Press Release February 11, 2025 AKSHERA PAPERS Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	32.75	ACUITE BB | Stable | Reaffirmed	-
Bank Loan Ratings	5.25	-	ACUITE A4+ | Reaffirmed
Total Outstanding	38.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuité has reaffirmed its long-term rating of ‘ACUITE BB' (read as ACUITE double B) and its short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.38.00 crore bank facilities of Akshera Papers (AP). The outlook is 'Stable'. Rationale for rating: The rating reaffirmation takes into consideration subdued operating performance of the firm. The rating draws comfort from experienced management and long operational track record. However, the rating is constrained due to moderate financial risk profile and exposure to volatile in raw material prices in a highly fragmented and competitive industry.

About the Company

Established in 2001, Akshera Papers is an Erode (Tamil Nadu) based partnership firm, promoted by Mr. K. Ramesh Krishnan and Mrs. Uma Maheshwari. The firm is engaged in the manufacturing of Kraft paper in the range of 12 to 30 burst factor with grams per square meter (GSM) of 150 to 300 GSM. The firm has two manufacturing units with an installed capacity of 51,000 metric tons per annum. It also has a captive power plant with a capacity of 1.2 megawatts.

Unsupported Rating

­­Not Applicable

Analytical Approach

­­Acuité has considered the standalone business and financial risk profiles of the Akshera to arrive at this rating.

Key Rating Drivers

Strengths

Long track record of operations and experienced management Established in 2001, Akshera manufactures kraft paper, which is primarily used in the production of corrugated boxes and paperboards. The promoters of the company, Mr. K. Ramesh Krishnan and Mrs. Uma Maheshwari, have more than 2 decades of experience in the paper industry. The extensive experience of the management and long-standing relationship with its customers ensuring repeated orders. Acuité believes that Akshera continues to enjoy the benefit of the promoters' longstanding presence in the industry and improving its business risk profile over the medium term. Moderate working capital operations Working capital operations of the firm are moderate marked by its GCA of 134 days as on March 31, 2024 against 109 days as on March 31, 2023. Debtor days stood at 59 days as on March 31, 2024 against 41 days as on March 31, 2023. Creditor days are at 65 days as on March 31, 2024 against 71 days as on March 31, 2023. The inventory days stood at 68 days as on March 31, 2024 against 63 days as on March 31, 2023. The current ratio of the firm stood at 1.04 times as on March 31, 2024 against 0.96 times as on March 31, 2023. Bank limits utilization of the company were highly utilized at average of ~92.36 percent, over the past 6 months ending 31 January, 2025. Acuite believes that the working capital management of the firm will remain moderate intensive over the medium term.

Weaknesses

­­Subdued operating performance The firm reported revenue of Rs.77.40 Cr. in FY24 against Rs.89.61 Cr. of FY23. This decline in revenue is primarily on account of sluggish demand in the market coupled with decrease in orders. The firm has reported the revenue of Rs. 80.59 Cr. in 9MFY25. The firm has reported EBITDA margins of 8.11 percent in FY 24 as against 3.26 per cent in FY23. PAT margin stood at 2.55 percent in FY24 as against (2.12) percent in FY23. The losses in FY23 were on account of high raw material cost due to shortage of wastepaper in the region. Acuite believes, the firm's operating performance remain moderate in the medium term owing to steady revenue growth. Moderate financial Risk Profile AP's financial risk profile is moderate marked by moderate net worth, moderate gearing (debt-to equity), and coverage indicators. AP's net worth is moderate at Rs. 25.93 Cr. as on March 31, 2024 as against Rs.24.26 Cr. as on March 31, 2023. Gearing is moderate at 0.94 times as on March 31, 2024, as against 1.01 times as on March 31, 2023. TOL/TNW is moderate at 1.37 times as on March 31, 2024, against 1.60 times as on March 31, 2023. Interest coverage ratio and Debt service coverage ratio’s improved to 2.99 times and 1.74 times respectively as on March 31, 2024, from 1.31 times and 0.52 times of previous year. Acuite believes that the financial risk profile  of AP’s will remain moderate  over the medium term due to low net worth base. Exposure to volatile raw material prices and highly fragmented and competitive industry The operating margins of the firm remain susceptible to volatile in raw material (wastepaper) prices. Any adverse fluctuation in raw material prices can impact profitability. Kraft paper is used for tertiary packaging; thus, offtake depends on industrial production and other macroeconomic factors. The recycling industry is highly intense competition and the highly fragmented industrial paper industry constrains scalability, pricing power, and product differentiation.

Rating Sensitivities

­ ­Improvement in the scale of operations while improving profitability.  Stretch in working capital cycle, leading to an increase in working capital requirements Changes in financial risk profile

Liquidity Position

Adequate

Akshera Papers’ liquidity position is adequate with adequate net cash accruals to its meet maturing debt obligations. The firm generated cash accruals of Rs.4.34 Cr. for FY24, with debt repayment obligations of Rs.1.56 Cr. for the same period. Further to this the firm’s unencumbered cash and bank balances stood at Rs.0.05 Cr. as on March 31, 2024 as against Rs. 0.04 Cr. as on March 31, 2023. The firm’s working capital operations are moderate, marked by GCA of 134 days for FY24 as against 109 days in FY23. The current ratio of the firm stood at 1.04 times in FY24 as against 0.96 times in FY23. Bank limits utilization of the company were highly utilized at average of ~92.36 percent, over the past 6 months ending 31 January, 2025. Acuité believes that the firm’s liquidity position is likely to improve in the medium term with adequate cash accruals against its debt repayments over the medium term.

Outlook: Stable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	77.40	89.61
PAT	Rs. Cr.	1.97	(1.90)
PAT Margin	(%)	2.55	(2.12)
Total Debt/Tangible Net Worth	Times	0.94	1.01
PBDIT/Interest	Times	2.99	1.31

Status of non-cooperation with previous CRA (if applicable)

­­Not Applicable

Any other information

­None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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 • Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 14 Nov 2023 Letter of Credit Short Term 3.75 ACUITE A4+ (Reaffirmed) Bills Discounting Short Term 1.50 ACUITE A4+ (Reaffirmed) Term Loan Long Term 2.45 ACUITE BB | Stable (Downgraded from ACUITE BB+ | Stable) Proposed Long Term Bank Facility Long Term 11.45 ACUITE BB | Stable (Downgraded from ACUITE BB+ | Stable) Working Capital Term Loan Long Term 2.35 ACUITE BB | Stable (Downgraded from ACUITE BB+ | Stable) Cash Credit Long Term 16.50 ACUITE BB | Stable (Downgraded from ACUITE BB+ | Stable) 16 Aug 2022 Letter of Credit Short Term 4.75 ACUITE A4+ (Reaffirmed) Bills Discounting Short Term 1.50 ACUITE A4+ (Reaffirmed) Cash Credit Long Term 15.50 ACUITE BB+ | Stable (Reaffirmed) Term Loan Long Term 4.60 ACUITE BB+ | Stable (Reaffirmed) Proposed Long Term Bank Facility Long Term 7.65 ACUITE BB+ | Stable (Reaffirmed) Working Capital Term Loan Long Term 4.00 ACUITE BB+ | Stable (Reaffirmed)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Karur Vysya Bank Not avl. / Not appl. Bills Discounting Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 1.50 Simple ACUITE A4+ | Reaffirmed Karur Vysya Bank Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 16.50 Simple ACUITE BB | Stable | Reaffirmed Karur Vysya Bank Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 3.75 Simple ACUITE A4+ | Reaffirmed Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 11.81 Simple ACUITE BB | Stable | Reaffirmed Karur Vysya Bank Not avl. / Not appl. Stand By Line of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 0.40 Simple ACUITE BB | Stable | Reaffirmed Federal Bank Not avl. / Not appl. Term Loan 24 Dec 2024 Not avl. / Not appl. 27 Jun 2030 4.04 Simple ACUITE BB | Stable | Reaffirmed

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Contacts

Mohit Jain Senior Vice President - Rating Operations Patel Sneh Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.