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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 50.00 | ACUITE BBB+ | Negative | Reaffirmed | - |
| Bank Loan Ratings | 62.25 | Not Applicable | Withdrawn | - |
| Bank Loan Ratings | 310.00 | - | ACUITE A2 | Reaffirmed |
| Bank Loan Ratings | 67.75 | - | Not Applicable | Withdrawn |
| Total Outstanding | 360.00 | - | - |
| Total Withdrawn | 130.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) on Rs. 50.00 Cr. and the short-term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs. 310.00 Cr. bank facilities of Sushila Parmar International Private Limited (SPIPL).The outlook is 'Negative'.
Also withdrawing the long-term rating on the Rs. 62.25 Cr. and short-term rating on the Rs. 67.75 Cr. of proposed bank facilities of Sushila Parmar International Private Limited (SPIPL) without assigning any rating as it is a proposed facility. The withdrawal is in accordance with Acuite's policy on withdrawal of rating as applicable to the respective facility / instrument. The rating is being withdrawn on account of request received from the company. Rationale for the rating The rating factors in the significant moderation of the company’s financial risk profile in FY2023 and Q1FY2024 led by the inventory losses due to steep decline in realisations of PVC and other products, following heavy dumping by China. The company reported net losses of Rs. 39.41 Cr. in FY2023 which resulted in the deterioration in the networth to Rs.106.32 Cr. as on March 31, 2023 from 146.56 Cr. as on March 31, 2022 along with the weakening of its debt protection metrics. The rating however, draws comfort from establish and wide distribution network, long standing relationship with its customers and suppliers which has resulted in revenue growth with an uptick in the sales volume. Further, the company has reported profits in Q2FY2024 and Q3FY2024 (provisional) mainly with a change in inventory holding policy to order-backed along with a fixed price contract that insulates it against the price volatility. Though the cashflows remains susceptible to the sluggish demand in end user industry. |
| About Company |
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Based of Pune, Maharashtra, Sushila Parmar International Private Limited (SPIPL), was established as a proprietary concern in 2002 and reconstituted as private limited company in March 2010. The company is promoted by Mr. Rohit Parmar. SPIPL primarily trades in PVC resin, followed by other petrochemical products like Chlorinated polyvinyl chloride (CPVC), HDPE, LLDPE etc. It is engaged in trading of PVC resins and CPVC). For other products, It was a registered Del Credere Associate - cum - consignment stockiest for ONGC Petro additions Limited (OPaL) earlier and used to earn commission income. However from FY2023 onwards, company has directly started selling the above products. The company has established distribution network for PVC resin business with pan India presence and caters to customers across the most remote places in India. Its diversified customer base includes midsized PVC pipe manufacturers and other manufacturers using PVC as raw material and SME industries across India.
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| About the Group |
| SPIPL has established presence of over a decade in PVC, CPVC trading industry since 2002. The key promotor Mr. Rohit Parmar has more than two decades of experience in the same line of business. The extensive experience of the key promoter and established presence in the industry has helped company in developing long standing relationship with its customers and suppliers. The company has a UK based subsidiary SAR Overseas Ltd (SAROL) that is engaged in the similar line of business. |
| Unsupported Rating |
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Not applicable
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| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profile of SPIPL and SAR Overseas Ltd (SAROL)while arriving at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management, established track record of operations and wide distribution network
SPIPL has established presence of over a decade in PVC, CPVC trading industry since 2002. The key promotor Mr. Rohit Parmar has more than two decades of experience in the same line of business. The extensive experience of the key promoter and established presence in the industry has helped company in developing long standing relationship with its customers and suppliers. Further, the company is well supported by second line of management. The same is reflected through improvement in scale of operations which has grown at a CAGR of 38% during last three years from Rs.1195.60 Cr. in FY2021 to Rs. 2290.47 Cr. in FY2023. Additionally, the company has wide distribution network with 10 strategically located warehouses and port establishments with Pan-India presence. It has five major warehouses in the port areas of Nhava Sheva, Kolkata, Chennai, Mundra and Pipavav (Gujarat), while the other warehouses are located in New Delhi (catering to North Indian market), Indore (Madhya Pradesh), Daman (Gujarat), and Pune and Kolhapur (Maharashtra, OPaL warehouses). Further, the company has customers across the most remote places in India and reaching over 395 locations in 24 states. SPIPL uses its widespread port establishments to route shipment towards the required region of demand, efficiently managing its inventory and fulfilling customer orders. Acuité believes the company will continue to benefit from the extensive experience of the promotors, and established business presence, in the near to medium term. Revenue growth albeit inventory losses in FY23 The scale of operations of the company have increased to Rs. 2290.84 crore in FY23 registering a 36% growth from Rs. 1684.35 Cr. in FY2022 on a consolidated level. The company sold around 2,27,470 MT quantity in FY2023 against 1,25,331MT in FY2022 marking an 81% increase in the volumes. The growth in volumes was moderated by decline in the average sales realisation mostly that of PVC, PE and PP that exhibited a 39 to 48% decline as compared to previous fiscal. Further, the company reported revenues of Rs. 1922.84 crore in 9M FY2024 mainly contributed by the increased volumes. The company is expected to report ~Rs.2400-2500 crore in FY24. Notwithstanding, the growth in the revenues, the company witnessed a decline in the profitability in FY23 and Q1FY24 due to the inventory losses emanating from the sharp decline in the polyvinyl chloride (PVC) prices. Though, the company’s margins recovered from Q2FY2024 as per provisional financials. |
| Weaknesses |
| Moderation in financial risk profile; operating cycle remains low
The financial risk profile of the company has moderated in FY2023 and Q1FY2024 led by the inventory losses due to steep decline in realisations of PVC and other products, following heavy dumping by China. The company reported net losses of Rs. 39.41 Cr. in FY2023 which resulted in the weakening of its debt protection metrics and the deterioration in the networth to Rs.106.32 Cr. as on March 31, 2023 from 146.56 Cr. as on March 31, 2022. The gearing of the company though increased stood comfortable at 0.75 times as on March 31, 2023 as the company mostly utilises the letter of credit for purchases. The total debt of Rs. 79.53 crore entirely consists of short-term debt and the company doesn’t has any long-term dues. Further, the working capital cycle of SPIPL are comfortable marked by Gross Current Assets (GCA) of 39 days as on March 31, 2023 declined from 56 days as on March 31, 2022 due to reduction in inventory and debtor days. However, the average non fund-based bank limits was utilized at around 85.5% for the last 11 months ended November 2023. Low operating margins susceptible towards volatility in raw material prices The operating profitability remains susceptible to volatility in the price of key raw material, PVC resin, which is linked to petrochemical prices and its raw materials. PVC resin accounts for majority of total cost and most of the raw material required for trading is imported, inventory related risks persist. The ability of company to pass on such price fluctuations to its customer remains key challenge in maintaining stable margins. For FY2021, the EBITDA margins stood at around 8.13 percent due to lower cost of raw materials while the margins were corrected during FY2022 and stood at 1.58 percent. In the FY2023, the company has reported operating and net losses mainly on account of decline in the domestic prices in India. The company remains exposed to forex fluctuation risk as it imports 50% of its raw materials. However, it has adequate cover in place to cover such forex fluctuation risk. From Q1FY24, the company has changed its business model from being inventory led business to order-backed model. In order backed model, the company takes the advance orders from their clients on a fixed price resulting in a holding inventory on old prices, this will mitigate the losses that occur due to the price fluctuation on holding stocks, if any during the voyage period. In 9MFY2024, the company reported an operating margin of 1.2% (provisional financials). Although, the interest cost in the current fiscal remains high due to increase in the debt in the subsidiary company which has moderated the key coverage ratios. Cash flows susceptible to economic slowdown and sluggish demand in end user industry SPIPL’s operations can be impacted by any economic slowdown, and sluggish demand in the end user industry like Infrastructure, construction, packaging and real estate. In the event of prolonged economic slowdown regular flow of orders and operating performance of players like SPIPL may get impacted. Also, competition in the industry from organized as well as midsize regional traders along with low entry barriers, further constrained by limited product portfolio and low value addition. However, SPIPL's wide network distribution mitigates the entry barrier risk to some extent. ??????? |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity position remains adequate marked by cash bank balance of Rs.18.35 crore as on November 2023 end and the average GCA days has improved to 39 days during FY23 compared with 56 days during the previous year. The company reported net cash accruals of Rs. 6.92 crore during 9MFY24 and the company holds no term debt obligations. Further, there remains a buffer in the bank limits with the average utilisation of around 26.5% and maximum utilisation at 55% during the last 12 months from January to December 2023. However, the company has around 85.5% of NFB limits utilized for the last 11 months ended in Nov 2023.
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| Outlook: Negative |
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Acuité has revised the outlook on SPIPL to 'Negative' led by the deterioration in the financial risk profile along with a substantial decline in the networth in FY2023. The rating may be 'downgraded' if the company is unable to improve its profitability leading to the further deterioration in the financial risk profile in FY2024. The outlook may be revised to 'Stable' if company is able to improve its profitability while improving its coverage indicators and maintaining its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 2290.47 | 1684.35 |
| PAT | Rs. Cr. | (39.41) | 19.08 |
| PAT Margin | (%) | (1.72) | 1.13 |
| Total Debt/Tangible Net Worth | Times | 0.75 | 0.20 |
| PBDIT/Interest | Times | (4.63) | 9.21 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||
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