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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 11.00 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 18.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short-term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.18.00 Cr bank facilities of Mask Polymers Private Limited (MPPL). The outlook remains 'Stable'.
Rationale for Rating Reaffirmation The reaffirmation in the rating reflects long track record of operations along with experienced management, moderate financial risk profile and adequate liquidity position. Further, the rating takes into consideration augmentation in business risk profile as a result of introduction of new range of rubber products and increase in its installed capacity from 9.90 Crore units per annum in FY2022 to 11.50 Crore units per annum in FY2023. Additionally, the company has maintained stable operating performance which resulted in an approx. 15% growth in revenue amounting to Rs.69.61 Crore in FY2022 as against Rs.60.63 Crore in FY2021. The rating, however, continues to remain constrained on account of working capital-intensive operations and fluctuations in margins due to volatility in the input prices along with customer concentration risks. |
| About the Company |
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Pune-based, MPPL was incorporated in 1999 by Mr. Rajesh R. Mhaske, Mr. Rajaram Mhaske and Mrs. Subhada Mhaske. At present, management is vested in the hands of Mr. Rajesh R. Mhaske, Mr. Rajaram Y and Mrs. Rajshree Mhaske. The company is engaged in manufacturing of rubber molded components and Teflon products which are used for automobile and industrial applications. MPPL has a manufacturing facility at Talegaon in Pune with an installed capacity of 11.50 crore units per annum.
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| Analytical Approach |
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Acuité has taken a standalone view of the business and financial risk profile of MPPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| >Long track record of operations and experienced management
MPPL is operating since 1997. The promoters, Mr. Rajesh R. Mhaske, Mr. Rajaram Mhaske and Mrs. Rajshree Mhaske, have more than two decades of experience in the rubber products industry. The extensive experience of promoters has helped MPPL to establish a healthy long term working relations with reputed customers of two-wheeler & three-wheeler automotive segment such as Bajaj Auto Limited, Tata Motors Limited, Fiat India Automobiles Private Limited and among others. The company’s operating income grew to Rs.69.61 Cr in FY2022 as compared to Rs.60.63 Cr in FY2021. The increase in the revenue is majorly due to increase in demand and introduction of new range of rubber products catering to two wheeler, three wheeler and electric vehicle segments of Bajaj Auto and Tata Motors. Further, the Company has installed new machineries during the year which has enhanced their production capacity to 11.50 Cr units per annum in FY2023 from 9.90 Cr units per annum in FY2022 improving the scale of operations. Acuité believes that the group will continue to benefit from the promoters' experience and established track record of operations in improving its business risk profile over the medium term. >Moderate Financial Risk Profile The financial risk profile of the company stood moderate, marked by moderate net worth, moderate gearing (debt-equity) and comfortable debt protection metrics. The tangible net worth stood at Rs.28.11 crore as on 31 March 2022 as against Rs.27.40 crore as on 31 March, 2021. The total debt of the company stood at Rs.14.98 crore which includes short-term debt of Rs.9.20 crore, long-term debt of Rs.2.95 crore, unsecured loans of Rs.0.08 crore and CPLTD of Rs.2.75 crore as on 31 March, 2022. The gearing (debt-equity) stood at 0.53 times as on 31 March 2022 as compared to 0.51 times as on 31 March, 2021. Interest Coverage Ratio stood at 4.68 times for FY2022 as against 4.95 times for FY2021. Debt Service Coverage Ratio (DSCR) stood at 1.47 times in FY2022 as against 2.25 times in FY2021. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 1.05 times as on 31 March, 2022 as against 0.98 times as on 31 March, 2021. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.30 times for FY2022 and FY2021.
Acuité believes that the financial risk profile of the company is expected to remain moderate in the absence of any debt funded capex plan. |
| Weaknesses |
| >Working capital intensive operations
The working capital management of the company is intensive marked by GCA days of 164 days in FY2022 as against 179 days in FY2021. The debtor days stood at 81 days in FY2022 as against 94 days in FY2021. The company generally gives a credit period of ~60 days to its customers. The Creditor days stood at 103 days in FY2022 as against 117 days in FY2021. However, the company is generally allowed a credit period of ~90 days from its suppliers. The inventory days stood at 38 days in FY2022 as against 29 days in FY2021. The company generally maintains an inventory holding period of 25-30 days on average. The average of utilization of the working capital facilities stood in the range of 75%-80% per cent for past eight months ended November 2022.
>Susceptibility of operating performance to input price volatility along with customer concentrationAcuité believes that the company’s ability to maintain its working capital efficiently will remain critical to maintain a stable credit profile. The margins of MPPL remain partially exposed to any adverse movement in the prices of key raw materials viz. rubber, as the company has limited pricing flexibility owing to intense competition in the industry, any adverse movement in raw material costs could directly affect the margins. Further, MPPL derives 70-75% of the total revenue from two of the reputed customer, i.e. Bajaj Auto Limited and TATA Motors. However, the company has recently started adding new customers to the existing client portfolio, which would aid MPPL to reduce customer concentration risk. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position: Adequate |
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The company’s liquidity position is adequate, marked by moderate net cash accruals against its maturity debt obligations. The company generated net cash accruals in the range of Rs.4.25-Rs.5.00 Crore from FY 2020- 2022 against its maturity repayment obligations in the range of Rs.1.27-Rs.2.75 crore in the same tenure. In addition, it is expected to generate sufficient cash accrual in the range of Rs.5.70-6.97 crores against the maturing repayment obligations of Rs.0.23-2.06 crore over the medium term. The working capital management of the company is intensive marked by GCA days of 164 days in FY2022 as against 179 days in FY2021. The average of utilization of the working capital facilities stood in the range of 75%-80% per cent for past eight months ended November 2022. The company maintains unencumbered cash and bank balances of Rs.0.34 crore as on March 31, 2022. The current ratio stands at 0.94 times as on March 31, 2022 as against 1.12 times as on 31 March, 2021.
Acuité believes that liquidity profile is expected to remain adequate on account of adequate cash accruals against moderate repayment obligations. |
| Outlook: Stable |
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Acuité believes that MPPL will maintain a ‘Stable’ outlook over the medium term owing to its experienced management and long track record of operations. 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 of deterioration in its working capital cycle or larger than-expected debt-funded capex leading to deterioration in its financial risk profile and liquidity position.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 69.61 | 60.63 |
| PAT | Rs. Cr. | 0.71 | 0.71 |
| PAT Margin | (%) | 1.02 | 1.17 |
| Total Debt/Tangible Net Worth | Times | 0.53 | 0.51 |
| PBDIT/Interest | Times | 4.68 | 4.95 |
| 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 |
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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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