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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 9.05 | ACUITE BB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 4.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 13.05 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating at ‘ACUITE BB+’ (read as ACUITE double B plus) and its short-term rating at ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.13.05 Cr bank facilities of Paramount Powders Private Limited (PPPL). The outlook remains 'Stable'.
Rationale for reaffirmation of the rating The rating reaffirmation takes into cognizance the steady operating performance of the company marked by stable revenues. The company has achieved revenues of Rs.86.13 Cr in FY2023 (Provisional) as compared to revenues of Rs.69.93 Cr in FY2022 and Rs.51.25 in FY2021 thereby registering a CAGR of 29.86 per cent over the two years. The rating also factors the experience of the management, the long track record of operations and the above average financial risk profile of the company. These strengths are, however, offset by the working capital intensive nature of operations of the company, the moderate profitability margins and the competitive industry. |
| About the Company |
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Based in Delhi, Paramount Powders Private Limited (PPPL) is established in 1997 and is managed by Mr. Tarlochan Singh Badyal and Mr. Manish Jain. The company is engaged in the manufacturing of polyurethanes and thermosetting powder coating.
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| Analytical Approach |
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Acuité has considered the standalone financial and business risk profile of Paramount Powders Private Limited (PPPL).
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Key Rating Drivers
| Strengths |
| Steady rise in the scale of operations coupled with experienced management
The company’s operations are aided by Mr. Tarlochan Singh Badyal and Mr. Manish Jain who possess an industry experience of more than two decades. PPPL has established a long track record of operations spanning over two decades in the manufacturing business of polyurethane and thermosetting powder coating. With the support from the management, the company has developed healthy clientele relationships which ensures the smooth business operations. Moreover, the company has witnessed improvement in the scale of operations and has achieved revenues of Rs.86.13 Cr in FY2023 (Provisional) as compared to revenues of Rs.69.93 Cr in FY2022 and Rs.51.25 in FY2021, thereby, registering a CAGR of 29.86 per cent over the two years. The increase in operating income is supported by the rise in the production capacity utilisation coupled with steady demand for the products. Acuité believes that the company will continue to be benefitted by the long standing operations and the experienced management of the promoters over the medium term. Above average financial risk profile The company’s above average financial risk profile is marked by low albeit improving net worth, low gearing and comfortable debt protection metrics. The tangible net worth of the company increased to Rs.11.44 Cr as on March 31, 2023 (Provisional) from Rs.10.62 Cr as on March 31, 2022 due to accretion of reserves. Gearing of the company stood comfortable at 0.60 times as on March 31, 2023 (Provisional) as against 0.51 times as on March 31, 2022, whereas, Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at a moderate level of 2.16 times as on March 31, 2023 (Provisional) as against 2.50 times as on March 31, 2022. The comfortable debt protection metrics is marked by Interest Coverage Ratio at 3.31 times and Debt Service Coverage Ratio at 2.75 times as on March 31, 2023 (Provisional). Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.18 times as on March 31, 2023 (Provisional). Acuité believes that, going forward, the financial risk profile will remain above average over the medium term, in the absence of any major debt funded capex plans. |
| Weaknesses |
| Moderate profitability margins
The profitability margins of the company remained at a moderate level over the years. The operating margin stood at 2.45 per cent in FY2023 (Provisional) as compared to 1.71 per cent in FY2022 on account of reduction in the operating cost as against the increase in the revenue level. The PAT margin stood at 0.80 per cent in FY2023 (Provisional) as compared to 0.42 per cent in FY2022. Acuité believes that, going forward improvement in the margins will be key monitorable.
Working capital intensive nature of operations The company’s intensive working capital management is marked by Gross Current Assets (GCA) of 135 days as on 31st March, 2023 (Provisional) as compared to 176 days as on 31st March, 2022. The moderately high GCA days are on account of the moderate debtor period. The debtor days stood at 76 days as on 31st March, 2023 (Provisional) as compared to 87 days as on 31st March, 2022. Further, the moderate inventory period is marked by 58 days as on 31st March, 2023 (Provisional) as compared to 85 days as on 31st March, 2022.
Acuité believes that the working capital operations of the company is likely to remain around the similar levels as evident from the moderate collection period and modest inventory cycle over the medium term. Competitive Industry PPPL is exposed to volatile margins owing to its presence in highly competitive industry. It faces competition from the other organised and unorganised players in the market. |
| Rating Sensitivities |
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| Material covenants |
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None
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| Liquidity Position: Adequate |
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The adequate liquidity position is marked by steady net cash accruals of Rs.1.19 Cr as on March 31, 2023 (Provisional) as against long term debt repayment of only Rs.0.02 Cr over the same period. The current ratio stood at 1.33 times as on March 31, 2023 (Provisional) as compared to 1.27 times as on March 31, 2022. The cash and bank balances of the company stood at Rs.0.05 Cr as on March 31, 2023 (Provisional). The fund based bank limit utilisation stood at a moderate level of 70 per cent over the six months ended June 2023. However, the working capital management of the company is intensive in nature marked by Gross Current Assets (GCA) of 135 days as on 31st March 2023 (Provisional) as compared to 176 days as on 31st March 2022. Acuité believes that, going forward, the liquidity position of the company may continue to remain adequate backed by steady accruals.
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| Outlook: Stable |
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Acuité believes that the outlook on PPPL will remain 'Stable' over the medium term on account of the experienced management and steady business risk profile. The outlook may be revised to 'Positive' in case of significant growth in revenues or operating margins from the current levels along with improvement in the financial risk profile and liquidity position. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or operating margins, deterioration in financial risk profile or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 86.13 | 69.93 |
| PAT | Rs. Cr. | 0.69 | 0.29 |
| PAT Margin | (%) | 0.80 | 0.42 |
| Total Debt/Tangible Net Worth | Times | 0.60 | 0.51 |
| PBDIT/Interest | Times | 3.31 | 2.70 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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Not Applicable
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| 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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