Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+' ratings on the bank loan facilities and commercial paper of Time Technoplast Ltd (TTL; flagship company of the Time group).

 

These ratings continue to reflect the healthy business risk profile of TTL, its steady operating margin and strong financial risk profile. These strengths are partially offset by moderate ROCE profile and the exposure to intense competition in certain product segments.

 

Revenue grew by 18% in fiscal 2023, driven by higher volume and strong demand for value-added products. The growth in established products was a stable 13% led by core packaging products like drums, jerry cans, PE pipes and energy storage devices amongst others. Growth in value-added products was at 17% which include Intermediate Bulk Containers (IBC), composite cylinders and MOX films. Share of value-added products now stands at 23%.

 

Operating margin remained stable at 13.5% owing to the ability to pass on fluctuations in raw material prices to end-users. Higher contribution of value-added products is expected to improve margins going forward. Financial risk profile is expected to remain strong, marked by a robust networth, healthy debt protection metrics and adequate cash accrual.

 

TTL had announced the plan to divest its majority holding in the overseas business to a strategic partner/investor. TTL is in discussions regarding the same. Proceeds from the stake sale will be used to reduce debt and support part of the capital expenditure (capex) towards the core business and composite cylinders segment and to provide benefit to shareholders. CRISIL Ratings will continue to monitor these developments.

 

For first quarter of fiscal 2024, TTL reported revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) of Rs 1097 crore and Rs 147 crore, respectively, against Rs 944 crore and Rs 124 crore, respectively, for the corresponding period last fiscal.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of TTL and its subsidiaries and joint ventures (JVs), as all the entities, collectively referred to as the Time group, have significant managerial, operational, and financial linkages.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Healthy business risk profile: TTL will continue to benefit from its dominant market position, diversified product and client profile, better economies of scale and wide geographical reach. The product portfolio, spread across the polymer-application segment, has been gradually diversified using a consolidated technology platform comprising blow, extrusion, and injection moulding. The company thus caters to varied segments including industrial packaging (66% of revenue), infrastructure (7%), technical and lifestyle (4%). The growth in established products was a stable 13% led by core packaging products like drums, jerry cans, PE pipes and energy storage devices amongst others. Innovative and value-added products give the Time group a pricing advantage in a highly competitive market. Growth in value-added products was at 17% which includes Intermediate Bulk Containers (IBC), composite cylinders and MOX films. Share of value-added products now stands at 23%.

 

Going forward, the revenue is expected to grow by 11-13% CAGR owing to stable growth in core packaging business and growth in composite cylinder business. The core packaging business caters to FMCG, specialty chemicals, construction chemicals, paints and pharmaceuticals which have healthy demand prospects.

 

• Focus on composite cylinder business for growth going forward: TTL sees growth in composite cylinder (LPG and CNG) business to drive the growth going forward. Revenue contribution from this segment has reached Rs 346 crore in fiscal 2023 from Rs 241 crore in fiscal 2022.

 

The Time group supplies composite LPG cylinders to more than 40 countries and has approval to supply in more than 50 nations. In March 2022, the Company was awarded order of over 0.75 million Type-IV LPG Composite cylinders from Indian Oil Corporation Limited (IOCL), supplies for which are ongoing.

 

For CNG Composite Cylinders, during fiscal 2023, the Company achieved a revenue of Rs 154 Cr. During the year, the Company enhanced its annual CNG cascade manufacturing capacity by 300 cascades (18,000 cylinders) under Phase I expansion. With this expansion, the total annual cascade manufacturing capacity has increased to 480 cascades (28,800 cylinders). Owing to the demand, company has undertaken Phase Il expansion plan for increasing the manufacturing capacity by 600 nos. cascades per annum. Subsequent to this expansion, which is expected to complete by end of fiscal 2024, total manufacturing capacity is expected to be 1080 nos cascades per annum.

 

• Steady operating profitability: Operating margin of the group has been steady at 13-14%, mainly aided by increased revenue from new, higher-margin products, despite competition in established products. Though profitability remains susceptible to volatility in crude prices, TTL is able to pass on any hike in raw material prices to its customers with a lag of 3-6 months. Operating margins are expected to increase gradually to ~14-15% as share of value-added products especially composite cylinder business increases.

 

• Strong financial risk profile: Networth was robust at Rs 2,325 crore as on March 31, 2023, aided by healthy cash accrual of over Rs 350 crore. Debt should also sustain at current levels with adequate cash accrual to cover the capex of Rs 180 crore per annum and debt obligation of Rs 80-100 crore. Interest coverage and gearing ratios were healthy at 5.5 times and 0.35 time, respectively, in fiscal 2023, as against 5.5 times and 0.39 time, respectively, in fiscal 2022. Key debt metrics are further likely to improve in fiscal 2024, supported by strong cash generation, moderate capex spend of Rs. 180-200 crore and keep debt metrics at healthy levels.

 

Weaknesses:

• Large investments in overseas geographies yet to contribute optimally limiting RoCE: The group has pursued a global growth strategy by entering several markets. While investments in overseas subsidiaries have constrained improvement in RoCE, performance of these entities has also picked up over the past few fiscals but remains below that of the domestic business. A cautious approach towards funding capex plans, limited debt addition and better operating performance should help the RoCE currently at 12-13% improve over the medium term to over 16-17%.

 

• Exposure to intense competition: The group faces intense competition, especially in the lifestyle, and battery segments. Several unorganised players have entered the market, given the low entry barriers and the simple injection moulding technology. In the battery segment, the subsidiary, NED Energy Ltd (NED) faces competition from other large players. Intense competition may continue to limit pricing power with suppliers and customers, thereby constraining profitability.

Liquidity: Strong

Overall cash accrual of over ~Rs 350 crore expected per fiscal in 2024 and 2025 should comfortably cover yearly debt repayment of over ~Rs 80 crore. Capex of Rs 160-200 crore, to be incurred over the medium term, will be funded internally. Cash and equivalents stood at Rs 82 crore as on September 30, 2023. The utilisation of fund-based bank limits of Rs 550 crore averaged 74% for the six months through September 2023.

Outlook: Stable

CRISIL Ratings believes the Time group will maintain a healthy business risk profile, backed by its established market position, diverse product portfolio, geographical diversity and the extensive experience of its promoters.

Rating Sensitivity factors

Upward factors:

• Substantial improvement in operating performance, in terms of revenue, profitability, and RoCE
• Sustenance of debt metrics at healthy levels, for instance interest coverage ratio (above 7 times),
• Increase in liquid surpluses

 

Downward factors:

• Sharp decline in revenue and profitability, leading to lower cash accrual to total debt
• Larger-than-expected, debt-funded capex or acquisition weakening the interest cover to less than 3-4 times on a sustained basis
• Moderation in liquidity position

About the Company

TTL, promoted by a group of qualified professionals, commenced operations in 1992, with its first facility at Daman. The company was listed on the Bombay Stock Exchange and the National Stock Exchange in 2007. It primarily manufactures polymer-based products that are used in the industrial packaging, infrastructure, automotive, lifestyle and other segments. The group has more than 30 manufacturing units globally (including 20 within India) and is present across 11 countries, covering South-East Asia, the Middle East and North Africa (MENA) and the USA. TTL’s subsidiaries and JVs have presence in the polymer-based and composite segments, except NED that manufactures storage batteries and Time Mauser, which makes steel drums.

Any other information: Not applicable

Annexure - Details of Instrument(s)

ISIN	Name of the instrument	Date of Allotment	Coupon Rate (%)	Maturity Date	Issue size (Rs. Crore)	Complexity Level	Rating assigned with outlook
NA	Commercial paper	NA	NA	7-365 days	75	Simple	CRISIL A1+
NA	Commercial paper	NA	NA	7-365 days	250	Simple	CRISIL A1+
NA	Cash credit**	NA	NA	NA	97.5	NA	CRISIL AA-/Stable
NA	Cash credit*	NA	NA	NA	32	NA	CRISIL AA-/Stable
NA	Cash credit***	NA	NA	NA	275	NA	CRISIL AA-/Stable
NA	Cash credit*	NA	NA	NA	30	NA	CRISIL AA-/Stable
NA	Cash credit##	NA	NA	NA	62.75	NA	CRISIL AA-/Stable
NA	Cash credit###	NA	NA	NA	125	NA	CRISIL AA-/Stable
NA	Letter of credit & bank guarantee**	NA	NA	NA	35	NA	CRISIL A1+
NA	Letter of credit & bank guarantee**	NA	NA	NA	45	NA	CRISIL A1+
NA	Letter of credit & bank guarantee@	NA	NA	NA	10.5	NA	CRISIL A1+
NA	Letter of credit & bank guarantee@@	NA	NA	NA	8	NA	CRISIL A1+
NA	Long-term loan	NA	NA	Jan-25	90	NA	CRISIL AA-/Stable
NA	Long-term loan	NA	NA	Mar-28	30	NA	CRISIL AA-/Stable
NA	Long-term loan	NA	NA	Sep-26	100	NA	CRISIL AA-/Stable
NA	Long-term loan	NA	NA	Jan-25	30	NA	CRISIL AA-/Stable
NA	Long-term loan	NA	NA	Apr-26	100	NA	CRISIL AA-/Stable
NA	Proposed Fund based and Non Fund Based bank limits	NA	NA	NA	184.25	NA	CRISIL AA-/Stable

*Fully interchangeable with Fund Based and Non Fund Based facilities

**Fully interchangeable with letter of credit

***Fully interchangeable with letter of credit and working capital demand loan

##Includes sublimit of Rs.15 crore for working capital demand loan

###Interchangeable with Letter of Credit/Bank Guarantee upto Rs 75 crore

@Includes sublimit of Rs.20 crore for bank guarantee

@@Includes sublimit of Rs.1 crore for bank guarantee