Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 30.00 ACUITE BBB- | Stable | Assigned -
Bank Loan Ratings 50.00 ACUITE BBB- | Stable | Reaffirmed -
Total Outstanding Quantum (Rs. Cr) 80.00 - -
 
Rating Rationale
­Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs.50.00 Cr bank facilities and has assigned the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs.30.00 Cr bank facilities of Krishna Vanijya Private Limited (KVPL). The outlook remains ‘Stable’.

Rationale for the rating
The rating takes into cognizance the substantial increase in the scale of operations of the company marked by growth in revenues  in FY2022 as well as in 9MFY2023, coupled with established clientele relationships and rising demand for packaging products. The rating also derives comfort from the experienced management and the above average financial risk profile of the company reflected by the comfortable leverage ratios. These strengths are however, offset by the moderate working capital operations of KVPL and the highly competitive packaging paper industry.

About the Company
­Incorporated in 1989, Krishna Vanijya Private Limited (KVPL) is headed by Mr. Kashi Prasad Bajaj, Mr. Vivek Bajaj and Mr. Ashutosh Bajaj. The company is engaged in the trading of paper and paper products. KVPL imports paper, paper board and specialty papers from China and Indonesia and also procures paper from domestic paper mills.
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profile of KVPL to arrive at the rating.
 

Key Rating Drivers

Strengths
­
  • Established track record of operations supported by long-term association with reputed clientele
KVPL has established long presence of over three decades in the paper and paper products trading industry aided by the experience of the promoter, Mr. Kashi Prasad Bajaj. The company has maintained long term relationships with the customers, CDC Printers Private Limited, Sati Paper Traders, The Calcutta Publishers, to name a few, and has established associations with suppliers like, ITC Limited PSPD, Gold East Trading (Hongkong) Co. Ltd., BAHL Papers Mills Ltd, thereby, ensuring smooth flow of orders and execution. Acuité derives comfort from the company’s long standing operations and the clientele relationships.
 
 
  • Significant improvement in the scale of operations
KVPL achieved revenues of Rs.244.84 Cr in FY2022 as compared to revenues of Rs.173.54 Cr in FY2021, thereby resulting 41 per cent revenue growth over the period. Further, the company has achieved revenues of Rs.281.10 Cr till December, 2022 (provisional). The upturn in revenues is driven by the regular order flow and execution along with the rising demand for paper packaging from the e-commerce sector. Acuité believes that, going forward, the growing demand for environment-friendly packaging will result in the development of biodegradable packaging solutions, which will in turn support the company’s revenue growth.

 
  • Above average financial risk profile
The company’s above average financial risk profile is marked by improving networth base along with low gearing and comfortable debt protection metrics. The tangible net worth of the company increased to Rs.46.91 Cr as on 31st March, 2022 from Rs.42.41 Cr as on 31st March, 2021 due to accretion of reserves. Acuité has treated unsecured loans of Rs.18.26 Cr as a part of networth as the management has undertaken to maintain this amount in the business over the medium term. Gearing of the company stood comfortable at 0.72 times as on 31st March, 2022 as compared to 0.76 times as on 31st March, 2021. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 0.93 times as on 31st March, 2022 as against 0.98 times as on 31st March, 2021. The Interest Coverage Ratio stood comfortable at 2.21 times as on 31st March, 2022. The Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.16 times as on 31st March, 2022. Acuité believes that going forward the financial risk profile of the company will improve backed by improving accruals and no major debt funded capex plans.
Weaknesses
­
  • Moderate working capital management
The moderate working capital management of the company is marked by improving Gross Current Assets (GCA) of 115 days in FY2022 as compared to 156 days in FY2021. The modest GCA days are primarily on account of the moderate collection cycle. The debtor period stood at 91 days in FY2022 as compared to 118 days in FY2021. Customers are usually allowed credit of around 30 to 95 days depending on the length of relationship with them. However, the inventory period stood comfortable at 24 days in FY2022 as compared to 37 days in FY2021. Acuite believes that, going forward, the working capital management of the company will remain around similar levels owing to the comfortable inventory holding period but modest collection mechanism.

 
  • Highly competitive and fragmented industry
The paper 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
­
  • Sustenance of the revenue growth and improvement in profitability parameters
  • Sustenance of the capital structure
  • Elongation in working capital cycle
 
Material covenants
­None
 
Liquidity position: Adequate
­The company’s liquidity position is adequate marked by the fund based bank limit utilisation at only 13 per cent over the six months ended September, 2022. The net cash accruals stood at Rs.5.43 Cr in FY2022 as against no long term debt repayment over the same period. The current ratio stood robust at 4.11 times as on 31st March, 2022 as compared to 4.50 times as on 31st March, 2021. The unencumbered cash balance increased to Rs.0.31 Cr in FY2022 from Rs.0.24 Cr in FY2021. However, the moderate working capital management of the company is marked by GCA days of 115 days in FY2022 as compared to 156 days in FY2021 due to moderate debtor period. Acuité believes that going forward the liquidity position of the company will improve on account of improving accruals.
 
Outlook: Stable
Acuité believes that the outlook on KVPL will remain 'Stable' over the medium term on account of the experience of the promoters, long track record of operations, the improving business risk profile and the above average financial risk profile. The outlook may be revised to 'Positive' in case the company continues to register consistent growth in revenues while improving their profit margins and sustaining the capital structure. Conversely, the outlook may be revised to ‘Negative’ in case of a decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile and liquidity position.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 244.84 173.54
PAT Rs. Cr. 4.51 2.63
PAT Margin (%) 1.84 1.51
Total Debt/Tangible Net Worth Times 0.72 0.76
PBDIT/Interest Times 2.21 1.61
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
• Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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
23 Jan 2023 Cash Credit Long Term 50.00 ACUITE BBB- | Stable (Upgraded from ACUITE BB+)
06 Jul 2022 Cash Credit Long Term 30.00 ACUITE BB+ ( Issuer not co-operating*)
Secured Overdraft Long Term 20.00 ACUITE BB+ ( Issuer not co-operating*)
07 Apr 2021 Cash Credit Long Term 30.00 ACUITE BB+ (Downgraded and Issuer not co-operating*)
Secured Overdraft Long Term 20.00 ACUITE BB+ (Downgraded and Issuer not co-operating*)
09 Jan 2020 Cash Credit Long Term 30.00 ACUITE BBB- | Stable (Upgraded from ACUITE BB+)
Secured Overdraft Long Term 20.00 ACUITE BBB- | Stable (Upgraded from ACUITE BB+)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
CITI Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 50.00 Simple ACUITE BBB- | Stable | Reaffirmed
Standard Chartered Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 30.00 Simple ACUITE BBB- | Stable | Assigned

Contacts
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About Acuité Ratings & Research
Acuité Ratings & Research Limitedwww.acuite.in