Rating Rationale
February 26, 2021 | Mumbai
TPL Plastech Limited
Ratings reaffirmed at 'CRISIL A+ / Stable / CRISIL A1 '
 
Rating Action
Total Bank Loan Facilities RatedRs.117.7 Crore
Long Term RatingCRISIL A+/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ratings on the bank facilities of TPL Plastech Limited (TPL) at ‘CRISIL A+/Stable/CRISIL A1’.

 

CRISIL Ratings expects the operating performance of TPL in fiscal 2021 to be moderately impacted due to the Covid-19 pandemic.

 

Revenue and operating margin for the nine months through December 31, 2020, were Rs 115 crore and 11.7%, compared with Rs 166 crore and 11.8%, respectively, for the corresponding period previous fiscal.

 

For fiscal 2020, revenue and operating margin were Rs 216 crore and 11.4% against Rs 226 crore and 11.6% respectively, for the previous fiscal. Revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) were impacted marginally in the last quarter of fiscal 2020 due to lockdown towards the end March 2020.

 

The ratings continue to reflect the strong managerial and financial support that TPL receives from its parent, Time Technoplast Limited (TTL), which holds 75% stake in the company; and established market position in the rigid industrial packaging segment. These strengths are partially offset by average financial risk profile because of modest networth and cash accrual, large working capital requirement, and susceptibility to fluctuations in polymer prices and foreign exchange (forex) rates.

Analytical Approach

CRISIL Ratings has applied its parent notch-up framework to factor in the support from TTL to TPL.

Key Rating Drivers & Detailed Description

Strengths:

•             Strategic importance to TTL, and strong operational and financial support from the parent

The parent has a strong market position in the rigid industrial packaging segment. This enables TPL to procure raw materials in bulk and benefit from favourable purchasing terms with suppliers. The company also benefits from the common treasury function and management overview by TTL. Being in the same business, TPL is of strategic interest to the parent and is, therefore, expected to continue to receive strong support from TTL.

 

•              Established market position in the rigid industrial packaging segment

The plastic-based industrial packaging industry comprises few organised players (including TPL, TTL, Balmer Lawrie) and some unorganised players. The units of TPL are in Silvassa (Dadra and Nagar Haveli), Jammu (Jammu and Kashmir), Pantnagar (Uttarakhand), Ratlam (Madhya Pradesh), Visakhapatnam (Andhra Pradesh) and Bhuj (Gujarat); and have combined installed capacity of 28,500 tonne per annum (tpa).

 

Weaknesses:

•             Susceptibility to volatility in polymer prices and forex rates

TPL follows sound procurement and hedging strategies under the guidance of its parent. Key raw materials, high density polyethylene (HDPE) and polypropylene that are commonly known as polymers, account for 75-80% of operating income and 85-90% of cost of sales. The company does not enter into long-term, index-linked contracts with customers and hence remains exposed to the risk of sharp fluctuations in polymer prices. However, TPL is able to pass on variations in polymer prices to its customers with a lag of maximum one month through monthly price revisions for regular clients. Furthermore, as it imports part of its raw material requirement, it is exposed to forex fluctuation risk. In last couple of years the company is meeting majority of raw material requirement indigenously. Hence, the share of imports in total purchases reduced to 30% from 70% earlier.

 

•              Average financial risk profile

Net worth and gearing were at Rs 86 crore and 0.4 time, respectively, as on September 30, 2020. Gearing is expected to improve in the medium term with low capex requirements which would be funded through internal accruals, but could be constrained by moderately high working capital requirement. Interest coverage ratio was at a healthy level of around 4 times for the 9 months period ending December 31, 2020.

Liquidity: Adequate

Internal accrual of Rs 10-13 crore per annum is expected to be sufficient to meet yearly debt obligation of Rs 3-6 crore and capex of Rs 1-3 crore, over the medium term. Additional working capital requirement is expected to be funded through internal accrual and incremental working capital borrowings. Cash and equivalent stood at about Rs 4 crore as on September 30, 2020. Average utilisation of fund-based bank limit was 58% for the 12 months ended January 31, 2021.

Outlook: Stable

CRISIL Ratings believes TPL will continue to benefit from its established market position and synergies of operating in the same business as the parent.

Rating Sensitivity factors

Upward factors:

  • Upward rating action on TTL’s bank facilities and debt programmes by 1 or more notches
  • Sustained improvement in revenue and profitability
  • Strengthening of financial risk profile through improvement in gearing and interest coverage ratio

 

Downward factors:

  • Downward rating action on the bank facilities and debt programmes of TTL by 1 or more notches
  • Decline in revenue growth and operating profitability
  • Weakening of debt protection metrics due to sizeable, debt-funded capex

About the Group

TPL was incorporated in 1992 as Tainwala Polycontainers Ltd. In July 2006, the original promoters exited the business and TTL acquired 75% stake and renamed the company.

 

TPL manufactures HDPE drum containers and pipes with capacity of 20-250 litres, primarily used in bulk packaging of speciality chemicals, paints and inks, pharmaceutical products, and fast-moving consumer goods. It has manufacturing facilities in Silvassa, Jammu, Pantnagar, Ratlam, Visakhapatnam and Bhuj, with total capacity of 28,000 tpa.

Key Financial Indicators

Particulars

Unit

2020

2019

Revenue

Rs crore

209

219

Profit after tax (PAT)

Rs crore

11

11

PAT margin

%

5.1

5.2

Adjusted debt/adjusted networth

Times

0.45

0.78

Interest coverage

Times

3.90

3.90

 

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Complexity level

Issue size

(Rs. crore)

Rating assigned with outlook

NA

Cash Credit^

NA

NA

NA

NA

28.5

CRISIL A+/Stable

NA

Cash Credit*

NA

NA

NA

NA

17.5

CRISIL A+/Stable

NA

Long Term Loan

NA

NA

30-Apr-22

NA

2.84

CRISIL A+/Stable

NA

Long Term Loan

NA

NA

01-May-22

NA

5.14

CRISIL A+/Stable

NA

Long Term Loan**

NA

NA

Mar-26

NA

4.40

CRISIL A+/Stable

NA

Long Term Loan%

NA

NA

Mar-25

NA

2.97

CRISIL A+/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

NA

19.85

CRISIL A+/Stable

NA

Letter of Credit$

NA

NA

NA

NA

5

CRISIL A1

NA

Letter of Credit#

NA

NA

NA

NA

31.5

CRISIL A1

^Interchangeability from cash credit to letter of credit of Rs 14.25 crore (50% of the sanctioned limit)

*Interchangeable from cash credit to letter of credit /Standby letter of credit fully

$Includes sublimit of bank guarantee/ Standby letter of credit amounting to Rs 5 crore

# Includes sublimit of bank guarantee amounting to Rs 3 crore and Standby letter of credit of Rs 15 crore

**Emergency credit line guarantee scheme – long-term loan - guaranteed by National Credit Guarantee Trustee Company Ltd -tenor - 5 years

%Emergency credit line guarantee scheme – long-term loan - guaranteed by National Credit Guarantee Trustee Company Ltd -tenor - 4 years

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 81.2 CRISIL A+/Stable   -- 23-07-20 CRISIL A+/Stable 28-06-19 CRISIL A+/Stable 30-07-18 CRISIL A+/Stable CRISIL A/Positive
      --   --   --   -- 24-07-18 CRISIL A+/Stable --
Non-Fund Based Facilities ST 36.5 CRISIL A1   -- 23-07-20 CRISIL A1 28-06-19 CRISIL A1 30-07-18 CRISIL A1 CRISIL A1
      --   --   --   -- 24-07-18 CRISIL A1 --
Commercial Paper ST   --   --   --   -- 24-07-18 Withdrawn CRISIL A1
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Facility Name of Lender Amount (Rs.Crore) Rating
Cash Credit* HDFC Bank Limited 17.5 CRISIL A+/Stable
Cash Credit^ IDBI Bank Limited 28.5 CRISIL A+/Stable
Letter of Credit$ HDFC Bank Limited 5 CRISIL A1
Letter of Credit# IDBI Bank Limited 31.5 CRISIL A1
Long Term Loan HDFC Bank Limited 5.14 CRISIL A+/Stable
Long Term Loan** HDFC Bank Limited 4.4 CRISIL A+/Stable
Long Term Loan% IDBI Bank Limited 2.97 CRISIL A+/Stable
Long Term Loan IDBI Bank Limited 2.84 CRISIL A+/Stable
Proposed Long Term Bank Loan Facility Not Applicable 19.85 CRISIL A+/Stable
Total - 117.7 -

This Annexure has been updated on 17-Aug-2021 in line with the lender-wise facility details as on 14-Aug-2021 received from the rated entity.

^Interchangeability from cash credit to letter of credit of Rs 14.25 crore (50% of the sanctioned limit)

*Interchangeable from cash credit to letter of credit /Standby letter of credit fully

$Includes sublimit of bank guarantee/ Standby letter of credit amounting to Rs 5 crore

# Includes sublimit of bank guarantee amounting to Rs 3 crore and Standby letter of credit of Rs 15 crore

**Emergency credit line guarantee scheme – long-term loan - guaranteed by National Credit Guarantee Trustee Company Ltd -tenor - 5 years

%Emergency credit line guarantee scheme – long-term loan - guaranteed by National Credit Guarantee Trustee Company Ltd -tenor - 4 years

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
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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