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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 4.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 106.00 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 110.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of 'Acuité BBB-’ (read as 'Acuité triple B minus) and the short-term rating of 'Acuité A3+ ' (read as 'Acuité A Three Plus) on the Rs. 110.00 Cr bank facilities of Resol Vinyls and Chlorides Limited (Erstwhile Salasar Impex Limited). The outlook is 'stable'.
Rationale for the rating Acuite takes into account the experience of the promoters of the company, who have been in the polymer trading business for a long time and have more than a decade of experience in the industry. The operating income of the company has improved in FY 2023, as per the provisional financials, showing a positive trend. The financial risk profile of the company has been adequately maintained with a comfortable net worth, low gearing, and moderate coverage indicators. However, in spite of the increase in revenue, the margins have declined when compared to earlier years, impacting the profitability of the company. |
| About the Company |
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Resol Vinyls and Chlorides Limited (Erstwhile Salasar Impex Limited) was incorporated on July 5, 2005, by Mr. Krishan Kumar Bansal, located in New Delhi. Currently, the company is being managed by Mr. Krishan Kumar Bansal, Mr. Parth Dodeja, and Mr. Vijay Rawal. It is involved in the wholesale trading of polymers and resins. The company procures products like PVC resin, PU, EVA, LLDPE, LDPE, DOP, DINP, melamine, phthalic anhydride, etc. and other polymer products from international markets, i.e., Taiwan, South Korea, China, Japan, Singapore, Malaysia, Hong Kong, Dubai, Thailand, etc. These products are mainly used in industries like footwear, PVC pipe and fittings, PVC doors and windows, PVC flouring, artificial leather, PVC flex, plastic toys, and many other similar types of products.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of Resol Vinyls and Chlorides Limited (Erstwhile Salasar Impex Limited) to arrive at this rating.
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Key Rating Drivers
| Strengths |
| Experienced Management
The promoters of the company have been in the polymer trading business for a long time and have more than a decade of experience in the industry. The management has gained valuable experience since the inception of the company and has developed strong relationships with customers and suppliers. This has enabled them to navigate the market and helped grow the company to the scale it is presently operating at. Going forward, the company will benefit from the relationships fostered by the management and be able to grow on a sustainable basis. Healthy financial risk profile The company has a healthy financial risk profile marked by comfortable net worth, low gearing, and strong coverage indicators. The net worth of the company in FY 2023 (Prov.) stood at Rs. 53.59 crore, which consisted of Rs. 23.24 crore of quasi-equity. The debt-to-equity ratio has improved in FY 2023 (prov.) to 0.39 times from 0.60 times in FY 2022 due to a decrease in total debt. The interest coverage ratio has moderated from 2.74 times in FY 2022 to 2.26 times in FY 2023. TOL/TNW has been maintained at 0.95 times in FY 2023. Further, the company has generated net cash accruals of Rs. 2.55 crore in FY 2023. |
| Weaknesses |
| Decline in margins
The revenues for the company have improved in the financial year FY 23 (provisional). However, profitability margins have declined. For FY 2023, the EBITDA margin stood at 1.29% while the PAT margin stood at 0.63%, as compared to an EBITDA margin of 2.09% and a PAT margin of 0.94% in FY 22. The decline is primarily due to the rise in price of the product, which the company was not able to pass on to its customers. Strong competition from unorganised players in the market The market is highly competitive, which includes local and unorganised players in the same domain of business. This is leading to competitive pricing of the products that the company is dealing in and hence affecting the pricing of the same. Price Volatility The product that the company is dealing in, i.e., PVC resin, is highly volatile. The fluctuation in the price of the product is hampering the profitability margins of the company. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position |
| Adequate |
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The company has an adequate liquidity position. The company generated cash accruals of Rs. 2.55 crore against a CPLTD of Rs. 0.07 crore in FY 2023. However, with the increase in revenues, the net cash accruals did not increase proportionately. The current ratio for the company stood at 2.33 times, and the cash and bank balance of the company stood at Rs. 7.42 crore for FY 2023 (prov). Short-term (less than 3 months) fixed deposits (out of the payment received from the buyers) are maintained by the company for the payment of LCs as and when they are due.
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| Outlook: Stable |
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Accuité believes that the company will maintain a 'stable' outlook over the medium term on the back of improving revenue profile and comfortable working capital operations. The outlook may be revised to 'Positive' in case the company registers higher-than expected growth in its revenue and profitability margins 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 margins or in case of deterioration in the company’s financial risk profile or an elongation in the working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 378.91 | 198.32 |
| PAT | Rs. Cr. | 2.37 | 1.87 |
| PAT Margin | (%) | 0.63 | 0.94 |
| Total Debt/Tangible Net Worth | Times | 0.39 | 0.60 |
| PBDIT/Interest | Times | 2.26 | 2.74 |
| 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 • 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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