| TPL Plastech Limited | ||||||
| Ratings reaffirmed 'CRISIL A+/Stable/CRISIL A1' | ||||||
| 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 reaffirmed its ‘CRISIL A+/Stable/CRISIL A1’ ratings on the bank facilities of TPL Plastech Limited (TPL).
The operating income is estimated to have grown by ~15% and operating margin is likely to have remained at 10-11% for fiscal 2023 due to healthy demand from end-user industries and low base effect. Over the medium term as well, moderate growth is expected due to healthy demand from end-user industries supported by commissioning of the Dahej plant. The financial risk profile is expected to remain comfortable owing to prudent funding of capital expenditure (capex) with debt and equity and above-average debt protection metrics.
Revenue and operating margin for the nine months through December 31, 2022, were Rs 199 crore and 11.1%, compared with Rs 167 crore and 12.1%, respectively, for the corresponding period of the previous fiscal. For fiscal 2022, revenue and operating margin were Rs 229 crore and 11.7% against Rs 170 crore and 11.8% respectively, for the previous fiscal.
The ratings continue to reflect the strong managerial and financial support that TPL receives from its parent, Time Technoplast Ltd (TTL), which holds 75% stake in the company; and has an 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 management support from the parent The parent has a strong market position in the rigid industrial packaging segment. This enables TPL to procure raw material in bulk and take advantage of 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 a few organised players (including TPL, TTL, Balmer Lawrie) and some unorganised players. The units of TPL are in Silvassa (Dadra and Nagar Haveli), Pantnagar (Uttarakhand), Ratlam (Madhya Pradesh), Visakhapatnam (Andhra Pradesh) and Bhuj (Gujarat); and have combined installed capacity of 24,200 tonne per annum (tpa). TPL has completed its capex at Dahej and is expected to resume commercial production shortly. This will increase the capacity for packaging products including intermediate bulk containers (IBC).
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. 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 a maximum of 30 days through monthly price revisions for regular clients. Furthermore, as it imports a part of its raw material requirement, it is exposed to forex fluctuation risk. In the last couple of years, the company is meeting majority of raw material requirement indigenously.
Average financial risk profile Networth and gearing were Rs 106 crore and ~0.3 time, respectively, as on September 30, 2022. Gearing is expected to remain at similar levels over the medium term due to prudent funding of capex through equity and debt and healthy accretion to reserve. Interest coverage ratio was at a moderate 5.8 times for the 9 months through December 2022. Over the medium term as well, interest cover is expected to remain at 4.5-5.0 times. |
Liquidity: Adequate Expected annual cash accrual of Rs 18-22 crore should comfortably meet yearly debt obligation of Rs 6-7 crore and support liquidity. In fiscal 2024, capex of Rs 6-7 crore would be funded through internal means. Additional working capital requirement is expected to be funded through internal accrual and available working capital limits. Cash and equivalent stood at Rs 4 crore as on February 28, 2023. Utilisation of fund-based bank limits of Rs 46 crore averaged 36% for the 12 months ended February 28, 2023. |
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 the bank facilities and debt programmes of TTL * Sustained improvement in revenue with profitability above 12% on a sustained basis * 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 * Decline in revenue growth and operating profitability * Weakening of debt protection metrics due to sizeable, debt-funded capex leading to interest coverage declining below 3 times on a sustained basis |
About the Company 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 with container capacity of 20-250 litre, primarily used in bulk packaging of speciality chemicals, paints and inks, pharmaceutical products, and fast-moving consumer goods. It has facilities in Silvassa, Pantnagar, Ratlam, Visakhapatnam and Bhuj, with total capacity of 24,200 tpa. TPL also manufactures small packaging products with container capacity of 30ml to 10 litre. TPL has completed its capex at Dahej and is expected to resume commercial production shortly.
For the nine months ended December 31, 2022; revenue was Rs 199 crore with operating margin of 11.1% |
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)
& - Interchangeable from Cash Credit to Letter of Credit/SBLC fully ^ - Interchangeability from Fund Based to Non Fund based to the extent of 75% of Fund based limit i.e. Rs 21.375 crore $ - Includes sub-limit of Bank Guarantee amounting to Rs 5 crore and SBLC of Rs 20 crore # - Emergency credit line guarantee scheme ' long-term loan - guaranteed by National Credit Guarantee Trustee Company Ltd |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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