Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Rating Rationale
Acuite has reaffirmed its long term rating of ‘ACUITE A+’ (read as ACUITE A plus) on the Rs.100.00 Crore bank facilities of Star Paper Mills Limited (SPML). The Outlook is 'Stable'.
Rationale for Rating
The rating reaffirmation factors in the long and established track record of the promoters, with over three decades of experience in the paper manufacturing industry. The capital structure remains healthy, marked by negligible dependence on external borrowings, as reflected by a gearing ratio of 0.01 times as on March 31, 2025. Further, the debt protection metrics are highly comfortable, with a debt service coverage ratio of 29.59 times in FY25.
However, the rating is constrained by the company’s intensive working capital operations, evidenced by GCA days of 127 days in FY25. The revenue profile witnessed a moderation, declining to Rs. 437.95 Cr. in FY25 from Rs. 447.78 Cr. in FY24. During 9MFY26, revenues stood at Rs. 297.35 Cr. as against Rs. 322.25 Cr. in 9MFY25.
The profitability profile also weakened, with EBITDA declining to Rs. 14.04 Cr. in 9MFY26 from Rs. 26.65 Cr. in 9MFY25, primarily due to a sharp increase in raw material costs. The same remains a key rating monitorable. Additionally, the company’s operating margins are exposed to volatility owing to fluctuations in input prices, coupled with intense competition inherent in the industry.
About the Company
Saharanpur (Uttar Pradesh) based Star Paper Mills Limited was incorporated in 1936. The company is engaged in manufacturing industrial and cultural paper of different varieties. Present directors are Mr. Madhukar Mishra, Mr. Shrivardhan Goenka, Mrs. Pragya Jhunjhunwala, Mr. Atul Mani Sharma, Mr. Anoop Mishra and Mr. Rishab Chand Lodha.
Unsupported Rating
Not applicable.
Analytical Approach
Acuite has considered the standalone financial and business risk profile of Star Paper Mills Limited to arrive at the rating.
Key Rating Drivers
Strengths
Experienced management and established track record of operations of the company
The company was incorporated in 1936 and integrated pulp and paper mill located at Saharanpur. It is a part of Kolkata based Ducon-Goenka Group owned by Mr. G.P.Goenka. The family took-over the business and Shri G.P. Goenka has been spearheading the business since 1979. It is engaged into wide range of Industrial, Packaging and Cultural Papers catering to almost all segments of the market. The extensive experience of the promoters and the management has helped the company build strong presence in the market. Further, the company has maintained long standing relationship with its supplier and customer. Acuité believes that the company will continue to benefit from its extensive experience and healthy relationship with its customers and suppliers in the paper industry.
Healthy financial risk profile
The company has a healthy financial risk profile, marked by a strong net worth base and robust debt protection metrics. The tangible net worth stood at Rs. 680.90 Cr. as on March 31, 2025, as against Rs. 647.28 Cr. as on March 31, 2024, registering an improvement on account of accrual of profits to reserves. The capital structure remains healthy, supported by negligible reliance on external borrowings, with the gearing ratio standing at 0.01 times as on March 31, 2025. Further, the debt coverage indicators are highly comfortable, with an Interest Coverage Ratio (ICR) of 63.06 times and a Debt Service Coverage Ratio (DSCR) of 29.59 times in FY25. Acuité believes that the company’s financial risk profile is likely to remain healthy over the near to medium term, supported by its strong net worth and the absence of any debt-funded capital expenditure plans.
Weaknesses
Decline in revenues and profitability
The company’s revenue profile moderated in FY25, with revenues declining to Rs. 437.95 Cr. from Rs. 447.78 Cr. in FY24, primarily due to a decline in paper price realization, although sales volumes improved during the year. The profitability profile also weakened, with EBITDA margins declining to 8.79% in FY25 from 13.49% in FY24, mainly on account of an increase in raw material prices. Consequently, the PAT margin contracted to 9.39% in FY25 from 14.29% in FY24. During 9MFY26, the company reported revenues of Rs. 297.35 Cr. as against Rs. 322.25 Cr. in 9MFY25, reflecting continued pressure on price realization. Operating margins further moderated to 4.72% in 9MFY26 from 8.27% in 9MFY25. Going forward, the company’s ability to stabilize EBITDA and PAT margins amid volatile input costs will remain a key rating sensitivity.
Intensive working capital operations
The company has intensive working capital requirements, as reflected by elevated GCA days of 127 days in FY25 as against 107 days in FY24. The increase was primarily driven by higher inventory holding, with inventory days rising to 124 days in FY25 from 109 days in FY24. Debtor days remained low to 5 days in FY25 from 3 days in FY24. Further, creditor days declined to 33 days in FY25 from 43 days in FY24. Acuité believes that the company’s working capital intensity is likely to remain at similar levels over the near to medium term, considering the inherent nature of its operations.
Operations in a highly competitive industry & susceptibility of margins to fluctuations in raw material prices
The Company is operating in highly competitive and fragmented industry. It is exposed to intense competition from several players operating in the industry. The kraft paper manufacturers in India are exposed to the risk of volatility in waste paper prices, largely due to intense competition. On account of competitive pressures, players face challenges in passing on increased costs to end users. Business risk profile will remain constrained by exposure to the downturn in the paper industry. The rise in the prices of duplex paper over that of waste paper is expected to be gradual, rendering the profitability susceptible to volatility in the price of paper. Acuite notes that profitability has declined to Rs.14.04 Cr. in 9MFY26 against Rs.26.65 Crore in 9MFY25. Furthermore, any abrupt change in raw material prices due to supply-demand scenario can lead to distortion of prices and affect the profitability of the company.
Rating Sensitivities
Potential triggers (individual or collective) for an upward rating action:
Growth in operating income by more than 30% and growth in EBIDTA
Improvement in working capital cycle.
Potential triggers (individual or collective) for a downward rating action:
Decline in operating margin below 3%.
Any large debt-funded capex, impacting the financial risk profile and liquidity.
Liquidity Position
Strong
The company’s liquidity position is strong, supported by adequate cash accruals and minimal debt repayment obligations. The net cash accruals stood at Rs. 47.53 Cr. in FY25, against negligible repayment obligations during the year. The liquidity profile is further supported by a healthy current ratio of 3.03 times as on March 31, 2025, compared to 2.64 times as on March 31, 2024. Additionally, the company had unencumbered cash and bank balances of Rs. 2.92 Cr. and liquid investments worth Rs. 208.09 Cr. as on March 31, 2025. Acuité believes that the company’s liquidity position is likely to remain strong over the near to medium term, backed adequate liquid surplus.
Outlook: Stable
Other Factors affecting Rating
None
Particulars
Unit
FY 25 (Actual)
FY 24 (Actual)
Operating Income
Rs. Cr.
437.95
447.78
PAT
Rs. Cr.
41.14
64.00
PAT Margin
(%)
9.39
14.29
Total Debt/Tangible Net Worth
Times
0.01
0.01
PBDIT/Interest
Times
63.06
104.09
Status of non-cooperation with previous CRA (if applicable)
Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Contacts
List of instruments and names of regulators of the instruments
