 crore as on March 31, 2022 and estimated gearing of 0.42x. Debt protection metrics are also expected to be healthy with Net cash accrual to total debt (NCATD) and interest coverage expected at over 30% and 10 times, respectively, over the medium term. Completion of the capacity expansion greenfield project at Dahej will improve net cash accrual to Rs 260-300 crore per annum over the medium term which should be sufficient to meet repayment of about Rs 83 crore and Rs 91 crore in fiscals 2023 and 2024, respectively.
The company has provided support to the Roha group's housing finance business through corporate guarantee of up to Rs 100 crore out of which Rs 41 crore is currently outstanding. Additionally, loans and advances to other group companies remains at Rs 120 crore and will continue to be a key monitorable. Any increase in exposure to the housing finance business and renewed exposure to real estate will remain key rating sensitivity factors.
The ratings continue to reflect RDPL’s established market position in the food colour business, stable solar energy business backed by consistent PLF and regular payments by customers. These strengths are partially offset by working capital-intensive operations and exposure to counterparty risks in the power segment, especially for wind power. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of RDPL and its subsidiaries, associates and joint ventures. This is because all the companies, together referred to as RDPL, have common promoters and management, and business and financial linkages. (Details of subsidiaries, associates and joint ventures in Annexure – List of entities consolidated)
Please refer Annexure – List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths RDPL is the leader in the domestic food colour industry with 80% market share and an established clientele. It also has sizeable global presence with 27 group companies in 20 countries. It has longstanding relationships with major domestic and global FMCG players and meets their stringent norms and certifications, which is an imperative in the food colour business. Exports/overseas sales account for over 80% of the total revenue. Adjusted networth and total outside liabilities to adjusted networth ratio stood at Rs 1,086 crore and 1.15 times, respectively, as on March 31, 2021, and are expected to improve going forward. The debt protection metrics were also healthy with NCATD and interest coverage at 32% and about 8.95 times, respectively, for fiscal 2021. The financial risk profile is expected to gradually improve, from already comfortable levels, over the medium term with strong cash accruals, progressive debt repayment, and limited debt-funded capex.
* Sound operating capability in the solar energy business The company has 63.5 megawatt (MW) solar power capacity in Gujarat, Rajasthan and Maharashtra. It has been able to commission the projects within scheduled timelines. The 25-MW solar power plant in Gujarat and 27.5 MW plant in Rajasthan have reported stable performance in the 12 months through January 2022, at an average PLF of 22% and 18%, respectively. Operating margin was around 86%. With long standing PPAs of 25 years with credible counter parties such as MP Power Management Company and Rajasthan Vidyut Nigam Limited, the performance is expected to remain stable going forward.
The company has entered into power purchase agreements with state utilities for the power generated from its renewable energy projects and is exposed to counterparty risks such as delays in payments. While payments for solar energy are regular, payments in the wind energy segment are delayed by up to six months. However, the contribution of this segment to revenue is just 0.1%. Stable cash flows from its major revenue sources (food colour and solar energy) mitigate the risk.
Gross current assets (GCAs) were at 180-260 days in the past four fiscals and were relatively higher at 257 days as on March 31, 2021 , because of inventory of 126 days and receivables of 82 days. The GCAs are estimated at 250-300 days as on March 31, 2022. The company has to maintain large inventory, being in a relatively niche category and as it deals in a large variety of products. The large receivables are due to the long approval process for products from the customers. |
Liquidity: Adequate Cash accrual is expected at Rs 260-300 crore per annum during fiscals 2022-24 against yearly term debt obligation of Rs 80-90 crore. The company maintains cash and equivalent of over Rs 100 crore. Fund-based working capital limit of Rs 180 crore was utilised 65% on average over the 12 months through January 2022. |
Outlook: Stable CRISIL Ratings believes RDPL will continue to benefit from its established market position in the food colour business and the stable operating performance of its solar power projects |
Rating Sensitivity Factors Upward Factors * Steady enhancement in debt protection metrics such as sustained improvement in the ratio of debt to earnings before interest, tax, depreciation, and amortisation (Ebitda) below 2.0 times at consolidated level * Deterioration in debt protection metrics with Debt/Ebitda higher than 3 times |
About the Company Established in 1972 and promoted by Mr Ramakant Tibrewala, RDPL manufactures dyes and colours used in food and beverages, drugs and cosmetics. It has a wide global network with group companies across 20 countries. RDPL also owns and operates three solar energy projects of 63.5 MW in Gujarat, Rajasthan and Maharashtra; and three wind energy projects of 31.5 MW in Maharashtra, Madhya Pradesh and Rajasthan. The energy generated from the solar plant in Maharashtra shall be used for captive purposes.
For fiscal 2021, at a standalone level, RDPL’s revenue fell 3.5% and operating margin dropped to 29.6% from 32.6% in fiscal 2020. At a consolidated level, revenue was around Rs 1,708 crore in fiscal 2021 with steady operating margin of around 19.5%. During the first nine months of fiscal 2021, the company, on a standalone basis, reported revenue of Rs 628 crore and operating margin of 27%. |
Key Financial Indicators - Standalone
Key Financial Indicators - Consolidated
*Provisional |
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)
*Interchangeable with export packing credit and packing credit in foreign currency |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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