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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 93.95 | ACUITE B+ | Stable | Downgraded | - |
| Bank Loan Ratings | 7.05 | - | ACUITE A4 | Downgraded |
| Total Outstanding | 101.00 | - | - |
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Rating Rationale |
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Acuité has downgraded the long-term rating to 'ACUITE B+' (read as ACUITE B plus) from 'ACUITE BB+' (read as ACUITE double B plus) and the short-term rating to 'ACUITE A4' (read as ACUITE A four) from 'ACUITE A4+' (read as ACUITE A four plus) on the Rs. 101 crore bank facilities of Kamakshi Suedpack Private Limited (Erstwhile Kamakshi Flexiprints Private Limited) (KSPL). The outlook is 'Stable'.
Rationale for Rating The rating downgrade reflects deterioration in the operating performance, weak financial risk profile,and stretch in liquidity position of the company. KSPL incurred losses at operating level which stood at (25.18)% in FY2024(Prov.) against (18.71)% in FY2023, thereby leading to PAT losses. The reason for the operating loss is the lower absorption of fixed costs due to subdued capacity utilisation and increase in employee costs. The losses incurred has led to deterioration in the networth position and overall financial risk profile. The company’s networth stood at Rs. 26.45 Cr. as of March 31, 2024(Prov.) against Rs. 68.91 Cr. as of March 31, 2023. Further, the debt coverage indicators stood poor due to negative EBITDA. Furthermore, it has led to a stretched liquidity position, as in absence of sufficient accruals generation, the company’s reliance on funds infused by Suedpack (German Co. having 46.63% shareholding) to meet the maturing repayment obligations has increased. The rating is also constrained due to moderately intensive nature of working capital operations of the company. Going ahead, the ability of the company to increase its scale of operations and become profitable, leading to improvement in financial risk profile and liquidity position will remain a key rating monitorable. |
| About the Company |
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Incorporated in 1994, Ahmedabad based Kamakshi Suedpack Private Limited is engaged in reverse printing of bi-axially oriented polypropylene (BOPP)/ polyethylene (PE)/polyethylene terephthalate (PET) films as well as manufacturing of co-extruded three-layer films and various types of flexible pouches and bags. KSPL’s current product portfolio includes stand-up pouches, sealed pouches, vacuum pouches, zipper pouches, patch handle bags, sealed bags etc. which find application across various industry segments like packaged food, confectionary, grain packaging, pharmaceuticals and fertilizers. KSPL has its sole manufacturing facility located in Ahmedabad, Gujarat. KSPL is currently promoted by SHG, Mr. Harish Goel and Mr. Narendra Dhupar, among others.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered the standalone business and financial risk profile of KFPL while arriving at the rating. |
| Key Rating Drivers |
| Strengths |
| Association with Suedpack Holdings GmBH, extensive experience of the promoters and established track record in the industry
KSPL is an Ahmedabad-based company, which was incorporated in July 1994. In 2019 the company tied up with a German flexible packaging manufacturer – Suedpack Holdings GmBH (SHG). Post tie-up with SHG, Mr. Tharcisse Michel Carl has been appointed on the board of KSPL as a representative from SHG. SHG’s stake in KFPL is 46.63% in FY2024. The tie-up with SHG has aided KFPL augment its capacity, product profile and shall give them access to newer overseas market such as Europe. Further, Suedpack has plan to fully takeover the company and hold 100% stake in KSPL, which is tentatively expected in July’2026. The revenue of the company increased to Rs.90.89 Cr. in FY2024 (Prov.) from Rs.73.37 Cr. in FY2023.The increase in revenue is on account of commencement of operations in new plant which has increased the production capacity to 18,472 MTPA from 3,500 MTPA. However, the project was completed with a delay of 1 year and commenced commercial operations from June FY2023. Further, the company continued to incur losses at operating level since FY2023. The loss margins at operating level increased to (25.18)% in FY2024(Prov.) against (18.71)% in FY2023. The increase in losses at operating level are attributed to low-capacity utilisation which stood at 28% for FY2024(Prov.) against 22% for FY2023, thereby limiting the absorption of fixed costs. Particularly the employee cost increased by ~38% in FY2024(Prov.) as the company onboarded several key personnel at the senior level management. Further, the net loss margins stood at (46.64)% in FY2024 (Prov.) against (26.46)% in FY2023. The company expects operating level losses to continue in FY25 as well, however would turn profitable by FY26 onwards on the back of increased capacity utilization. Acuité believes the company shall continue to benefit from experienced management, association with Seudpack Holdings GmBH and established relationships with customers and suppliers. |
| Weaknesses |
| Weak Financial Risk Profile
The financial risk profile of KSPL is weak, marked by low net worth, high gearing, and poor debt protection metrics. The tangible net worth of the company declined significantly on account of net losses being incurred since FY2023. It stood at Rs. 26.45 Cr. as of March 31, 2024(Prov.), compared to Rs. 68.91 Cr. as of March 31, 2023. The total debt is Rs. 187.17 Cr. as of March 31, 2024(Prov.), which consists of long-term debt of Rs. 45.06 Cr., short-term debt of Rs. 17.88 Cr. and USL of Rs. 106.87 Cr., which is in form ECB from Suedpack. Also Suedpack has invested Rs. 4 million euro in April’2024. Further, Suedpack will invest additional Rs. 2.8 million euro in form of ECB in October’2025 to support the operations and repayment obligations of the company. The gearing stood at 7.08 times as of March 31, 2024(Prov.), against 1.89 times as of March 31, 2023. The high gearing is attributed to increase in the debt level and decline in networth. The TOL/TNW stood at 7.55 times as of March 31, 2024(Prov.), compared to 2.28 times as of March 31, 2023. The debt protection metrics of Interest Coverage Ratio (ICR) stood poor at (2.03) times in FY2024 (Prov.) against (2.39) times in FY2023 and Debt Service Coverage Ratio (DSCR) stood at (1.09) times in FY2024 (Prov.) against (0.59) times in FY2023. Going forward, the ability of the company to improve its financial risk profile will remain key monitorable. Moderately Intensive nature of working capital operation KSPL’s working capital operations are moderately intensive marked by the high Gross Current Asset days (GCA) of 209 days in FY2024 (Prov.) against 235 days in FY2023. The inventory days stood at 45 days in FY2024 (Prov.) and 64 days in FY2023. The debtors’ days stood at 104 days in FY2024 (Prov.) against 106 days in FY2023. The company provides credit period in the range of 45-90 days to its customers. The creditors’ days stood at 42 days in FY2024 (Prov.) against 96 days in FY2023. The company enjoys a credit period of 30-40 days from its suppliers.
Acuite believes that working capital operations of the company will continue to remain in similar range over the medium term. Susceptibility of margins to fluctuations in the oil prices KSPL’s primary raw material is derivative of crude oil. Any adverse movement in oil prices or forex rates will directly affect the KFPL’s margins as the production costs will rise without corresponding increase in the revenues. Highly competitive and fragmented industry The company operates in a highly competitive and fragmented packaging industry characterized by a large number of unorganized players. This limits the pricing power of the company putting pressure on profitability. Acuité believes that the highly fragmented and competitive industry will remain a key concern for the Company going ahead. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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KSPL’s liquidity position is stretched, as reflected by generation of insufficient cash accruals against repayment obligations. Going ahead, the company is expected to continue to incur EBITDA level loss, thereby generating insufficient cash accruals to repay its debt obligations in the near term. However, infusion of funds from Suedpack is expected to support the repayment obligations. Further, the working capital operations of the company are moderately intensive in nature marked by GCA days of 209 in FY2024 (Prov.). The reliance on working capital limits is moderate, with average utilisation at 68% over the last 15 months ending July 2024.
The current ratio stood average at 0.94 times as of March 31, 2024(Prov.). Unencumbered cash and bank balances stood at Rs 0.81 Cr. as of March 31, 2024(Prov.). Going ahead, ability of the company to generate sufficient accruals to meet its repayment obligations will remain key monitorable. |
| Outlook: Stable |
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Acuité believes that KSPL outlook will remain 'Stable' over the medium term backed by long track record of operations along with experienced management. The outlook may be revised to 'Positive' in case the company registers higher than-expected growth in its revenue and profitability while restricting significant elongations in working capital cycle and improving the
financial risk profile and liquidity position. Conversely, the outlook may be revised to 'Negative' in case the company registers lower-than expected growth in revenues and profitability, or, in case of deterioration in the company's business or financial risk profile or significant elongation in working capital cycle leading to stretch in liquidity. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 90.89 | 73.37 |
| PAT | Rs. Cr. | (42.39) | (19.42) |
| PAT Margin | (%) | (46.64) | (26.46) |
| Total Debt/Tangible Net Worth | Times | 7.08 | 1.89 |
| PBDIT/Interest | Times | (2.03) | (2.39) |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| 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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