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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6.00 | - | ACUITE A3+ | Reaffirmed |
| Bank Loan Ratings | 6.50 | ACUITE BBB | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 12.50 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating at "ACUITE BBB" (read as ACUITE triple B) and short term rating at ACUITE A3+ (read as A three plus) on the Rs.12.50 crore bank facilities of Kunal Conchem Private Limited(KCPL). The outlook is "Stable". The rating has been reaffirmed on the basis of minuscule improvement in the top line of the business. Apart from this, the working capital of the company is stretched. Overall Acuite believes that company will grow in near future on the back of healthy accretion of reserves. |
| About the Company |
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Haryana based, Kunal Conchem Private Limited (KCPL) was established in 2009. The directors of the company are Mr. Narendra Prasad, Mrs. Indira Prasad, Mr. Kunal Prasad and Mr. Mrinal Prasad. The company is engaged in the manufacturing of chemicals for construction companies. KCPL has 3 plants; located in Faridabad, Gujarat and West Bengal with installed capacities of 12000MT, 10000MT and 8000MT respectively. The notable customers that KCPL cater to include PNC Infratech Limited, Ashoka Buildcon Limited, and Larsen & Toubro Limited to name a few.
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of Kunal Conchem Private Limited to arrive at this rating. |
Key Rating Drivers
| Strengths |
| Experienced Management
KCPL was incorporated in 2009. The directors of the company are Mr. Narendra Prasad, Mrs. Indira Prasad, Mr. Kunal Prasad and Mr. Mrinal Prasad. Mr Narendra Prasad has an experience of over four and a half decades while Mrs. Indira Prasad, Mr. Kunal Prasad and Mr. Mrinal Prasad have an experience of over a decade in the said line of business. The established track record of operations and experience of management has helped the firm to develop healthy relationships with customers and suppliers. Healthy Financial Risk profile The financial risk profile of the company is healthy marked by net worth of Rs.91.74 Crore in FY22 as against Rs.75.56 Crore in FY21 due to healthy accretion of reserves. The gearing ratio of the company is 0.14x in FY22 against 0.06x in FY21. The firm on the other hand generated cash accruals of Rs.17.10 in FY22. The interest coverage ratio of the company is 90.96 times in FY22. Acuite believes that the financial risk profile of the firm is likely to remain healthy over the medium term on account of comfortable debt protection metrics. |
| Weaknesses |
| Working capital intensive operations
Working capital intensive operations marked by GCA days of around 217 days in FY22 as against 171 days in FY21. GCA remained high due to high debtor collection period and the company is going to file litigation against one of its customer for around Rs. 3 crore of outstanding. KCPL has maintained inventory period of around 37 days in FY22 as against 26 days in FY21. The current ratio of the company is 2.78 times in FY22. Acuite believes that the working capital management of the company remain capital intensive over the medium term on the account of high debtor collection period. Highly competitive and fragmented nature of industry The company operates in a highly competitive and fragmented industry being characterised by large number of players mainly on account of low entry barriers. This can have an impact on the profitability margins of the company. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
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KCPL has adequate liquidity marked by adequate net cash accruals to its maturing debt obligations. The company generated net cash accruals of Rs.17.10 Crore in FY22. The company’s working capital operations are intensive marked by GCA days which stood at 217 in FY22(Provisional). The bank limit utilization of the company is 15.15% in in last six months through August 2022 giving adequate liquidity buffer in the form of unutilized bank limits.
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| Outlook: Stable |
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Acuité believes that KCPL will maintain a ‘Stable’ outlook over the medium term backed by its experienced management and healthy financial risk profile. The outlook may be revised to ‘Positive’ in case the company registers higher-than-expected growth in its revenue and profitability while improving its 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 financial risk profile or significant elongation in working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Provisional) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 96.95 | 95.59 |
| PAT | Rs. Cr. | 16.18 | 19.33 |
| PAT Margin | (%) | 16.69 | 20.23 |
| Total Debt/Tangible Net Worth | Times | 0.14 | 0.06 |
| PBDIT/Interest | Times | 90.96 | 134.51 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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 |
| https://www.acuite.in/view-rating-criteria-55.htm |
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