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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 23.00 | ACUITE BB+ | Stable | Assigned | - |
| Bank Loan Ratings | 12.00 | - | ACUITE A4+ | Assigned |
| Total Outstanding Quantum (Rs. Cr) | 35.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuite has assigned its long term rating at 'ACUITE BB+' (read as ACUITE double B plus) and short term facilities at 'ACUITE A4+'(read as ACUITE A four plus) on the Rs. 35.00 Cr. bank facilities of Pep-Cee Pack Industries. The outlook is 'Stable'.
Rationale behind rating The assignment of rating takes into consideration the experienced management, track record of the company along with the growth in operating revenue of the company. Further the financial risk profile of the company though moderate remains in a comfortable range. The aforesaid factors are underpinned by decline in the margins due to raw material price fluctuations. |
| About the Company |
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Pep-Cee pack industries, established as a partnership firm in 2003, manufactures food-grade plastic bags, plastic rolls, and plastic sheets, which are used for packaging in industries such as fast-moving consumer goods, pesticides, and chemicals. The current partners of the firm are Mr. Jay Shah, Mr. Mihir Shah, Mr. Bhupat B.Shah & Mr.Akash P. Shah. Pep-Cee's manufacturing plant is in Daman, while its office is in Mumbai.
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| Analytical Approach |
| Acuite has considered the standalone financial and business risk profiles of Pep-Cee Pack Industries to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Experienced management
The partners of the entity Mr. Jay Shah and Mr. Mihir Shah, Mr. Bhupat B.Shah & Mr.Akash P. Shah has vast experience in the aforementioned line of business. Their experience into this line of business would help the company to flourish. Acuite believes that the company will continue to benefit from its operations and excellence. Established track record of operations The company has achieved revenue of Rs.291.35 Crore in FY22 against Rs.236.45 Crore in FY21. The company has seen an upward trend over the last three years, with EBITDA margins of 2.51% in FY22 compared to 2.96 percent in FY21. The company involves both production and product trade activities. 60% of the revenue comes from the production unit, while the remaining 40% comes from trading. Compared to 1.82% in FY21, the company's PAT margin in FY22 is 1.25%. The company has so far generated sales of Rs. 207 Crore as of October. Financial Risk Profile The financial risk profile of the company is marked by the net worth of Rs.10.33 Crore in FY22 against Rs.9.14 Crore in FY21. The total debt of the company is Rs.25.66 Crore in FY22 (Long term debt of Rs.1.75 Crore in FY22, Unsecured loans of Rs.8.99 Crore, short term debt of Rs.13.99 Crore). The debt equity profile of the company has improved at 2.48 times in FY22 against 3.36 times in FY21. Going forward, the interest coverage ratio and debt service coverage ratio of the company in FY22 is at 2.90 times and 2.49 times against 4.58 times and 3.80 respectively. |
| Weaknesses |
| Susceptibility of profitability margins to fluctuations in prices of raw materials
Volatile and unstable global markets have widespread implications for manufacturing organizations. This may impact the profitability of the business. Strong competition from other market players The company is operating in a industry where in there are several players in the organized and un-organized markets leading to strong competition. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
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The company has adequate long term liquidity marked by healthy net cash accruals to its maturing debt obligations. The net cash accruals in FY22 at Rs.4.88 Crore against debt repayment obligation of Rs.0.43 Crore for the same period. Going forward, the company is expecting to generate net cash accruals under the range of Rs.5 Crore against the debt repayment obligations under range of Rs.0.93 crore in the same period. The bank limit utilisation of non-fund based facilities at 59.05% and for the fund based facilities at 91.39%.
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| Outlook: Stable |
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Acuité believes that Pep-Cee Pack Industries will maintain a 'Stable' outlook over the medium term on the back of its established track record of operations and experienced management. The outlook may be revised to 'Positive' in case the company registers higher-than-expected growth in its revenues and profitability while maintaining its capacity utilization. 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 further elongation in the working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 291.35 | 236.45 |
| PAT | Rs. Cr. | 3.64 | 4.30 |
| PAT Margin | (%) | 1.25 | 1.82 |
| Total Debt/Tangible Net Worth | Times | 2.48 | 3.36 |
| PBDIT/Interest | Times | 2.90 | 4.58 |
| Status of non-cooperation with previous CRA (if applicable) |
| The company has been flagged as issuer not cooperating at "CRISIL B+" dated March 12, 2020 |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.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 |
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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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| Rating History : |
| Not Applicable |
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