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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 27.63 | ACUITE BBB | Downgraded & Withdrawn | - |
| Bank Loan Ratings | 263.00 | ACUITE BBB | Stable | Downgraded | Negative to Stable | - |
| Bank Loan Ratings | 15.00 | Not Applicable | Withdrawn | - |
| Bank Loan Ratings | 42.00 | - | ACUITE A3+ | Downgraded |
| Bank Loan Ratings | 18.93 | - | Not Applicable | Withdrawn |
| Total Outstanding | 305.00 | - | - |
| Total Withdrawn | 61.56 | - | - |
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Rating Rationale |
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Acuité has downgraded its long-term rating to 'ACUITE BBB' (read as ACUITE triple B) from 'ACUITE BBB+' (read as ACUITE triple B plus) and short term rating to 'ACUITE A3+' (read as ACUITE A three plus) from 'ACUITE A2' (read as ACUITE A two) on Rs.305.00 Cr. of bank facilities of Kanpur Plastipack Limited (KPL). The outlook is changed to 'Stable’ from ‘Negative’.
Acuite has downgraded and withdrawn its long-term rating to 'ACUITE BBB' (read as ACUITE triple B) from 'ACUITE BBB+' (read as ACUITE triple B plus) on Rs.27.63 Cr. bank facilities of Kanpur Plastipack Limited (KPL). Acuite has also withdrawn the long-term and short-term rating on the Rs.33.93 Cr. of bank facilities of Kanpur Plastipack Limited (KPL) without assigning any rating, as the instruments are proposed facilities and stand no outstanding obligations to the company. The rating is being withdrawn on account of the request received from the company, changes in the sanctioned limits, reduction in the term loans and proposed facilities which as per Acuité’s policy on withdrawal of ratings as applicable to the respective facility/instrument. Rationale for downgrade and revision in outlook The rating downgrade and revision in outlook takes into account of negative operating PBT reported during the last three consecutive quarters, primarily led by increase in interest and depreciation cost on account of delays in completion of CPP project. Further, the debt protection indicators remained below average with debt service coverage ratio (DSCR) under unity and high debt to EBITDA at 7.30 times as on March 31, 2024 and expected to remain below average for the current year. The FY2024 net cash accruals would tightly match the current year’s debt repayment obligations. However, the issue of Rs.20.50Cr warrants is expected to provide liquidity comfort.
Going forward, KPL’s ability in improving the operational efficiency and net cash accruals will be a key rating monitorable. |
| About the Company |
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Kanpur based Kanpur Plastipack Limited was incorporated in July 1971 as a private limited company by Mr. Mahesh Swarup Agarwal. The company is engaged in the manufacturing and exporting of flexible intermediate bulk containers (FIBCs), PP woven fabrics, and multifilament yarn (MFY). The company has an installed capacity of 30,300 MT, with an additional 5000 MT added in FY2022. Further, the company started manufacturing of CPP (Cast Polypropylene Film) in September 2023 with installed capacity of 6500 MT. KPL is listed on the BSE and NSE.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuite has considered the standalone financial and business risk profiles of KPL to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management and an established track record of operations
Incorporated in 1971, the company commenced its operations under the leadership of Mr. Mahesh Swarup Agarwal, and thus, the company boasts a long track record of operations spanning five decades in the packaging industry. KPL started manufacturing high-density polyethylene woven fabric, sacks, and plastic. Currently, the company is engaged in the manufacturing and exporting of flexible intermediate bulk containers (FIBCs), PP woven fabrics, and multifilament yarn (MFY). Further, KPL started manufacturing cast polypropylene from September 2023. The established presence of the company, along with experienced management, has helped KPPL maintain a long relationship with its customers, which has aided the company in maintaining healthy revenue. The key customers of the company include names like Pema Verpackung Gmbh, Saccheria Franceschetti among others, with no major concentration in revenues. Acuité believes KPL will continue to benefit from its long track record of operations, its strong presence in the export market, and the rich experience of its management over the medium term. Moderately intensive working capital management The working capital management of the company is moderately intensive in nature, as marked by gross current asset days, which stood at 137 days in FY2024 as compared to 111 days in FY2023. The increase in GCA days is on account of a moderate increase in debtor and inventory days. The debtors of the company stood at 54 days in FY2024 as against 37 days in FY2023. The increase in debtors is due to the introduction of CPP product and major sales booked in March 2024. However, 90 percent of debtors aging is less than 30 days. The inventory days stood at 77 days in FY2024 as against 67 days in FY2023. Working capital requirements are moderately supported by its creditors, with creditor days in range of 15–25 days for the last three years ended in FY2024. The bank limit utilisation for fund-based limits of the company stood at moderate at 69.66 percent and non-fund-based limits stood low at 15.15 percent for the last 12 months ended July 2024. Acuité believes that the working capital management of the company will improve to be efficient over the medium term owing to the stabilisation of manufacturing of CPP product. |
| Weaknesses |
| Moderation in scale of operations
The company achieved a turnover of Rs. 496.37 Cr. in FY2024, Rs. 476.90 Cr. in FY2023 as compared to Rs. 626.77 Cr. in FY2022. The company has shown a sharp decline in the top-line and bottom-line of business due to the geopolitical tensions, increased competition within the country, absence of fabric sales in Brazil and volatility in the global market. However, KPL has expanded its geographical locations to the Japanese market, which will further open new avenues going forward. The company has reported turnover of Rs.132.21 Cr. in Q1FY2025. The operating margins of the company stood at 5.88 percent in FY2024 and 5.19 percent in FY2023 as against 9.71 percent in FY2022. The operating margins are affected due to lower realisations in sales of fabric, an increase in freight charges due to the Red Sea crisis and an increase in domestic competition. Further, in-spite of the establishment of a new vertical i.e CPP product, performance in the CPP division was sluggish, leading to lower than expected realisation and underutilisation of the capacity. The company reported an operating margin of 2.28 percent for Q1FY2025. Acuite believes that the scale of operations of the company will improve over the medium term owing to stabilisation of CPP product and ease of global markets. Further, KPL has entered into two agreements for the purchase of an additional solar power total of 4MW which will aid in the improvement in the operating margins in FY2025. Going forward, the ability of the company to improve its operating margins is key monitorable. Below -average financail risk profile. The financial risk profile of the company is below-average marked by below unity DSCR, deteriorated Debt/EBITDA and weak debt protection metrics. The Debt/EBITDA of the company stood at 7.30 times as on March 31, 2024 as against 6.33 times as on March 31, 2023. The debt protection metrics of the company are average, marked by the Interest Coverage Ratio (ICR) at 1.83 times as on March 31, 2024 as against 2.14 times as on March 31, 2023. Further, the Debt Service Coverage Ratio (DSCR) stood below unity with 0.92 times as on March 31, 2024. However, the infusion of capital in the form of warrants in FY2025 will aid in the improvement of cash flows. The tangible net worth of the company stood at Rs.179.91 Cr. as on March 31, 2024 from Rs.180.51 Cr. as on March 31, 2023. A decrease in the net worth is due to the issue of a final dividend of Rs.1.07 Cr. in FY2024. Gearing of the company moderately deteriorated and stood at 1.25 times as on March 31, 2024 as compared to 0.92 times as on March 31, 2023. The total debt stood at Rs.224.11 Cr. as on March 31, 2024 consists of long term debt of Rs.84.49 Cr, Short term debt of Rs.118.63 Cr, and CPLTD of Rs.20.99 Cr. Acuité believes that going forward, the financial risk profile of the group will improve on account of improving cash accruals, the issue of warrants and the absence of debt funded CAPEX planned over the medium term. Susceptibility of profitability margins to fluctuations in raw material prices and foreign exchange fluctuations The basic raw materials required by KPL are plastic granules, which are crude oil derivatives. The prices of the commodities are subject to volatility in line with those of global crude oil prices. Furthermore, KPL exports 70%-75% to Europe, the United States, and some Asian countries while importing only 5% of raw materials. Thus, it is exposed to adverse fluctuations in foreign currency exchange rates. However, KPL generally enters into forward contracts, which partially mitigate the forex risk. |
| Rating Sensitivities |
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| Liquidity Position: Stretched |
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The company’s liquidity position is stretched, marked by insufficient net cash accruals against its debt obligations. The NCA stood at Rs.13.20 Cr. as on March 31, 2024 as against long term debt repayment of Rs.15.94 Cr. over the same period. However, there are no delays in the repayment of the debt obligations by the company. Further, the net cash accruals are estimated to remain at a range of Rs.14.53 – 23.82 Cr in FY2025 and FY2026 as against CPLTD in the range of Rs.20.00-21.00 Cr. for the same period. With the issuance of warrants and sale of land of subsidiary company, KPL will be able to repay the debt obligations over the medium term.
The current ratio of the company is moderate at 1.03 times as on March 31,2024. Furthermore, unencumbered cash and bank balances stood at Rs.1.42 Cr. and liquid investments at Rs.9.60 Cr. as on March 31,2024. Acuité believes that going forward the group will maintain an adequate liquidity position due to accruals and expected cashflows. |
| Outlook: Stable |
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Acuité has revised the outlook on KPL to 'Stable' based experienced management and an established track record of operations and moderately intensive working capital management. The outlook may be revised to 'Positive' in case of significant improvement in scale of operations and financial risk profile of the company. Conversely, the outlook may be revised to 'Negative' in case of further deterioration in operating performances or any significant stretch in its working capital management leading to deterioration of its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 496.37 | 476.90 |
| PAT | Rs. Cr. | 0.36 | 4.14 |
| PAT Margin | (%) | 0.07 | 0.87 |
| Total Debt/Tangible Net Worth | Times | 1.25 | 0.92 |
| PBDIT/Interest | Times | 1.83 | 2.14 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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