| Standard Glass Lining Technology Limited | ||||||
| Ratings upgraded to 'CRISIL A- / Stable / CRISIL A2+ '; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 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 upgraded its ratings on the bank loan facilities of Standard Glass Lining Technology Ltd (SGLTL; part of Standard Glass Group) to ‘CRISIL A-/Stable/CRISIL A2+’ from ‘CRISIL BBB+/Stable/CRISIL A2’.
The rating upgrade factors the strong operating performance of Standard Glass group driven by higher-than-expected revenue growth, sustained profitability margins and its improving financial risk profile. Operating Income almost doubled to around Rs 500 crore in fiscal 2023 supported by addition of new products and customers. Revenue is projected to grow at a healthy rate over the medium term as well supported by both organic and inorganic growth while the operating margin is also expected to improve going forward with increase in higher margin export sales. Working capital requirements remained large, but are largely funded by internal accruals, advances from customers and creditors, resulting in strong return on capital employed over 46% in fiscal 2023.
The rating action also factors the group’s improving financial risk profile with a healthy networth base, comfortable capital structure and indebtedness ratios along with strong debt protection metrics. Its’s capital structure improved significantly during fiscal 2023 on account of healthy accretions and fresh infusion of equity (Rs 43 crore) through private placement of shares. Interest coverage ratio is also projected to remain strong at 12-15 times going forward. Liquidity is also expected to be supported by healthy net cash accruals, minimal repayment obligations and cushion available in working capital limits. Sustenance of projected performance while maintaining the capital structure and working capital cycle will be the key monitorable.
The ratings also reflect the group's established market position supported by the extensive experience of its promoters in the industry, improving financial risk profile and reputed clientele. These strengths are partially offset by its working capital-intensive operations with exposure to intense competition and exposure to cyclicality in demand from the key end user industries. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of SGLTL, S2 Engineering Industry Private Limited (SEIPL) and Standard Flora Pvt Ltd (SFPL). That is because all these entities, together referred to as the Standard Glass group, operate in same line of business, with a common management team and significant operational and financial linkages.
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: Established market position supported by the extensive experience of the promoters: In the past few years, Standard Glass group has evolved as a leading supplier of glass lined reactors and other equipment which are used by leading pharma and chemical companies. The promoters’ experience of more than 10 years along with their strong understanding of market dynamics helped scale up the business significantly. Business profile will continue to be supported by the extensive industry experience of the promoters and their established relationships with the customers & suppliers.
Comfortable and improving financial risk profile: Financial risk profile is marked by a healthy networth of Rs. 159 cr while gearing and total outside liabilities to tangible networth ratios (TOLANW) were also comfortable at 0.38 time and 1.13 times, respectively, as on March 31, 2023. Interest coverage ratio is projected to remain strong at 12-15 times over the medium term. These metrics are further expected to improve over the medium term with sustenance of healthy operating performance and prudent working capital management. Despite the planned capex of Rs 175-200 crore over the three fiscals ended 2026, financial risk profile is expected to remain healthy marked by a comfortable capital structure.
Weaknesses: Exposure to cyclicality in end-user industries: The demand for the reactors and other products manufactured by Standrad Glass group remain susceptible to the capex plans of the key end-user industries such as pharmaceutical and chemicals, which are cyclical. Slowdown of capex in any of these industries may impact the company’s performance.
Working capital intensive operations and exposure to intense competition: Working capital requirements are large driven by large raw material and work in process inventory and high debtors’ levels. Significant delays in realization of receivables along with high inventory requirements results in an elongated working capital cycle. Moreover, the group is a moderate sized player in the glass-lined equipment business and faces competition from other larger players such as GMM Pfaudler Ltd which constrains the scale and pricing flexibility. |
Liquidity: Strong Net cash accruals projected at Rs 75-95 crore per fiscal in 2024 and 2025; should adequately cover yearly debt obligations of Rs 1-2 crore per fiscal. Bank limits were utilized at 37% on an average through the 12 months ended March 2023. Moreover, the group has raised Rs 43 crore through private placement of shares in fiscal 2023; out of this Rs 33 crore was received in fiscal 2023 which also strengthened its financial risk profile and liquidity. |
CRISIL Ratings believes Standard group will continue to benefit from the strong operating performance and healthy cash generation from business. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group Incorporated in 2012, SGLTL manufactures glass-lined reactors, receivers and heat exchangers. The company has two facilities in Hyderabad with capacity to manufacture 150-160 vessels per month, ranging from 50 litre to 60,000 litre.
SEIPL was incorporated in September 2021. It is a wholly owned subsidiary of SGLTL. Company is set to manufacture stainless steel and nickel alloy process equipment such as dryers, filters, reactors, vessels, vacuum pumps, laboratory equipment, etc. It has manufacturing facility located in Hyderabad- Telangana.
SFPL is engaged in the manufacturing of PTFE coated lines and valves. SGLTL holds 51% stake in SFPL.
The group is promoted and managed by Mr K Nageswara Rao, Mr K Rama Krishna and Mrs. K Krishna Veni. |
Key Financial Indicators (Standalone)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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