Rating Rationale
July 23, 2020 | Mumbai
TPL Plastech Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.117.7 Crore
Long Term Rating CRISIL A+/Stable (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its rating on the bank facilities of TPL Plastech Limited (TPL) at 'CRISIL A+/Stable/CRISIL A1'.
 
CRISIL expects the operating performance of TPL to be moderately impacted due to the Covid-19 pandemic. This is because most of the products of TPL are classified as essential products and the units resumed operations after brief initial period of lockdown at part capacity.
 
For fiscal 2020, TPL reported revenues and operating margin of Rs 216 crore and 11.4% against Rs 226 crore and 11.6% respectively for the previous fiscal year. The revenue and EBITDA were impacted marginally in last quarter of fiscal 2020 due to lockdown towards end of March-2020.
 
The ratings continue to reflect the strong managerial and financial support that TPL receives from its parent, Time, which holds 75% stake 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 has applied its parent notch-up framework to factor in support from Time to TPL.

Key Rating Drivers & Detailed Description
Strengths
* Strategic importance to the Time group, and strong operational and financial support from the parent
Time group has a strong established market position in the rigid industrial packaging segment. The strong combined market position enables TPL to procure raw material in bulk and benefit from favourable purchasing terms with suppliers. TPL also benefits from the common treasury function with, and management overview by, Time. TPL, being in the same business, is of strategic interest to the parent. Hence, TPL should continue to receive strong support from Time.
 
* Established market position in the rigid industrial packaging segment
The plastic-based industrial packaging segment comprises very few organised players including TPL, Time, Balmer Lawrie and a few unorganised players. TPL's units are at Silvassa (Dadra and Nagar Haveli), Jammu (Jammu and Kashmir), Pantnagar (Uttarakhand), Ratlam (Madhya Pradesh), Visakhapatnam (Andhra Pradesh) and Bhuj (Gujarat), and have installed capacity of 28,500 tonne per annum (tpa).

Weaknesses
* Susceptibility to volatility in polymer prices and forex rates
TPL follows sound procurement & hedging strategies under the guidance of its parent, Time. Key raw materials, high density polyethylene (HDPE) and polypropylene (PP), 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 1 month through monthly price revisions for regular customers. Further as the company imports part of its raw material requirement, it is exposed to foreign exchange fluctuation risk. In last couple of years the company is meeting majority of raw material requirement indigenously. The share of imports in total purchases has reduced from 70% to 30% over the last few years.
 
* Average Financial Risk
Net worth and gearing were at Rs 87 crore and 0.5 time, respectively, as on March 31, 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 around 4.3 times in fiscal 2020, as against 3.9 times in fiscal 2019.
Liquidity Adequate

TPL is expected to have internal accruals of about Rs 7-13 crore per annum which is expected to be sufficient for repayment obligations of around Rs 1-6 crore per annum and capital  expenditure requirements of Rs 1-3 crore per annum. Additional working capital requirements are expected to be funded through internal accruals and incremental working capital borrowings. TPL had cash and equivalents of about Rs 4 crore as on March 31, 2020. Average bank limit utilization was 77% for the 12 months ended May 31, 2020.

Outlook: Stable

CRISIL believes TPL will continue to benefit from its established market position and synergies of operating in the same business as the parent, Time.
 
Rating Sensitivity factors
Upward factors:
* Upward rating action on Time's bank facilities and debt programmes
* Sustained improvement in operating performance, in terms of revenue, profitability with operating margin over 12% on sustainable basis
* Strengthening of financial risk profile through improvement in gearing and interest coverage ratio
 
Downward factors:
* Downward rating action on Time's bank facilities and debt programmes
* Decline in topline growth and operating profitability with operating margin below 8% on sustainable basis
* Weakening of debt protection metrics due to sizeable, debt-funded capital expenditure

About the Group

TPL was incorporated in 1992 as Tainwala Polycontainers Ltd. In July 2006, the original promoters exited the business, and Time acquired 75% stake and renamed the company as TPL.
 
TPL manufactures HDPE drums containers and pipes with capacity of 20-250 litres, primarily used in bulk packaging of specialty 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 4.26 3.90

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs.Cr) Rating assigned with outlook
NA Cash Credit^ NA NA NA 28.5 CRISIL A+/Stable
NA Cash Credit* NA NA NA 17.5 CRISIL A+/Stable
NA Long Term Loan NA NA 30-Apr-2022 8.45 CRISIL A+/Stable
NA Long Term Loan NA NA 1-May-2022 14.0 CRISIL A+/Stable
NA Proposed Long Term Bank Loan Facility** NA NA NA 2.75 CRISIL A+/Stable
NA Cash credit@ NA NA NA 10 CRISIL A+/Stable
NA Letter of Credit$ NA NA NA 5 CRISIL A1
NA Letter of Credit# NA NA NA 31.5 CRISIL A1
^Interchangeability from LC to CC Rs. 5.00 crs Total permissible Rs. 33.5 crs and Interchangeability from CC to LC Rs. 14.25 crs(50% of the sanctioned limit)
*Interchangeable from Cash Credit to Letter of Credit/SBLC fully
$Includes sub-limit of Bank Guarantee/SBLC amounting to Rs 5 crore
#Includes sub-limit of Bank Guarantee amounting to Rs 3 crore & SBLC Rs 12 crs
@Sub-limit - LC Rs. 2.50 crs
**Proposed fully interchangeable both ways. i.e FB to NFB and NFB to FB
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST    --    --    --  24-07-18  Withdrawal  01-08-17  CRISIL A1  CRISIL A1 
                    23-02-17  CRISIL A1   
Fund-based Bank Facilities  LT/ST  81.20  CRISIL A+/Stable      28-06-19  CRISIL A+/Stable  30-07-18  CRISIL A+/Stable  01-08-17  CRISIL A/Positive  CRISIL A/Stable 
                24-07-18  CRISIL A+/Stable  23-02-17  CRISIL A/Positive   
Non Fund-based Bank Facilities  LT/ST  36.50  CRISIL A1      28-06-19  CRISIL A1  30-07-18  CRISIL A1  01-08-17  CRISIL A1  CRISIL A1 
                24-07-18  CRISIL A1  23-02-17  CRISIL A1   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit^ 28.5 CRISIL A+/Stable Cash Credit^^ 28.5 CRISIL A+/Stable
Cash Credit* 17.5 CRISIL A+/Stable Cash Credit^ 17.5 CRISIL A+/Stable
Cash Credit@ 10 CRISIL A+/Stable Letter of Credit$ 5 CRISIL A1
Letter of Credit$ 5 CRISIL A1 Letter of Credit# 31.5 CRISIL A1
Letter of Credit# 31.5 CRISIL A1 Proposed Long Term Bank Loan Facility$$ 12.75 CRISIL A+/Stable
Long Term Loan 22.45 CRISIL A+/Stable Long Term Loan 22.45 CRISIL A+/Stable
Proposed Long Term Bank Loan Facility$$ 2.75 CRISIL A+/Stable -- 0 --
Total 117.7 -- Total 117.7 --
^Interchangeability from LC to CC Rs. 5.00 crs Total permissible Rs. 33.5 crs and Interchangeability from CC to LC Rs. 14.25 crs(50% of the sanctioned limit)
*Interchangeable from Cash Crdit to Letter of Credit/SBLC fully
$Includes sub-limit of Bank Guarantee/SBLC amounting to Rs 5 crore
#Includes sub-limit of Bank Guarantee amounting to Rs 3 crore & SBLC Rs 12 crs
@Sub-limit - LC Rs. 2.50 crs
^^Interchangeability from LC to CC Rs. 11.50 crs Total permissible Rs. 40 crs and Interchangeability from CC to LC Rs. 21.375 crs(75% of the sanctioned limit)
##Includes sub-limit of Bank Guarantee amounting to Rs 3 crore
$$ Proposed fully interchangeable both ways. i.e FB to NFB and NFB to FB
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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