Long track record of operation and experienced management
The group has a long execution track record of 10 years in the plastic industry and is one of the leaders in the manufacturing of tarpaulin in the eastern part of the country. The promoter of the group Mr. Krishna Chandra Mondal, Mr. Mainak Mondal, Mr Bimal Paul and Mr Kamal Paul possesses more than a decade of experience in the plastic and polymers industry. The group has a long presence in this sector and has established a healthy relationship with customers for more than a decade.

Moderate scale of operation coupled with healthy profitability margin
The revenue of the group stood moderate at Rs.113.43 crore in FY2021 as compared to Rs.91.49 crore in the previous year. This improvement in revenue of the group is mainly on account of increase in volume sales during the period and increase in average realization on account of high demand for LDPE tarpaulin during the period. Currently the group has achieved the revenue of Rs.149.39 crore till 31st January in FY’22 (Prov.). This significant increase in revenue during 10MFY2022 is mainly on account of continuous increase in average realization per unit which led to increase the overall top-line of the group despite of decrease in volume sales as compared to FY2021. Acuité believes that the revenue of the group will increase on account of increase in the steady demand in the market and well established presence in the eastern part of the country.

The operating margin of the group stood healthy at 13.44 per cent in FY2021 as compared to 13.87 per cent in the previous year. However, this slight decline in operating profitability margin is on account of increase in raw material price during the period. Further, the operating margin of the group is expected to maintain at same level during FY2022 backed by increase in overall realization during the same period. The net profitability margin of the company also stood healthy at 6.81 per cent in FY2021 as compared to 5.98 per cent in the previous year. Acuité believes that the profitability margin of the group will remain healthy on account of steady demand for LDPE tarpaulin, HDPR tarpaulin, LDPE hose pipe in the domestic market.

Healthy financial risk profile
The financial risk profile of the group is marked by moderate net worth, low gearing and strong debt protection metrics. The net worth of the group stood moderate at Rs.35.90 crore in FY 2021 as compared to Rs 28.19 crore in FY2020. Acuité has considered Rs.2.27 crore of unsecured loan as quasi capital as the management undertakes that the same amount is subordinated with bank debt. The networth of the group is expected to increase further in FY2022 (Prov.).The gearing of the group stood low at 0.73 times as on March 31, 2021 when compared to 0.71times as on March 31, 2020. The gearing of the group is expected to improve and maintain at the lower side during FY2022 (Prov.).Interest coverage ratio (ICR) is healthy and stood 7.84 times in FY2021 as against 5.22 times in FY 2020. The debt service coverage ratio (DSCR) of the group also stood healthy at 2.76 times in FY2021 as compared to 2.37 times in the previous year. The overall coverage indicators is alos expected to remain at the same level during FY2022 (Prov.). The net cash accruals to total debt (NCA/TD) stood comfortable at 0.43 times in FY2021 as compared to 0.45 times in the previous year. Going forward, Acuite believes the financial risk profile of the group will remain healthy on account steady cash accruals and no major capex plan in the near term.

Working capital intensive nature of operation
The working capital management of the company is marked by high GCA days of 179 days in FY2021 as compared to 154 days in FY2020. This high GCA day is mainly on account of the high inventory days of the group of 103 days in FY2021 as compared to 110 days in the previous year. The collection period of the company also stood moderate at 59 days in FY2021 as compared to 36 days in the previous year. Acuité believes that the ability of the company to manage its working capital operations efficiently will remain a key rating sensitivity.

Competitive and fragmented nature of operations-
The group is operating in competitive and fragmented nature of industry. There are several players engaged in the Plastic Packaging industry in organized and unorganized sector. Hence, the group might face pricing pressure from other competitors. Therefore, having an established brand name is of utmost importance in this industry along with continuous addition of value added products in the product offerings.