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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 48.79 | ACUITE BBB- | Stable | Downgraded | - |
| Bank Loan Ratings | 7.91 | - | ACUITE A3 | Downgraded |
| Total Outstanding | 56.70 | - | - |
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Rating Rationale |
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Acuite has downgraded its long term rating to ‘ACUITE BBB-‘ (read as ACUITE Triple B minus) from ‘ACUITE BBB‘ (read as ACUITE triple B) and short term rating to 'ACUITE A3' (read as ACUITE A three) from 'ACUITE A3+' (read as ACUITE A three plus) on Rs. 56.70 crore bank facilities of UNIGLOBAL PAPERS PRIVATE LIMITED (UPPL). The outlook is 'Stable'.
Rationale for rating The rating is downgraded due to the stretched liquidity, intensive working capital operations and weakening of debt protection metrics. However, rating gets comfort from experienced management and improving operation of the company in terms of volume sales sold in FY2024. |
| About the Company |
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Incorporated in 2003, Uniglobal Papers Private Limited (UPPL), [erstwhile Agio Industries Limited] is promoted by Mr. Rahul Tikmani. Based in Kolkata, UPPL is engaged in the production of coated duplex board. Currently the company has enhanced the production capacity from 33,000 MTPA to 49,500 MTPA.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of Uniglobal Papers Private Limited (UPPL) to arrive at this rating.
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| Key Rating Drivers |
| Strengths |
| Established operations and experienced management
UPPL has a long track record of operations of around two decades in the paper industry. The company is supported by the decade long expertise of the director, Mr. Rahul Tikmani, along with a set of experienced professionals. Acuité believes that, going forward, the established clientele relationships and the experienced management will continue to support the company’s growth plans. Stable business risk profile albeit decline in revenues The company has reported revenue of Rs. 121.31 Crore in FY24 (prov.) against Rs. 146.13 Crore in FY23. This dip in top line of the company is because volatility in price realization. However, the volume sales has increased to 31292.06 MT in FY2024 (prov.) from 28655 MT in FY2023. The margins have also remained volatile with margins at 7.37 % in FY 2024 (Prov) against 6.06% in FY2023 and 9.81% in FY2022. |
| Weaknesses |
| Moderate Financial Risk Profile
The financial risk profile of the company is marked by adjusted net-worth of Rs. 76.59 Crore in FY24 (prov.) against Rs. 75.76 Crore in FY23 due to small accretion to reserves. Acuite has treated the unsecured loans of Rs. 33.96 Cr. as quasi equity due to an undertaking received from management to retain such amount in the business over the medium term. The total debt of the company stood at Rs. 51.33 Crores in FY24 (prov.) which consists of long term debt of Rs. 16.88 Crore, Short term debt of Rs. 27.32 Crore and CPLTD of Rs. 7.14 Crore. Further, the debt-equity ratio of the company stood at 0.67 times in FY24 (prov.) against 0.73 times in FY23. The interest coverage ratio of the company stood at 1.92 times in FY24 (prov.) against 2.46 times in FY23. The DSCR of the company stood at 0.91 times in FY24 (prov.) against 1.34 times in FY23 and TOL/TNW ratio stood at 1.02 times in FY24 (prov.) against 1.00 times in FY23. Working capital operations The working capital operations of the company is intensive marked by GCA days of 157 days in FY24 (prov.) against 136 days in FY23. There is an increase in the GCA days due to the debtor days of the company which stood at 77 days in FY24 (prov.) against 30 days in FY23, creditor days of the company stood at 25 days in FY24 (prov.) against 10 days in FY23. However, inventory days stood at 74 days in FY24 (prov.) against 80 days in FY23. Highly fragmented and competitive industry The recycling industry is highly fragmented with several organized and unorganized players, thereby impacting the company's profitability. Players in the industry have to comply with stringent, and effluent treatment norms of pollution control boards and complete discretion of the government, which led to high compliance risks. However, most pulp-based paper mills has adopted environment friendly technologies to minimize wastage and maximize recycling/reuse materials to produce eco-friendly paper. Also, the domestic industry faces immense competition of imports from Asian countries, which are of superior quality and of lower prices. Acuité believes that adherence to several environmental regulations and continuous investments are required to comply with the norms, which is likely to impact the profitability. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The liquidity profile of the company is stretched. The net cash accruals of company stood at Rs. 4.89 Cr. in FY 24 (prov.) against the CPLTD of Rs. 5.85 Cr. The shortfall of debt obligation was paid by squeezing the working capital of the company. The company had cash & bank position of Rs. 0.08 Cr. and current ratio stood at 1.25 times for FY 24 (prov.). The average fund based bank limit utilization is at 89.67% and non-fund based bank limit utilization is at 49.42% for the 6 months’ period ending June 2024. Acuite believes that the liquidity of the Company would remain stretched due to tightly matched small accruals against debt obligations, modest current ratio and high fund based bank limit utilization over the medium term.
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| Outlook: Stable |
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Acuité believes that the outlook of the company will remain 'Stable' over the medium term on account of the long track record of operations, and experienced management. The outlook may be revised to 'Positive' in case of significant growth in revenue while achieving sustained improvement in operating margins, improvement in debt protection metrics and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 121.31 | 146.13 |
| PAT | Rs. Cr. | 1.32 | 1.74 |
| PAT Margin | (%) | 1.09 | 1.19 |
| Total Debt/Tangible Net Worth | Times | 0.67 | 0.73 |
| PBDIT/Interest | Times | 1.92 | 2.46 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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None
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| Applicable Criteria |
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• 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 |
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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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