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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.06 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 47.00 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 54.06 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE BBB-’ (read as ACUITE triple Bminus) and the short term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.54.06 crore bank facilities of Akshat Plastics Private Limited (APPL). The outlook is 'Stable'. Rationale for the rating Rating reaffirmation takes into account the long track record of operations, improvement in scale of operations, moderately working capital intensive nature of operations and fluctuating margins. In the current year company has experienced dip in profitability as compared to FY 2021 however in terms of profitability FY 2021 was an exceptional year and hence the decline in margin was normal for the business. Company has been able to maintain the moderate financial risk profile despite increase in debt and decline in profitability. Going forward movement of profitability margins and the scale of operation will remain key rating sensitivities. |
| About the Company |
| Established as a proprietorship entity by Mr. Brij Mohan Gupta in 1993 and later converted into a private limited company in 2003, Akshat Plastics Private Limited (APPL) is engaged in the trading of various polymers and plastic raw materials viz. PVC resins, ethylene-vinyl acetate (EVA), foam, PVC paste resins, plasticizers, PVC chemicals, plastic granules, etc., which find application in various sectors viz. PVC pipes, textiles, chemicals, leather products, etc. The products dealt by the company are sold entirely in the domestic market across various cities in Delhi, Haryana and Gujarat. On the other hand, the said products are majorly imported from Korea, Taiwan and Thailand. The company operates through its corporate office and six warehousing facilities located in New Delhi, India. |
| Analytical Approach |
| Acuité has considered the standalone business & financial risk profiles of APPL to arrive at the ratings. |
Key Rating Drivers
| Strengths |
| Long track record of operations and highly experienced promoters APPL possesses a long track record of over three decades of operations in the trading of polymers and plastic raw materials. The overall operations of the company are looked after by the promoters – Mr. Brij Mohan Gupta along with his wife – Mrs. Rekha Gupta, who possess a total experience of over three decades in the trading of polymers and plastic raw materials. Over the years of its operations, the company has established long term relationships with its various customers, suppliers and other stakeholders. Moreover, the long experience of the promoters has helped the company to establish a strong market position as well as scale up its operations. Moderately working capital intensive nature of operations Company’s operations are moderately working capital intensive in nature with moderately high GCA days of 93 days in FY 2022 as against 102 days in FY 2021, since the majority of funds of over 60-75 days are blocked in inventory. Inventory holding period has moderated from 90 days in FY 2021 to 74 days in FY 2022. Debtor period has remained comfortable and have marginally declined from 3 days in FY 2021 to 2 days in FY 2022. Creditor days have also moderated from 19 days in FY 2021 to 9 days in FY 2022. Since company’s majority share of purchases is through imports company uses sight and usance LCs of 90 days to procure the materials. Average bank limit utilization in CC limit of Rs. 5.50 Cr from State Bank of India has remained comfortable at 19.09% for 19 months’ period between April 2021 to October 2022. Moderate financial risk profile The financial risk profile of the company is moderate marked by relatively small tangible net-worth base and comfortable capital structure & debt coverage indicators. The tangible net-worth base stood relatively small at Rs. 28.11 crore as on March 31, 2022 as against Rs. 20.68 crore as on March 31, 2021. Total debt stood at Rs. 21.57 Cr in FY 2022 comprising of Rs. 7.75 Cr of unsecured loans and Rs. 13.82 Cr of working capital borrowing. Consequently, gearing moderated from 0.49 times in FY 2021 to 0.77 times in FY 2022. Interest Coverage Ratio although moderated marginally but stood strong at 9.02 times in FY 2022 as against 9.93 times in FY 2021. NCA/TD moderated from 0.99 times in FY 2021 to 0.35 times in FY 2022. TOL/TNW and Debt-Ebitda moderated from 0.94 times and 0.68 times in FY 2021 respectively to 1.13 times and 1.90 times respectively in FY 2022. Moderation in debt protection metrics is a result of moderation of profitability from exceptional levels achieved in FY 2021 and increase in debt in FY 2022. |
| Weaknesses |
| Susceptibility of profit margins to volatility in raw material prices The profit margins of APPL are highly susceptible to the volatility in the prices of polymers and plastic raw materials, since the same are directly linked to the crude oil prices which witness high fluctuations depending upon the actions of the major crude oil players like OPEC. Moreover, the domestic demand for the polymers and plastic raw materials is directly linked to the industrial activities in various sectors viz. PVC pipes, textiles, chemicals, leather products, etc. Hence, any slowdown in the said industrial activities may have a bearing on the demand, thereby having an impact on the revenues and in turn on the profit margins & profitability of the company. Foreign exchange fluctuation risk APPL is highly reliant on the imports from Korea, Taiwan, Thailand, etc. for procuring the products, wherein the imports comprised 83.88% of the total purchases in FY22 as against 81.27% in FY21. Moreover, the operations of the company do not serve as a natural hedge, since the company does not cater to the exports market. This makes the company being highly exposed to the foreign exchange fluctuation risk. However, the company undertakes hedging by way of entering into the forward contracts with the bank. The company posted a foreign exchange gain worth Rs.1.54 crore in FY22 as against Rs.1.43 crore in FY21. Presence in highly competitive & fragmented plastics & polymers trading industry APPL is present in a highly competitive & fragmented plastics & polymers trading industry, wherein a number of small-sized & medium-sized players are engaged in the trading of polymers and plastic raw materials. Moreover, the presence of reputed domestic customers and reputed global suppliers leads to a limited bargaining power by the company with its customers & suppliers, which is evidently reflected from the low profit margins till FY20. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
| Company has adequate liquidity position. In FY 2022 company generated net cash accruals of Rs. 7.51 Cr in FY 2022 against nil maturing debt obligations. Average bank limit utilization in CC limit of Rs. 5.50 Cr from State Bank of India has remained comfortable at 19.09% for 19 months’ period between April 2021 to October 2022. Company has unencumbered cash and bank position of Rs. 0.09 Cr in FY 2022. |
| Outlook: Stable |
| Acuité believes that APPL will continue to maintain a ‘Stable’ outlook over the medium term owing to the established track record of operations coupled with highly experienced promoters in the industry. The outlook may be revised to ‘Positive’ in case of an expected increase in the scale of operations while maintaining the profitability and efficiently managing the working capital cycle. Conversely, the outlook may be revised to ‘Negative’ in case of an expected deterioration in the overall financial risk profile and the liquidity position. |
| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 201.80 | 124.21 |
| PAT | Rs. Cr. | 7.43 | 9.96 |
| PAT Margin | (%) | 3.68 | 8.02 |
| Total Debt/Tangible Net Worth | Times | 0.77 | 0.49 |
| PBDIT/Interest | Times | 9.02 | 9.93 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| 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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