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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 57.50 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 32.50 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding | 90.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short-term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.90.00 Cr bank facilities of Eastern Polycraft Industries Limited (EPIL). The outlook remains ‘Stable’.
Rationale for rating reaffirmation The rating reaffirmation considers the steady scale of operations in FY2023 coupled with comfortable margins. The rating also factors in the experienced management and the reputed clientele base of the company. These strengths are, however, offset by the moderate financial risk profile of EPIL, the working capital intensive nature of operations and the competitive industry it operates in. |
| About the Company |
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Incorporated in 1997, Eastern Polycraft Industries Limited (EPIL) is engaged in the manufacturing of plastic moulded container products through injection & blow moulding which are primarily used in the lubricants, edible oil, paint and fertilizer industry. The company is managed by Mr. K. C. Padia, Mr. Vijay Padia and Mr. Ajay Padia. EPIL has four units, two in West Bengal (Bhadreswar and Uluberia) and two in Rajasthan (Bhiwadi).
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has taken a standalone view of the business and financial risk profile of EPIL to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management
EPIL is managed by Mr. K. C. Padia, Mr. Vijay Padia and Mr. Ajay Padia, having an experience of more than four decades in the industry. The company has a long track record of operations of over two decades and has established healthy relationships with the reputed PSUs and private players, Indian Oil Corporation Limited (IOCL) and Bharat Petroleum Corporation Limited (BPCL), Haldia Petrochemicals Limited (HPCL), Asian Paints Ltd to name a few. Acuité believes the healthy clientele relationships and the experienced management will continue to benefit the company going forward. Increase in the operating income The scale of operations of the company increased to Rs.216.39 Cr in FY2023 from Rs.187.59 Cr in FY2022 on account of operational efficiencies owing to enhancing the installed capacity in the Unit-IV in Rajasthan to 3000 MTPA from 1950 MTPA. The revenue levels are further supported by the regular order flow from the PSU along with the regular clientele and the timely execution of the same. The company has achieved revenues of Rs.130 Cr till November, 2023. Further, EPIL has an order book position to the tune of Rs.191.32 Cr which will be executed in the next 12-18 months which provides moderate revenue visibility over the medium term. The company is adding a new plant at Kharagpur, West Bengal which is expected to further augment the scale of operations. However, the operating margin dipped to 7.78 per cent in FY2023 from 8.97 per cent in FY2022. The decline is on account of rise in the operating expenses, mainly loading charges, vehicle running expenses, freight inward and labour charges. The PAT margin, however, stood at 1.38 per cent in FY2023 as against 1.18 per cent in FY2022 due to reduction in the interest cost. Acuité believes that, going forward, the scale of operations will further improve over the medium term owing to the ongoing capex plans. |
| Weaknesses |
| Moderate financial risk profile
The company’s financial risk profile is marked by moderate capital structure and debt protection metrics. The tangible net worth of the company increased to Rs.34.33 Cr as on 31st March, 2023 from Rs.31.35 Cr as on 31st March, 2022. Gearing of the company improved to 1.65 times as on 31st March, 2023 from 2.56 times as on 31st March, 2022 due to reduction in the debt burden. However, it is expected to weaken slightly on the back of debt funded capex plans. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 3.07 times as on 31st March, 2023 as compared to 3.99 times as on 31st March, 2022. However, the debt protection metrics of the company is moderate as marked by Interest Coverage Ratio at 2.16 times and Debt Service coverage ratio at 1.18 times as on 31st March, 2023. The Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.14 times as on 31st March, 2023. Acuité believes that the gearing of the company will witness further moderations due to the ongoing capex plan. Exposure to competitive space EPIL operates in a competitive and fragmented industry with several players engaged in the moulded plastic products industry in organized and unorganized sector. Thus, the company faces pricing pressure from other competitors which limits its bargaining power. |
| Rating Sensitivities |
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| All Covenants |
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None
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| Liquidity Position |
| Adequate |
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The company’s adequate liquidity position is marked by net cash accruals Rs.7.95 Cr in FY2023 as against long term debt repayment of Rs.5.56 Cr over the same period. The current ratio stood moderate at 1.07 times as on 31st March, 2023. The cash and bank balances stood at Rs.0.17 Cr in FY2023. However, the working capital intensive nature of operations of the company is marked by moderate Gross Current Asset (GCA) days of 147 days in FY2023 as compared to 206 days in FY2022. The fund based limit remained utilised at 85 per cent over the seven months ended August, 2023.
Acuité believes that going forward the liquidity position of the company will remain adequate over the medium term due to the steady accruals. |
| Outlook: Stable |
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Acuité believes that the outlook on EPIL will remain 'Stable' over the medium term on account of the experience of the promoters, long track record of operations and the improving scale of operations. The outlook may be revised to 'Positive' in case the company witnesses a steady scale of operations while improving profitability margins and improvement in capital structure and debt protection metrices. Conversely, the outlook may be revised to 'Negative' in case of any further detreiration of margins or significant elongation in its working capital management leading to weakening of its financial risk profile.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 216.39 | 187.59 |
| PAT | Rs. Cr. | 2.99 | 2.22 |
| PAT Margin | (%) | 1.38 | 1.18 |
| Total Debt/Tangible Net Worth | Times | 1.65 | 2.56 |
| PBDIT/Interest | Times | 2.16 | 1.88 |
| 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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