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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 36.40 | ACUITE BB+ | Stable | Upgraded | - |
| Bank Loan Ratings | 17.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 53.40 | - | - |
| Rating Rationale |
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Acuité has Upgraded its long-term rating from ‘ACUITE BB’ (read as ACUITE double B) to ‘ACUITE BB+’ (read as ACUITE double B Plus) and reaffirmed its short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.53.40 crore bank facilities of Veekay Plast (VP). The outlook is 'Stable'.
Rationale for Rating Action Acuite factors in experienced management, Improvement in Business, Moderate financial risk profile and adequate liquidity profile of the firm The revenue from operations of the firm witnessed improvement to Rs. 109.25 crore in FY2023 (Provisional) as against Rs. 97.63 crore in FY2022. The operating profit margin of the company improved to 8.22 percent in FY2023 (Provisional) as against 6.83 percent in FY2022 on account of lower input cost resulting improvement in Operating margin . Similarly, PAT Margin improved & stood at 3.40 Percent in FY 2023(Prov.) as against 2.29 percent in FY 2022. Coupled to this coverage indicators improved in FY 23(Prov.) Acuité believes that the firm will grow its scale of operations in the volume terms and improve profitability while maintaining a healthy capital structure. |
| About the Company |
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Veekay Plast (VP) is a Jaipur-based partnership firm established in 1996 and is engaged in the manufacturing of High Density Polyethylene (HDPE) pipes, Double wall corrugated (DWC) pipes and Medium Density Polyethylene (MDPE) pipes catering to telecom, gas and water segment. Further, the firm are also a Del Credere Associates cum Consignment stockists for Indian Oil Corporation Limited (IOCL) for marketing of polymer in Rajasthan state. The manufacturing facilities are located in Rajasthan and Hyderbad with a total capacity of 60 to 70 Ton per day.
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| Analytical Approach |
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For arriving at its rating, Acuité has considered the standalone business and financial risk profile of Veekay Plast to arrive at this rating.
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Key Rating Drivers
| Strengths |
| Experienced Management
The promoter of Veekay Plast (VP), Mr. Vijay Kumar Katiyar, Mrs. Reema Godikar and Mr. Vimal Katiyar have more than two decades of experience in the pipe industry. Further, having more than two decades of operational track record has helped the firm to maintain to establish strong relations with its customers as well as with its suppliers and also maintain strong market position. Business risk profile-Improvement VP’s revenue improved which is apparent from growth in revenue from operations by ~11.90% in FY2023 (Prov.) to Rs.~109.25 crore as against Rs. 97.63 crore in FY2022. (overall ~ 53 percent increase in last three years FY 21 to FY 23). Firm has booked revenue of Rs~21 crore in first three months of FY 24. Expected revenue for FY 24 is Rs ~ 125 to 130 crore. Firm has total orders in hand Rs~71 crores are to be executed by end of next 2-3 Months.
The operating profit margin of the firm improved by 139 bps in FY 23(Prov.). Operating Profit Margin of firm stood at 8.22% in FY2023 (Prov.) as against 6.83% in FY2022.Likewise ,the net profit margin of the firm improved by 111 bps and stood at 3.40 percent in FY2023 (Prov.) as against 2.29 percent in FY2022. Financial Risk Profile- Moderate Firm has moderate financial risk profile marked by moderate net worth and moderate debt protection metrics. Firm’s net worth stood at Rs~41.97 Cr as on 31st March 2023(Prov.) as against Rs.~38.42 Cr as on 31st March 2022. Networth improved on account of Profit accretions.Firm follows conservative leverage policy. Gearing levels (debt-to-equity) witnessed improvement by 14 bps and stood below unity at 0.82 times as on March 31, 2023 (prov.) as against 0.96 times in FY 2022. Further, the interest coverage ratio improved by 14 bps and stood moderate at 1.90 times for FY2023 (Prov.) as against 1.76 times in FY2022. Likewise Debt Service coverage ratio witnessed minuscule improvement of 4 bps and stood moderate at 1.26 times for FY2023 (Prov.) as against 1.22 times in FY2022.Total outside liabilities to total net worth (TOL/TNW) stood at 1.32 times as on FY2023 (Prov.) vis-à-vis 1.42 times as on FY2022. Debt-EBITA improved to 3.20 times as on 31st March 2023 (Prov.) as against 4.35 times as on 31st March 2022. |
| Weaknesses |
| Working capital operations- Intensive
Firm has improved yet intensive working capital requirements as evident from gross current assets (GCA) of 250 days in FY2023 (prov.) as compared to 264 days in FY2022. Intensiveness of the working capital is due to high debtor days. Debtor days improved by 17 days and stood at 150 days in FY2023 (167 days in FY2022). Inventory days moderated by 5 days and stood at 94 days in FY2023 (Prov.) as against 89 days in FY2022. Current ratio of firm stood at 1.63 times as on March 31, 2023 (Prov.). Highly competitive and tender base nature of business The firm is exposed to intense competition in the pipe industry due to low entry barriers and a large number of unorganized players. Further, the operations are tender-based with revenues susceptible to the number of tenders won by the firm. However, the extensive experience of the partners and established relations with clients, partially mitigate this risk. |
| Rating Sensitivities |
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Significant improvement in operating performance of the firm leading to improvement in overall financial risk profile Any deterioration in its liquidity leading to deterioration in debt protection metrics. Improvement in working capital cycle. Sacricity and Competitive price of Raw material |
| Liquidity Position |
| Adequate |
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Firm has adequate liquidity marked by net cash accruals, Current Ratio, Bank Balances. Firm generated cash accruals of Rs. 5.08 crore for FY2023 (Prov.) against Rs 2.89 crore debt obligations. Current Ratio stood at 1.63 times as on 31 March 2023 (Prov.) as against 1.66 times in the previous year. Cash and Bank Balances of firm stood at Rs 0.19 crores. Further Fund based Bank Limit Utilization in 12 months ended March 23 was ~94 percent. The liquidity of the company is expected to improve as firm is expected to generate cash accruals in the range of Rs. 8 Cr. to 10 Cr. against debt obligation of Rs 2 to 2.5 crore will also support the liquidity of the company.
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| Outlook: Stable |
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Acuité believes that VP will maintain a 'Stable' outlook over the medium term on account of its partners’ extensive experience and healthy relationship with existing clients. The outlook may be revised to 'Positive' if the firm is able to sustain growth in revenues while maintaining its profitability and improving its working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of any stretch in its working capital management leading to deterioration of its financial risk profile and liquidity profile.
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| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 109.25 | 97.63 |
| PAT | Rs. Cr. | 3.72 | 2.23 |
| PAT Margin | (%) | 3.40 | 2.29 |
| Total Debt/Tangible Net Worth | Times | 0.82 | 0.96 |
| PBDIT/Interest | Times | 1.90 | 1.76 |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- 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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