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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 44.00 | ACUITE BB+ | Stable | Reaffirmed | Negative to Stable | - |
| Bank Loan Ratings | 16.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 60.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating to 'ACUITE BB+' (read as ACUITE Double B Plus) and short-term rating to 'ACUITE A4+' (read as ACUITE A Four Plus) to the Rs. 60.00 Cr. bank facilities of Unisource Papers Private Limited (UPPL). The outlook is revised from 'Negative' to ‘Stable’.
Rationale for revision in outlook and rating reaffirmation The revision in outlook and reaffirmation of the rating is on account of the moderate growth in scale and improvement in operating margin. The turnover of UPPL stood at Rs. 236.62 crore in FY24 (Prov.) against Rs. 206.97 crore in FY23 reflecting a year-on-year growth of ~14.33% in FY24 (Prov.). The company witnessed positive EBITDA margins of 2.69%(Prov.) in FY24 as compared to -0.31% in FY23. Further the rating also considers efficient working capital management, however, these strengths are partially set off by below average financial risk profile marked low net-worth, moderate gearing & moderate debt protection metrics and stretched liquidity position of the company. Also, the company faces intense competition in the industry along with supplier concentration risk. |
| About the Company |
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Unisource Papers Private Limited (UPPL) incorporated in 2005 and is promoted by Mr. Inder Aurora. The company imports, trades in, and processes a variety of paper, including kraft, test liner, and virgin. The company imports 20% of its material requirement from US, Europe, and Australia whereas remaining requirements are fulfilled from domestic markets. UPPL has three units located at Pune and two units at Sonipat with a total installed capacity of 1,26,200 MT. The company has an agreement with ITC Limited and has two units specifically dedicated for them on a Job-work model basis.
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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 Unisource Papers Private Limited (UPPL) to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Established track record and experienced management
UPPL has an established track record of more than a decade in this line of business with an experienced management. The company is managed by Aurora family since its inception. The experience of the promoters has helped the company to maintain a healthy relationship with its customers and suppliers. The experience of the promoters is also reflected through stable revenue generation over the last three years. The revenue of the company improved to Rs.236.62 Cr. in FY24 (Prov.) as against Rs.206.97 Cr. in FY23 reflecting a year-on-year growth of ~14.33% in FY24 (Prov.). The EBITDA improved and stood at Rs. 6.36 Cr. in FY24 (Prov.) as against Rs. -0.65 Cr. in FY23. The operating margin of the company also improved and stood at 2.69% in FY2024 (Prov.) as against -0.31% in FY2023. Acuité believes that the company will benefit from the long track record of operations along with a healthy relationship with its customer and suppliers. Efficient Working Capital Cycle The working capital management of the company is efficient marked by GCA days of 77 days in FY24 (Prov.) as against 83 days in FY23. The debtor days stood at 46 days in FY24 (Prov.) as against 37 days in FY23. The creditor days stood at 26 days in FY24 (Prov.) as against 20 days in FY23. The average credit period allowed by suppliers is of 40 days. The inventory holding period of the company stood similar at 22 days in FY24 (Prov.) and FY23. The average fund-based bank limit utilization for last five months ended April 2024 stood at ~92.36%. Acuité expects the working capital management to remain efficient over the medium term. |
| Weaknesses |
| Below Average Financial Risk Profile
The financial risk profile of the company stood below average, marked by low net worth, moderate gearing and moderate debt protection metrics. The tangible net worth at stood at similar level at Rs.16.38 Cr. as on 31 March 2024 (Prov.) as against Rs. 16.39 Cr. as on 31 March 2023. The total debt of the company stood at Rs. 43.19 Cr. in FY24(Prov.) as against Rs. 45.01 Cr. in FY23. Total debt includes Rs.3.25 Cr. of long-term debt, Rs. 36.96 Cr. of short-term debt and Rs. 2.97 Cr. of CPLTD as on 31 March 2024 (Prov.). The gearing (debt-equity) stood at 2.64 times as on 31 March 2024 (Prov.) as compared to 2.75 times as on 31 March 2023. Interest Coverage Ratio stood at 1.46 times for FY24 (prov.) as against -0.09 times for FY23. Debt Service Coverage Ratio (DSCR) stood at 0.92 times in FY24 (prov.) as against 0.19 times in FY23. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 3.65 times as on 31 March 2024 (Prov.) as against 3.52 times as on 31 March 2023. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.05 times for FY24 (Prov.) as against -0.06 times for FY23. Acuité believes ability of the company to improve its capital structure driven by improved operating performance and no major debt-funded capex in the near to medium term will remain a key rating monitorable. Highly competitive and fragmented industry with supplier concentration risk The paper industry is highly competitive and fragmented marked by the presence of many organized and unorganized players in this industry, thus putting pressure on the profitability margins of the company. However, this risk is partially mitigated by company’s experienced management and long-standing relationships with its reputed clientele. UPPL also faces a supplier concentration risk as more than 50% of its raw material requirements are being procured from ITC Limited. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The company’s liquidity position is stretched marked by insufficient net cash accruals against its maturing debt obligations. The company has net cash accruals of Rs. 2.04 Crore in FY24 (Prov.) against its maturing debt obligations of Rs.2.62 crore in the same tenure. Further, it is expected to generate cash accrual of ~Rs. 3.24 Cr. against the maturing repayment obligations of around Rs. 2.97 Cr. over the medium term. The company has cash and bank balances of Rs.0.12 Cr. as on March 31, 2024 (Prov.). The current ratio stands at 0.98 times as on March 31, 2024 (Prov.) as against 1.00 times as on March 31, 2023. The average fund-based bank limit utilization for last five months ended April 2024 stood at ~92.36%.
Acuité believes that the liquidity of the company is likely to remain a key sensitivity over the medium term. |
| Outlook: Stable |
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Acuité believes UPPL will maintain a ‘Stable’ outlook marked by improvement in the operating margins while maintaining its working capital cycle. The outlook may be revised to ‘Positive’ incase of higher than expected improvement in revenue and profitability margins and financial risk profile. The outlook may be revised to ‘Negative’ in case of deterioration of operating performance of the company along with any further deterioration of its financial risk profile and liquidity position and any elongation of the working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 236.62 | 206.97 |
| PAT | Rs. Cr. | 0.00 | (4.70) |
| PAT Margin | (%) | 0.00 | (2.27) |
| Total Debt/Tangible Net Worth | Times | 2.64 | 2.75 |
| PBDIT/Interest | Times | 1.46 | (0.09) |
| 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 • 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 • 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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