Press Release

Press Release

October 07, 2024

MANGALAM PIPES PRIVATE LIMITED
Rating Assigned and Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	7.00	ACUITE BBB \| Stable \| Assigned	-
Bank Loan Ratings	25.00	ACUITE BBB \| Stable \| Upgraded	-
Total Outstanding	32.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuité has upgraded its long-term rating to ‘ACUITE BBB’ (read as ACUITE Triple B) from ‘ACUITE BBB-’ (read as ACUITE Triple B minus) on the Rs.25.00 crore bank facilities of Mangalam Pipes Private Limited (MPPL). The outlook remains ‘Stable’.

Further, Acuité has assigned the long-term rating to ‘ACUITE BBB’ (read as ACUITE Triple B) on the Rs. 7.00 Crore bank facilities of Mangalam Pipes Private Limited (MPPL). The outlook is ‘Stable’.

Rationale for Rating

The upgrade takes into account the stable revenue growth along with significant improvement in the profitability margins supported by moderate financial risk profile, efficient working capital operations and adequate liquidity position of the company. The company generated a revenue of Rs. 332.87 Cr. in FY2024 (Prov.) as against Rs. 293.87 Cr. in FY2023. The profitability margins stood significantly improved due to lower material costs. The EBITDA margin stood at 10.35 percent in FY2024 (Prov.) as against 5.44 percent in FY2023. PAT margin stood at 5.97 percent in FY2024 (Prov.) as aginst 1.66 percent in FY2023. The rating also draws comfort from the extensive experience of the promoters in the industry, but is constrained due to the volatility in the raw material prices, which affects the profitability margins of the company.

About the Company

Mangalam Pipes Private Limited was incorporated in 2009 and is based in Bengaluru (Karnataka). The company is one of the largest manufacturers and suppliers of HDPE pipes in South India including Karnataka, Tamil Nadu, Kerala, Telangana, Andhra Pradesh, and Maharashtra. The manufactured pipes are used in commercial and residential constructions, irrigation projects, etc. The company is promoted by Mrs. Vimala Devi Lodha, Mr. Jeetendra Mal Lodha and Mr. Vikas Lodha. The company has its manufacturing facilities located at Bangalore with an installed capacity of 24000 MTPA for pipes & fittings and 260 MTPA for drips & sprinklers.

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has considered the standalone business and financial risk profile of Mangalam Pipes Private Limited (MPPL) to arrive at the rating.

Key Rating Drivers

Strengths

Established track record and experienced management
Incorporated in 2009, MPPL has an established track record of more than a decade in this line of business with an experienced management. The company is managed by the Lodha family since inception. Mr Vikas Lodha, Mr Jeetendra Mal Lodha and Mrs Vimala Devi Lodha are the current promoters with more than three decades of experience that helped company to maintain a healthy relationship with its stakeholders, along with a dealers' network in South Indian region, such as Hyderabad, Chennai, Coimbatore, Trivandrum, Cochin, Hubli, Mysore, Mangalore, etc.
The experience of the promoters is also evident through the improving scale of operations, with revenue of Rs. 332.87 Cr. in FY2024 (Prov.) as against Rs.293.87 Cr. in FY2023 and Rs.188.21 Cr. in FY2022. Going forward, the Company's scale of operations are expected to improve considering more emphasis of government on water irrigation and dam projects.
Acuité believes that the company will benefit from the long track record of operations along with a healthy relationship with its customer and suppliers.

Moderate Financial Risk Profile
The moderate financial risk profile of Mangalam pipes is marked by moderate but growing net worth, low gearing and comfortable debt protection metrics. The tangible net worth of the company improved to Rs. 50.08 Cr. on March 31, 2024 (Prov.) as against Rs. 30.20 Cr. on March 31, 2023. Improvement in the net worth is on account of accretion of profit to reserves. The total debt of the company stood at Rs. 26.53 Cr. on March 31, 2024 (Prov.) which includes long term debt of Rs. 9.67 Cr, unsecured loans amounting to Rs. 10.81 Cr, short term debt of Rs. 3.94 Cr. and current portion of long term debt (CPLTD) of Rs. 2.11 Cr. The gearing (debt-equity) improved significantly to 0.53 times on March 31, 2024 (Prov.) from 1.21 times on March 31, 2023. This is due to lower utilization of working capital limits. The TOL/TNW stood at 0.97 times on March 31, 2024 (Prov.) as against 1.77 times on March 31, 2023. Debt-EBITDA improved to 0.77 times on March 31, 2024 (Prov.) as against 2.26 times on March 31, 2023.

The debt protection indicators stand comfortable, with Interest coverage Ratio (ICR) at 8.53 times in FY2024 (Prov.) as against 4.35 times in FY2023 and Debt Service Coverage Ratio (DSCR) at 6.79 times in FY2024 (Prov.) as against 3.20 times in FY2023.

The financial risk profile is expected to remain moderate in the near to medium term.

Efficient Working Capital Operations
The efficient working capital operations of the company is reflected through the Gross Current Assets (GCA) of 70 days on March 31, 2024 (Prov.) as against 61 days in FY2023. The GCA days are driven by inventory days and debtor days. The company has maintained inventory levels of 16 days in FY2024 (Prov.) as against 19 days in FY2023. Generally, the company maintains an inventory holding period of 30 days. The debtor collection period stood at 48 days in FY2024 (Prov.) as against 31 days in FY2023. The company provides an average credit period of ~60 days to their customers. Higher debtors days are also attributable to higher sales during the month of March. The bank limit utilization has remained low at 23.87 percent for the last six months ended August 2024.

The working capital operations are expected to remain efficient in the near to medium term.

Weaknesses

Highly competitive industry with susceptibility of margins to volatility in raw material prices
The pipes and fittings industry is highly competitive, results in facing competition from both the organized and un-organized segments. Moreover, the fragmented nature of the business and the current scale of operations limit MPPL's pricing flexibility amidst intense competition. Major raw material includes plastic granules and master batch which are a crude oil based products. The input prices are volatile, and thus, any sharp decline or increase in crude oil prices can impact the operating profitability. This risk is mitigated to some extent, due to the long standing relation of the company with its suppliers, which enables them to negotiate a fair price for the raw materials.
However, the ability of the company to sustain their operating margins over the medium term shall remain a key monitorable.

Rating Sensitivities

Improvement in scale of operations while sustaining profitability margins.
Any major debt funded capex which can lead to deterioration of financial risk profile.

Liquidity Position

Adequate

The adequate liquidity position of the company is supported by healthy net cash accruals (NCA) against maturing repayment obligations. In FY2024 (Prov.), the company generated NCA of Rs. 24.74 against repayment obligations of Rs. 0.18 Cr. in the same period. The average bank limit utilization stands low at 23.87 percent for the last 6 months ended August 2024. The current ratio stood at 2.45 times on March 31, 2024 (Prov.) as against 1.78 times on March 31, 2023. The company has maintained an unencumbered cash and bank balance of Rs. 4.77 Cr. on March 31, 2024.

The liquidity profile of Mangalam Pipes Private Limited is expected to remain adequate on account of healthy cash accruals against moderate repayment obligations.

Outlook: Stable

Acuité believes that MPPL will maintain a 'Stable' outlook and continue to benefit over the medium term owing to the extensive experience of the promoters, established track record of operations and efficient working capital operations. The outlook may be revised to 'Positive' if the company achieves significant growth in revenue and improvement in profitability while maintaining comfortable liquidity position. Conversely, the outlook may be revised to 'Negative' in case of significant deterioration in the financial risk profile on account of higher-than-expected working capital requirement or major debt funded capital expenditure plan.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	332.87	293.87
PAT	Rs. Cr.	19.87	4.88
PAT Margin	(%)	5.97	1.66
Total Debt/Tangible Net Worth	Times	0.53	1.21
PBDIT/Interest	Times	8.53	4.35

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Any other information

None

Applicable Criteria

• 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

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.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
11 Jul 2023	Cash Credit	Long Term	19.50	ACUITE BBB- \| Stable (Reaffirmed)
11 Jul 2023	Cash Credit	Long Term	5.50	ACUITE BBB- \| Stable (Reaffirmed)
12 May 2022	Cash Credit	Long Term	19.50	ACUITE BBB- \| Stable (Assigned)
	Cash Credit	Long Term	4.70	ACUITE BBB- \| Stable (Assigned)
	Proposed Long Term Bank Facility	Long Term	0.80	ACUITE BBB- \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Indusind Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	19.50	Simple	ACUITE BBB \| Stable \| Upgraded ( from ACUITE BBB- )
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.50	Simple	ACUITE BBB \| Stable \| Upgraded ( from ACUITE BBB- )
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	2.00	Simple	ACUITE BBB \| Stable \| Assigned
Indusind Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BBB \| Stable \| Assigned

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Kruti Patel
Associate Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.