|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 100.00 | ACUITE A+ | Stable | Reaffirmed | - |
| Total Outstanding | 100.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
|
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 ReaffirmationThe rating reaffirmation reflects the established track record and experience of the promoters of more than three decades in the manufacturing of paper. Further, the rating factors in the steady business risk profile over the past years, albeit slight decline in revenue to Rs.447.78 Crore in FY24 against Rs.492.69 Crore in FY23. In H1FY25, the revenues had been at Rs. 224.77 Cr. against H1FY24 at Rs. 229.23 Cr. The declining profitability is also reflected in EBIDTA of Rs.18.86 Crore in H1FY25 vis-vis Rs.37.82 Crore H1FY24 due to steep rise in the raw material cost. The same will remain a key monitorable. Also, capital structure is healthy owing to no reliance on external funds with total outside liabilities to adjusted net-worth ratio of 0.01 times as on 31 st March 2024 and highly comfortable debt protection metrics with a debt service coverage ratio of 83.91 times in FY24. Further, the company has a longstanding relationship with reputed clients namely Akshaydeep papers private limited, Esskay Impex, Raghav Trading Corporation etc. However, the rating is constrained due to the intensive working capital operations with a high GCA days of 107 days in FY2024. Further, the volatility in operating margins is a constraint owing to fluctuating input material prices, as also, the company operates in a highly competitive industry. |
| About the Company |
|
About the Company Star Paper Mills Limited (SPML) is an integrated Pulp and Paper Mill located at Saharanpur, U.P. The company was incorporated in 1936. It is part of Kolkata based Duncan-Goenka Group owned by Mr. G.P. Goenka. The company produces a wide range of Industrial, Packaging and Cultural Papers catering to almost all segments of the market. The company is currently managed by Mr. Madhukar Mishra. The company is based in West Bengal.
|
| Unsupported Rating |
| Not applicable. |
| Analytical Approach |
|
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 company also operates two turbines of 5 megawatts and 6 megawatts each. The extensive experience of the promoters and the management has helped the company build strong presence in the market. Further, the company is able to maintain a long-standing relationship with its supplier and customer. Acuité believes that the company will continue to benefit from its extensive experience and longstanding relationship with its customers and suppliers in the paper industry. Healthy Financial Risk Profile The company has a healthy financial risk profile marked by healthy tangible net-worth and healthy debt protection metrics. The tangible net worth of the group stood at Rs.647.28 Cr. as on March 31, 2024 against Rs.594.42 Crore as on 31st March2023. The net-worth has improved sequentially due to accretion of profits in reserves. The capital structure is healthy owing to no reliance on external funds with total outside liabilities to adjusted net-worth ratio of 0.01 times as on 31 st March 2024 and highly comfortable debt protection metrics. The coverage ratios of the company remained strong with Interest Coverage Ratio (ICR) of 104.09 times for FY24 and The Debt Service Coverage Ratio (DSCR) stood at 83.91 times for FY24. Going forward, the company is going for capital expenditure which hasn’t been finalised yet. While the capex will be funded partly through debt, financial risk profile will remain healthy with TOL/TNW and gearing expected to remain below unity in near term. Acuité believes that the financial risk profile of the company is likely to remain healthy in near to medium term with healthy net worth. Steady Scale of operations despite a decline in revenues and profitability The company have achieved a revenue of Rs. 447.78 Crore in FY24 against Rs.492.69 Crore in FY23 and Rs.330.54 Crore in FY22. Currently, the raw material prices are on the higher side and the price realization for same has come down resulting into lower margins as compared to previous years. The operating margins of the company stood at 13.49% in FY24 against 16.40% in FY23 and the PAT margins of the company stood at 14.29% in FY24 against 13.33% in FY23. Wastepaper prices and pulp and paper prices have seen a rise in global market in current financial year, which may impact profitability and will remain a key rating sensitivity factor. While margin was moderate, significant rise in operating income ensured steady net cash accrual. In addition, the company have achieved the turnover of Rs.224.77 Crore till September 2024 coupled with decline in the EBITDA which stood at Rs.18.86 Crore in H1FY25 against Rs.37.82 Crore in H1FY24. Going forward, the company is expected to generate the top-line under the same range in near to medium term. |
| Weaknesses |
| Working capital intensive operations
The working capital operations of the company is moderately intensive marked by GCA days which stood at 107 days as on 31st March 2024 against 87 days as on 31st March 2023. The Debtor and inventory days of the company stood at 3 days and 109 days respectively as on 31st March 2024 against 2 days and 85 days respectively as on 31st March 2023. The duration from conversion of raw material into finished product takes 12 hrs and on an average company keeps an inventory for four-five months as it is a demand based product and SPML gets an order on monthly basis. On the other hand, the creditor days of the company stood at 43 days as on 31st March 2024 against 53 days as on 31st March 2023. Acuite believes that working capital operations of the company may continue to remain in the same range in near to medium term considering the nature of 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. 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 |
|
| Liquidity Position |
| Strong |
|
The liquidity profile of the company is Strong. The company has generated net cash accruals which stood at Rs.69.44 Crore as on 31st March 2024 against the debt repayment obligation of almost nil. Going forward, the company is expected to generate sufficient net cash accruals against the debt repayment obligation of almost nil in near to medium term. The current ratio of the company stood at 2.66 times as on 31st March 2024 against 4.28 times as on 31st March 2023. The unencumbered cash and bank balance of the company stood at Rs.1.86 Crore as on 31st March 2024 against Rs.3.47 Crore as on 31st March 2023 and Investments worth Rs.208.87 Crore as on 31 st March 2024 against Rs.177.85 Crore as on 31 st March 2023.
|
| Outlook: Stable |
| |
| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 447.78 | 492.69 |
| PAT | Rs. Cr. | 64.00 | 65.67 |
| PAT Margin | (%) | 14.29 | 13.33 |
| Total Debt/Tangible Net Worth | Times | 0.01 | 0.00 |
| PBDIT/Interest | Times | 104.09 | 159.42 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None. |
| Applicable Criteria |
|
• 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 |
|
| |
|
|
||||||||||||||||||
|
|
Contacts |
About Acuité Ratings & Research |
