Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 11.60 ACUITE BBB | Stable | Reaffirmed -
Bank Loan Ratings 6.40 - ACUITE A3+ | Reaffirmed
Total Outstanding Quantum (Rs. Cr) 18.00 - -
Total Withdrawn Quantum (Rs. Cr) 0.00 - -
 
Rating Rationale

­Acuité has reaffirmed its long-term rating at ‘ACUITE BBB’ (read as ACUITE triple B) and the short-term rating at ‘ACUITE A3+’ (read as ACUITE A three plus)  on the Rs.18.00 Cr bank facilities of Fibre Foils Limited (FFL). The outlook is ‘Stable.’

Rationale for reaffirmation
The rating reaffirmation continues to reflect the stable operating performance of the company, healthy financial risk profile and reputed clientele base. The revenue of Fibre Foils Limited (FFL) stood at Rs.100.49 crore in FY2022 as against Rs.73.91 crore in FY2021. The operating profit margin of the company remained stable at around 12.5%. However, the rating remains constrained on account of the working capital intensive nature of operations.

About the Company

­Incorporated in 1968, Fibre Foils Limited (FFL) is engaged in manufacturing of consumer and industrial packaging products. The day to day operations is managed by its chairman, Mr. Diwakar S. Shetty who has an experience of over four decades of packaging industry along with Mrs. Yashoda D. Shetty, Mr. Daksharaj Shetty, Mr. Mohan Menon, Mr. Harsh Vardhan Jajoo and Mr. Narendra M. who has experience of over two decades in the packaging industry. The Company has 3 manufacturing units located at Khopoli (Maharashtra), Bhiwadi (Rajasthan) and Bengaluru (Karnataka). Khopoli unit is owned by the company and other 2 are on a rental basis
 
Analytical Approach

­Acuité has taken a standalone view of the business and financial risk profile of FFL to arrive at the rating.
 

Key Rating Drivers

Strengths

­Extensive track record and experienced management
Incorporated in 1968, the company has a long track record of operations in this industry. The company is led by its chairman Mr. Diwakar S. Shetty who has an experience of over four decades of packaging industry along with Mrs. Yashoda D. Shetty, Mr. Daksharaj Shetty, Mr. Mohan Menon, Mr. Harsh Vardhan Jajoo and Mr. Narendra M. who has experience of over two decades in the packaging industry. The long track record of the management has helped the company develop healthy relations with suppliers and reputed customers such as ITC Limited, Hindalco Limited, TATA Steels, J. K. Paper, Glaxo Smithkline Consumer, Diageo India, Allied Blenders and Dist., Wockhart Life Science, Glenmark Pharmaceuticals, Novarties India Limited, Zydus Nycomed, TVS Motor Company Limited, Titan Company Limited, Café Coffee Day Limited, Unibic Foods Limited, etc.

Acuité believes that the experience of the management in the industry and established relationships with customers is likely to favourably impact the business risk profile of the company over the near to medium term.

Diversified product range and diversified industry presence along with reputed clientele
Company has diversified product range under the segment of consumer and industrial packaging products. It finds its usage in various industries like food, pharmaceuticals, chemicals, commodities, liquor, pesticides, agriculture to name a few. It has reputed clientele which includes ITC Limited, Hindalco Limited, TATA Steels, Garware Polyester Limited, J. K. Paper, Glaxo Smithkline Consumer, Naturell India Private Limited, Diageo India, Pernod Ricard India, Allied Blenders and Dist., Agro Tech Foods Limited, USV Limited, Wockhart Life Science, Glenmark Pharmaceuticals, Novarties India Limited, UPL Limited, Gharda Chemicals Limited, Zydus Nycomed, TVS Motor Company Limited, Titan Company Limited, Café Coffee Day Limited, Unibic Foods Limited, etc.

Healthy Financial Risk Profile
The financial risk profile of FFL is healthy marked by low gearing, modest tangible net worth and comfortable debt protection metrics. The company has followed a conservative financial policy in the past as reflected by its peak gearing of 0.40 times as on March 31, 2022. The company’sleverage policy is supported by the healthy tangible net-worth levels, reflected through its peak gearing and Total Outside Liabilities to Tangible Net-worth (TOL/TNW), which stood at 0.91 times as on March 31, 2022 against 0.83 times as on March 31, 2021. The tangible net worth of the company stood modest at Rs.33.49 crore as on March 31, 2022 against Rs.28.26 crore as on March 31, 2021.

The total debt of Rs.13.45 crore as on March 31, 2022 is the working capital borrowing. In the current financial year 2023, the company has availed a vehicle loan of Rs. 0.42 crore. The debt protection metrics including, interest coverage ratio stood comfortable at 12.94 times ; while DSCR stood at 4.40 times in FY2022.

Acuité believes that the financial risk profile of the company is expected to remain healthy on account of modest net worth backed by healthy cash accruals vis- à-vis moderate debt repayment obligations and comfortable debt protection metrics.

Weaknesses

­Working Capital Intensive Nature of Operations
The operations of FFL are of working capital intensive nature marked by Gross Current Asset days (GCA) of 130 days in FY2022 against 160 days in FY2021. The inventory days stood at 52 days in FY2022 against 74 days in FY2021. The company sources raw material from secondary suppliers and stores inventory of 45-60 days on an average. The debtors’ days stood at 58 days in FY2022 against 67 days in FY2021. The creditors’ days stood at 87 days in FY2022 against 86 days in FY2021. The working capital limits remains utilized at 64.92 percent for last 7 months ended October 2022.

Acuité believes that FFL’s working capital intensive operations would be mitigated by the availability of adequate liquidity over the medium term.

Highly competitive and fragmented industry
The packaging industry is highly competitive and fragmented marked by the presence of many organized and unorganized players in this industry, thus putting pressure on the profitability margins of the company. However, this risk is partially mitigated by company’s experienced management and long-standing relationships with its reputed clientele.

Rating Sensitivities

  • ­Growth in revenue with sustainability of the profitability margins.

  • Any deterioration of its financial risk profile and liquidity position.

  • Any elongation of the working capital cycle leading to deterioration in debt protection metrics.
 
Material covenants
­None
 
Liquidity Position
Adequate

­The liquidity position of the company is adequate marked by adequate net cash accruals against no maturing debt obligations. The company generated cash accruals of Rs.8.75 crore in FY2022. Going ahead in FY2023 to FY2024 the cash accruals are expected to be in the range of Rs.13.81 crore -Rs.15.50 crore against no significant maturing debt obligations. However, working capital limits remains utilized at 64.92 percent for last 7 months ended October 2022. The unencumbered cash and bank balances stood at Rs.6.39 crore as on March 31, 2022 with a current ratio of 1.59 times.
 
Outlook: Stable

­Acuité believes that FFL will maintain a ‘Stable’ outlook over the medium term owing to its experienced management, its long track record of operations and its healthy financial risk profile. The outlook may be revised to 'Positive' if the company demonstrates substantial and sustained growth in its revenues from the current levels while maintaining its margins. Conversely, the outlook may be revised to 'Negative' in case the company registers lower than expected growth in revenues and profitability or deterioration in its working capital management or larger-than-expected debt funded capex leading to deterioration in its financial risk profile particularly its liquidity.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 100.49 73.91
PAT Rs. Cr. 7.48 6.57
PAT Margin (%) 7.44 8.89
Total Debt/Tangible Net Worth Times 0.40 0.34
PBDIT/Interest Times 12.94 7.61
Status of non-cooperation with previous CRA (if applicable)
­None
 
Any other information
­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Entities In Manufacturing Sector:- 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

­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.
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
29 Dec 2021 Cash Credit Long Term 9.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Proposed Bank Facility Long Term 2.60 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Letter of Credit Short Term 6.40 ACUITE A3+ (Upgraded from ACUITE A3)
Term Loan Long Term 2.60 ACUITE BBB (Withdrawn)
07 Oct 2020 Letter of Credit Short Term 6.40 ACUITE A3 (Assigned)
Cash Credit Long Term 9.00 ACUITE BBB- | Stable (Assigned)
Term Loan Long Term 2.60 ACUITE BBB- | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
The Cosmos Cooperative Bank Ltd Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 9.00 Simple ACUITE BBB | Stable | Reaffirmed
The Cosmos Cooperative Bank Ltd Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 6.40 Simple ACUITE A3+ | Reaffirmed
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 2.60 Simple ACUITE BBB | Stable | Reaffirmed

Contacts
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