| Technova Imaging Systems Private Limited | ||||||
| Rating outlook revised to ‘Stable’; ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank loan facilities of Technova Imaging Systems Pvt Ltd (TISPL; a part of the Technova group) to ‘Stable’ from ‘Negative’ while reaffirming the rating at ‘CRISIL BBB+’; the short-term rating has been reaffirmed at ‘CRISIL A2’. CRISIL Ratings has also partially withdrawn its ratings on the bank facilities of Rs 175 crore following a request from the group and on receipt of required documentation from the respective bankers. The rating action is in-line with CRISIL Ratings’ policy on withdrawal of bank loan ratings.
The outlook revision factors in the significant improvement in the group’s financial risk profile because of efficient working capital management and prudent balance sheet management resulting in sustenance of nil debt since last 12 months. This has been further strengthened owing to liquidity of over Rs 55 crore available as of December 30, 2021. Further, sustained recovery in the business, backed by re-imposition of anti-dumping duty (ADD) in 2020 on the imports of digital offset printing plates coupled with cost rationalisation measures being undertaken, has benefitted the group in improving its leadership position and recovering its pricing power.
A sharp rise in raw material prices, driven by global commodity prices, impacted the operating margin in the first half of the current fiscal; however, the margin is expected to improve over the near term, aided by the pricing flexibility enjoyed by the group. Moreover, the group continues to benefit from its diversified customer base established over the past three decades. The clientele includes major players in the printing and publishing industry and in the un-organised sector. A sequential recovery is being seen in the print media and printing consumables industry post the second wave of Covid-19 infections. The recovery in the end-user industry’s revenue is likely to have a cascading impact on the group’s topline. Besides strong market position in the digital plates segment, it has significant presence in segments such as chemicals, digital print and digital print media.
The ratings continue to reflect the Technova group’s strong market position in the domestic printing consumables industry, and its strong financial risk profile. These strengths are partially offset by exposure to volatility in raw material prices, fluctuations in foreign exchange (forex) rates and dependence on ADD amid threat from cheaper imports. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of TISPL and its associate company Lastra Niraj Pvt Ltd (LNPL) as they are in similar businesses and have strong operational and financial linkages. The two companies, collectively referred to as the Technova group, have common promoters and marketing network, and operate in the same line of business.
Please refer Annexure - List of entities consolidated for details of entities consolidated and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths Strong market position in the domestic printing consumables industry and varied product portfolio: The Technova group is the market leader in most of its product segments, with a significant market share in the offset printing plates division. The group’s diversified product portfolio includes digital offset plates, printing chemicals and digital print media (DPM). DPM operates in niche markets with lesser competition and healthy margin while digital imaging solution products have also demonstrated steady growth in the recent past. Besides offset plates - the main product - the group also trades equipment/consumables for graphic arts industry to offer one-stop solution.
Strong financial risk profile: Efficient working capital management has resulted in the company being debt free as on date. The group too has healthy capital structure and comfortable debt protection metrics in the absence of debt. Capital structure is expected to remain healthy in the absence of any large debt-funded capital expenditure (capex) plan. Networth has seen progressive improvement in the past few years and stood at Rs 326 crore in fiscal 2021. It is expected to cross Rs 400 crore in the medium term.
Weaknesses Susceptibility to volatility in raw material prices and forex rates: The group imports a substantial portion of its key raw materials to ensure its requirement is not impacted by their unavailability in the domestic market, and maintains adequate inventory, which exposes the group to volatility in raw material prices. Furthermore, the group has forex exposure, on account of its imports as well as exports of offset plates and chemicals. However, forex exposure on account imports has substantially reduced as company stopped availing buyers’ credit for its imported raw material. This has resulted into reduction in net exposure, which remain adequately hedged. Also, the group has been exposed to regulatory risk in the past in the form of non-extension of ADD, which was re-imposed from January 2020.
Dependence on ADD amid threat from cheaper imports: The group has benefited over the years from the ADD on printing plates. Government of India has taken measures for reducing cheaper imports from countries such as China, South Korea and to cut down foreign competition by imposing ADD on printing plates. However, non-extension of ADD, in the past, also attracted significant imports leading to high competition in the domestic market, which impacted the group’s operating performance in fiscals 2019 and 2020. The group’s operating performance would remain susceptible to non-extension of ADD in future. |
Liquidity: Adequate Liquidity is supported by expected annual cash accrual of more than Rs 50 crore over the medium term, and cash and bank balance of over Rs 55 crore as on December 30, 2021, as against nil debt. Fund-based limit remained largely unutilised over the 12 months through November 2021. CRISIL Ratings believes that the company’s cash accrual and cash and equivalents would more than suffice to meet its working capital as well as planned capex requirements over the medium term. |
Outlook: Stable CRISIL Ratings believes that the Technova group would continue to benefit from its market leadership position in the industry and the gradual improvement in its operating performance. Moreover, strong financial risk profile would also support the group’s credit risk profile. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Group TISPL was founded by Mr Pranav Parikh in 1971. The company is a prominent manufacturer of printing consumables. Its products include offset printing plates, printing chemicals, digital print media, and related items. LNPL manufactures analogue offset printing plates on job-work basis for TISPL. |
Key Financial Indicators- Consolidated
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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)
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Annexure - List of Entities Consolidated
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| 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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This Annexure has been updated on 30-Dec-2021 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity.
Criteria Details
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