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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6.75 | ACUITE BBB- | Positive | Assigned | - |
| Bank Loan Ratings | 61.98 | ACUITE BBB- | Positive | Reaffirmed | Stable to Positive | - |
| Bank Loan Ratings | 3.25 | - | ACUITE A3 | Assigned |
| Bank Loan Ratings | 42.75 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding | 114.73 | - | - |
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Rating Rationale |
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Acuité has assigned its long-term rating of ‘ACUITE BBB-’ (read as ACUITE Triple B minus) on the Rs.6.75 Cr. bank facilities of Sylvan Plyboard India Limited (SPIL). The outlook is ‘Positive’.
Acuite has also assigned a short- term rating of 'ACUITE A3' (read as ACUITE A three) on the Rs.3.25 Cr. bank facilities of Sylvan Plyboard India Limited (SPIL). Acuite has reaffirmed its long-term rating at ‘ACUITE BBB-’ (read as ACUITE Triple B minus) on the Rs.61.98 Cr. bank facilities of Sylvan Plyboard India Limited (SPIL). The outlook is revised to ‘Positive’ from 'Stable'. Acuite has reaffirmed its short-term rating to ‘ACUITE A3’ (read as ACUITE A three) on the Rs.42.75 Cr. bank facilities of Sylvan Plyboard India Limited (SPIL). Rationale for Rating The rating reaffirmed reflects the benefits derived from the long standing experience of the promoters in the industry along with steady scale of operations. The financial risk profile of the company is healthy marked by improving net worth, comfortable gearing and moderate debt protection metrics. The company has recorded an operating income of Rs. 198.56 Cr. in FY2023 as against Rs. 172.04 Cr. in FY2022. Further, the company has achieved revenues of around Rs. 223.82 Cr. for the FY2024 (Provisional). It has also been able to improve its operating margin to 8.50% in FY2024(Provisional) largely because of improvement since pandemic times and partial automation of its machinery leading to lower power and employee costs. The performance of the company is expected to remain at similar improved levels over the medium term. These strengths are constrained by working capital intensive nature of operations as evident from gross current assets (GCA) of 320 days for FY2023 and same for the FY2022 and fragmented nature of the industry as the industry is highly fragmented and unorganized in nature. |
| About the Company |
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Sylvan Plyboard India Limited was incorporated in August 2002 as Singh Brothers Exim Pvt Ltd to take over the operations of Singh Brothers & Co, a proprietorship firm established by late Mr Shree Krishna Singh in 1951. In March 2013, the company was given its current name. The company's promoters are Mr. Jai Prakash Singh and his son, Mr. Anand Kumar Singh. The manufacturing facility has been strategically located in proximity to Kolkata Port leading to easier imports. SPIL is engaged in manufacturing of various wood products such as face veneer, sawn timber, plywood, block board, flush door and flexi ply across grades and thickness. The company markets its products under the brand name of “Sylvan”, through its network of branch offices, authorized dealers, and sub dealers. The company had more than 360 authorized dealers across 15 states.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of SPIL to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Long standing experience of the promoters in the industry
The key promoters, Mr. Jai Prakash and Mr. Anand Kumar Singh have more than 4 decades of experience in the business. The long-standing experience of the promoters and long track record of operations has helped them to establish strong relationships with suppliers and customers; has aided in the establishment of a widespread dealer network for processed timber and other timber products in West Bengal, Odisha, and Uttar Pradesh and in last financial year, Uttarakhand. Acuité derives comfort from the long experience of the management and believes this will benefit the company going forward, resulting in steady growth in the scale of operations. Steady scale of operations SPIL reported operating income of Rs. 198.56 Cr. in FY2023 as against Rs. 172.04 Cr. in FY2022. It has clocked a revenue of Rs. 223.82 Cr. in FY2024 (provisional). The increase in revenue in FY2023 is attributable to better pricing, as the price of finished goods has increased by 5–6%. The company uses a dual approach, buying from local markets and through imports. When local prices rise, the company increases its import. For sawn timber, they import most of the raw wood (round wood) due to higher local prices, and then convert it into sawn timber themselves. This year, the company relied mostly on imports. The operating margin of the company increased to 6.83% in FY2023 as compared to 6.25% in FY2022. The company’s margins are expected to improve further due to atomisation of plant. Additionally, majority of the factory is automated, which lowers the labour and electricity costs. The company intends to fully automate its factory. Further, PAT margin stood at 1.78% in FY2023 as against 1.77% in FY2022. The ROCE levels stood comfortable at 8.71% in FY2023 as against 7.47% in FY2022. Healthy financial risk profile The financial risk profile of the company is healthy marked by improving net worth, comfortable gearing and moderate debt protection metrics. The tangible net worth of the company stood at Rs. 88.12 Cr. as on FY2023 as compared to Rs.82.83 Cr. as on FY2022 due to accretion to reserves. The Company has also infused Rs. 5 Cr. as equity capital in FY2024 which is expected to improve its capital structure. The gearing of the company stood comfortable at 0.62 times as on FY2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) has increased and stood at 1.32 times as on FY2023. The debt protection metrices of the company remain moderate marked by Interest coverage ratio (ICR) of 1.96 times and debt service coverage ratio (DSCR) of 1.20 times for FY2023. The net cash accruals to total debt (NCA/TD) stood healthy at 0.11 times in FY2023. Going forward, Acuité believes that the financial risk profile will remain healthy over the medium term, supported by steady accrual, comfortable capital structure and debt protection metrices |
| Weaknesses |
| Working capital intensive nature of operations
SPIL has high working capital requirements as evident from gross current assets (GCA) of 320 days for FY2023 and same for the FY2022. Debtor days decreased to 71 days in FY2023 as against 86 days in FY2022. Inventory days increased to 260 days in FY2023 as against 241 days in FY2022. The management has to import raw materials and there is a high lead time involved in procurement and shipment of raw materials. As an outcome, the Company maintains high inventory levels for maintaining continuity of operations. Creditor days of the company stood at 157 days as on FY2023 as compared to 138 days of FY2022. A majority of the suppliers of the company provides a credit of 180 to 270 days backed by letter of credit. Acuité believes that the working capital operations of the company will remain at the similar levels over the medium term Fragmented nature of the industry The industry is highly fragmented and unorganized in nature thereby putting pressure on the profitability margins of the companies engaged in the industry. Furthermore, due to low entry barriers, the competition gets intensified, which put pressure on profitability of the existing as well as new players. Accordingly, the margins of the company may fluctuate, depending upon price movement and level of competition. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has adequate liquidity marked by net cash accruals of Rs. 5.87 Cr. as on FY2023 as against debt obligation of Rs. 3.66 Cr. over the same period. The net cash accruals are expected to improve backed by improving profitability over the medium term and be range bound to Rs.5.87 Cr. and Rs. 8.48 cr. The cash and bank balance stood at Rs. 0.34 Cr. for FY 2023. Further, the current ratio of the company stood at 1.59 times in FY2023. The working capital cycle of the company is marked by Gross Current Assets (GCA) of 320 days for FY2023 and same for the FY2022. The bank limit of the company has been ~ 82.53 percent utilized for the last six months ended in February 2024. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of steady cash accruals, low term debt repayment obligations and moderate current ratio over the medium term.
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| Outlook: Positive |
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Acuité believes that the company, will maintain a ‘Positive’ outlook over the medium term due to improvement in revenues and expected improvement in profitability due to automation of its machinery. The rating may be upgraded in case the company achieves higher than expected improvement in its operating income and profitability while improving its working capital cycle. Conversely, the outlook may be revised to ‘Stable’ in case of substantial reduction in its operating income, sharp decline in its operating margins and further stretch in 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. | 198.56 | 172.04 |
| PAT | Rs. Cr. | 3.53 | 3.05 |
| PAT Margin | (%) | 1.78 | 1.77 |
| Total Debt/Tangible Net Worth | Times | 0.62 | 0.55 |
| PBDIT/Interest | Times | 1.96 | 2.08 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.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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