| Sundaram Multi Pap Limited | ||||
| 'CRISIL BB- / Stable' assigned to 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 Rating has assigned its ‘CRISIL BB-/Stable’ ratings to the bank facilities of Sundaram Multi Pap Limited (SMPL).
The rating reflects SMPL's extensive promoter experience of the industry and its moderate financial profile . These strengths are partially offset by its volatile operating margins being susceptible to the volatility in paper prices moderate scale of operations and working capital intensive operations. |
Key Rating Drivers & Detailed Description Strengths:
The promoters have an experience of over four decades in the publishing industry with the second generation also involved in day to day business. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers.
SMPL’s capital structure is comfortable with gearing and total outside liabilities to adjusted net worth (TOLANW) of less than 1 time as on March 31, 2022. SMPL’s debt protection measures are comfortable with interest coverage ratio and net cash accrual to adjusted debt (NCAAD) ratio at 2.58 times and 0.20 times respectively for fiscal 2022. SMPL’s financial risk profile is expected to remain at similar level over medium term
Weakness:
Operating margins are expected to remain volatile since they are susceptible to the fluctuations in the prices of its raw material, paper. The margins which were at 0.03% in fiscal 2021 jumped to 16.2% in fiscal 2022. Though the company, due to its long standing relationships with its distributors, is able to effectively pass on the increased prices of paper, however, the extent that it will be able to pass on these prices will remain a key monitorable.
Although revenues of the company has grown to Rs 70 crores in fiscal 2022 from Rs 50 crores in fiscal 2021, overall scales remain moderate. Intense competition and fragmented industry may continue to constrain scalability, pricing power and profitability. Thus improvement in scales of operations will remain a key monitorable factor.
Gross current assets were at 275 to 360 days over the past three fiscals ended March 31, 2022. This is majorly due to high inventory maintained of 207 days as on March 31, 2022, due to its business need and large work in process inventory. It’s large working capital requirements also arise from its high debtor levels with a sizeable portion being above 6 months. Debtor days stood at 82 days as on March 31, 2022 with close to 89% of the total debtors being above 6 months. The debtors above 6 months majorly pertain to old bulk paper lying in the stock given to distributors, the recoveries of which are expected to be slow. All of these are fully recoverable and will gradually reduce in the coming fiscals. |
Liquidity: Stretched Bank limit utilization is high at around 91 percent for the past twelve months ended October 2022. Cash accruals are expected to be in the range of Rs.10-12 crores which are sufficient against the term debt obligations of Rs. 2 crores to Rs. 5 crores over the medium term. Current ratio is healthy at 2.52 times as on March 31, 2022. Low gearing and moderate net worth support it’s financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business |
Outlook Stable CRISIL Ratings believes that SMPL will continue to benefit from the extensive experience of its promoters and established relationships with its customers. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1995, SMPL is engaged in manufacturing of stationary for school children notably note books, long books, diaries, note pads etc. and also providing office related stationary under the brand name 'Sundaram'. The company's manufacturing facility is located in Palghar, Maharashtra.
Its listed in Bombay Stock Exchange and National Stock Exchange. The company is managed by the Shah family and is promoted by Mr. Amrut Shah and his brother Mr. Shantilal Shah |
Key Financial Indicators
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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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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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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This Annexure has been updated on 30-Nov-2022 in line with the lender-wise facility details as on 30-Nov-2022 received from the rated entity.
Criteria Details
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