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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 178.82 | ACUITE A- | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 3.18 | Not Applicable | Withdrawn | - |
| Bank Loan Ratings | 68.00 | - | ACUITE A2+ | Reaffirmed & Withdrawn |
| Total Outstanding | 0.00 | - | - |
| Total Withdrawn | 250.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed and withdrawn the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) and the short-term rating of ‘ACUITE A2+’ (read as ACUITE A two plus) on the Rs. 246.82 Cr. bank facilities of Forace Polymers Private Limited. Further Acuité has withdrawn the proposed long-term rating on the Rs. 1.68 crore bank facilities of Forace Polymers Private Limited without assigning any rating as it is a proposed facility. The rating withdrawal is in accordance with Acuité's policy on withdrawal of rating as applicable to the respective facility / instrument. The rating has been withdrawn on account of the request received from the company along with No Objection Certificate received from the lender.
Further Acuité has withdrawn the long-term rating on the Rs. 1.50 crore bank facilities of Forace Polymers Private Limited without assigning any rating as the instrument is fully repaid. The rating withdrawal is in accordance with Acuité's policy on withdrawal of rating as applicable to the respective facility / instrument. The rating has been withdrawn on account of the request received from the company along with No Due Certificate received from the lender. Rationale for reaffirmation The recommendation factors the decline in the company’s scale of operations, healthy financial risk profile, adequate liquidity profile of the company. However, the rating is constraint with intensive working capital operations and profitability being susceptible to raw material prices. |
| About the Company |
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Forace Polymers Private Limited (FPPL) was established in the year 1980 by the late Mr S. K. Garg. Since 2001, FPPL is being managed by Mr Vikas Garg, son of the late Mr S. K. Garg. The company is engaged in the manufacturing of Phenolic Resins having its applicability in many industries including foundry, refractory, abrasives, friction and rubber. The current installed capacity of FPPL stands at 90000 MTPA and the company further plans to expand it to around 120000 MTPA. FPPL has a manufacturing plant in Haridwar (Uttarakhand) India, with its sales office-cum-service centres spread PAN-India, positioned in major cities including Coimbatore, Jamshedpur, Mumbai, etc. FPPL also has an overseas subsidiary; FP Speciality (PTY)Ltd. with its registered office in Gauteng, South Africa.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered a standalone financial and business risk profile of Forace Polymers Private Limited (FPPL).
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| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations
FPPL was established in the year 1980 by the late Mr S. K. Garg. Since 2001, FPPL is being managed by Mr. Vikas Garg, son of the late Mr. S. K. Garg. The current promoters have more than two decades of experience in the resins industry. The extensive experience has helped the management to build strong reputation and brand in the industry over the years. Moreover, their experience has also helped in building healthy relations with reputed customers such as, Mahindra & Mahindra, Jindal Saw Ltd. among others. Further, for procurement of raw materials the company has association with large companies like Deepak Phenolics Ltd etc. Acuité believes that the company will continue to benefit from the extensive experience of the management in establishing key relations with their suppliers and customers. Financial Risk Profile FPPL’s financial risk profile is healthy marked by healthy net worth, moderate gearing, and healthy debt protection metrics. The net worth of the company stood at Rs. 176.10 Cr. as on March 31, 2024 (Prov.) against Rs. 157.59 Cr. as on March 31, 2023. The company has issued non-cumulative preference shares to the promoters of Rs.103.59 Cr. for a period of 20 years and are redeemable in 2036. The gearing of the company improved and stood at 1.13 times on March 31, 2024 (Prov.) as against 1.26 times as on March 31, 2023. The debt protection metrices (i.e. ICR & DSCR) are expected to deteriorate marginally and remain at 4.11 times and 1.99 times for FY2024 (Prov.) against 4.74 times and 2.49 times for FY2023 respectively. |
| Weaknesses |
| Intensive Working Capital Cycle
The company’s operations are working capital intensive marked by Gross Current Asset (GCA) days of 187 days in FY2024 (Prov.) against 176 days in FY2023. The elongation of GCA days is primarily contributed by elongated debtor days of 124 days in FY2024 (Prov.) against 115 days in FY2023. The company directly caters to multiple industries including foundry, refractory, abrasive, rubber etc. The payment terms of every industry being different company has to extend longer credit period resulting in elongation of collections which further leads to increase in creditor days from 71 days in FY 23 to 79 days in FY 24 (Prov.). The company has been maintaining average inventory days of 59 days in FY2024 (Prov.) against 57 days in FY 23. Profitability susceptible to fluctuations in prices of raw material The major raw material for the company is the base chemical derived from natural gas and crude oil. The company’s performance remains vulnerable to cyclicality in the oil industry as prices for the industry are highly volatile and may affect the market demands. Moreover, the prices of the same are fluctuating in nature, therefore the operating performance of the company remains susceptible to raw material price fluctuation. However, company has been able to maintain stable operating margins over the years which shows that company can pass on the price fluctuations to its customers. |
| Rating Sensitivities |
| Not Applicable |
| Liquidity Position |
| Adequate |
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The liquidity profile of the company is adequate as net cash accruals generated is Rs. 35.71 Cr in FY 2024 (Prov.), against current maturities of long- term debt of Rs. 11.20 Cr. over the same period. The current ratio of the company is 1.26 times for FY 2024 (Prov.). The cash & bank balance of the company is Rs. 5.73 Cr. as on 31st March 2024 (Prov.). Acuite believes the liquidity is expected to remain adequate on the back of cushion between net cash accruals and debt repayment obligations with steady accruals over the medium term.
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| Outlook |
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Not Applicable
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 684.12 | 780.33 |
| PAT | Rs. Cr. | 18.46 | 25.06 |
| PAT Margin | (%) | 2.70 | 3.21 |
| Total Debt/Tangible Net Worth | Times | 1.13 | 1.26 |
| PBDIT/Interest | Times | 4.11 | 4.74 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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None
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| 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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