Press Release April 15, 2025 V V G PAPER INDUSTRY PRIVATE LIMITED Rating Assigned

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	32.50	ACUITE BB- | Stable | Assigned	-
Total Outstanding	32.50	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­Acuité has assigned its long-term rating of ‘ACUITE BB-' (read as ACUITE double B minus) on the Rs. 32.50 Cr. bank facilities of V V G Paper Industry Private Limited (VVG). The outlook is 'Stable'. Rationale for rating assigned The rating assigned reflects VVG’s established track record of operations and improving trend recorded in its operating profitability albeit moderation in operating revenues. The rating remains constrained due to VVG’s below average financial risk profile, moderately intensive working capital management, stretched liquidity position and susceptibility of profitability to volatility in raw material prices in a highly fragmented and competitive industry.

About the Company

Tamil Nadu Based, VVG was incorporated in 2017. Currently Mr. Gundur Ramasamy Ananda Babu and Mr. Prasad Dilip Kumar are the directors of the company. It is engaged in manufacturing of Kraft Paper with a GSM range of 120-240 from recycled material. The company has a paper mill with an installed capacity of 38,400 tons per annum (TPA).

Unsupported Rating

­Not Applicable

Analytical Approach

­Acuité has considered the standalone business and financial risk profiles of the V V G Paper Industry Private Limited (VVG) to arrive at this rating.

Key Rating Drivers

Strengths

Established track record of operations and extensive experience of promoters Incorporated in 2017, VVG commenced its commercial production in November 2019. VVG manufactures kraft paper, which is primarily used in the production of corrugated boxes and paperboards. The company is promoted by Mr. G. R. Ananda Babu and Mr. Dilip Kumar P. Mr. G. R. Ananda Babu, hasover three decades of entrepreneurial experience in the cement wholesale and C&F business. This extensive experience has enabled the company to establish strong relationships with its customers and suppliers. Acuité believes that the company will benefit from the extensive experience of the management to further augment its business risk profile. Improving operating profit margins amid marginal decline in operating income The company’s operating profit margin improved to ~15% in 11MFY2025 from 10.45% in FY2024 and 8.74% in FY2023. This improvement in profitability is primarily led by lower material costs. However, the operating revenue moderated to Rs.102.99 Cr. in FY2024 from Rs 107.77 Cr. in FY2023 and stood at Rs. 102 Cr. in 11MFY2025. The moderation in revenue is on account of decline in price realisations amid increased volumes. Going ahead, the ability of the company to improve its operating revenue while maintaining its profitability will remain key monitorable.

Weaknesses

Below Average Financial Risk Profile The financial risk profile of the company stood below average, marked by low net worth, high gearing (debt-equity) and average debt protection metrics. The tangible net worth increased to Rs. 4.46 Cr. as of March 31, 2024, from Rs. 1.23 Cr. as on March 31, 2023, due to accretion of profits to reserves. The total debt of the company stood at Rs. 38.43 Cr. which includes long term loans of Rs. 22.55 Cr., unsecured loans from directors/promoters of Rs. 5.18 Cr. and short-term debt of Rs. 10.71 Cr. as on 31 March 2024. The gearing (debt-equity) ratio stood high at 8.62 times as on 31 March 2024 as compared to 32.35 times as on 31 March 2023. The debt protection metrics stood average where the Interest Coverage Ratio stood at 2.68 times for FY2024 as against 2.32 times for FY2023. Debt Service Coverage Ratio (DSCR) stood at 1.15 times in FY2024 as against 0.76 times in FY2023.  Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 11.72 times as on 31 March 2024 as against 42.57 times as on 31 March 2023. The Debt-EBITDA improved marginally to 3.48 times for FY2024 as against 4.17 times for FY2023.Going ahead, the ability of the company to improve its overall financial risk profile will remain a key monitorable. Moderately Intensive Working Capital Management The working capital management of the company is moderately intensive marked by GCA days of 128 days in FY2024 as against 109 days in FY2023. The inventory days stood at 27 days in FY2024 as against 26 days in FY2023. Further, the debtor’s collection period stood at 75 days in FY2024 as against 62 days for FY2023. The creditors’ days stood at 47 days in FY2024 as against 41 days in FY2023. The reliance on working capital limits stood high marked by average utilization of fund based working capital limits of ~96% for 6 months ended February 2025. Exposure to volatile raw material prices and highly fragmented and competitive industry Operating margin remains susceptible to volatile raw material (wastepaper) prices, which are linked directly to international prices. Any adverse fluctuation in raw material prices can impact profitability. Kraft paper is used for tertiary packaging; thus, offtake depends on industrial production and other macroeconomic factors. The recycling industry is competitive, and the highly fragmented industrial paper industry constrains scalability, pricing power, and product differentiation.

Rating Sensitivities

Improvement in the operating revenue while maintaining the profitability margins. Any further deterioration in financial risk profile leading to deterioration in liquidity. Elongation in working capital cycle.

Liquidity Position

Stretched

The liquidity position remains stretched, evidenced by net cash accruals against maturing debt obligations. Projections indicate stretched liquidity, with expected tightly matched cash accruals ranging from Rs. 7 Cr. to Rs. 9 Cr. against maturing repayment obligations of Rs. 5.5 Cr. to Rs. 7.5 Cr. over the medium term. The reliance on working capital limits stood high marked by average utilization of fund based working capital limits of ~96% for 6 months ended February 2025. The current ratio has improved slightly from 1.11 times on March 31, 2023, to 1.14 times on March 31, 2024. The cash and bank balance as on 31st March 2024 stood at Rs. 3.20 Cr. Going ahead, the ability of the company to register improvement in its net cash accruals generation will remain a key monitorable over the medium term.

Outlook: Stable

­

Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	102.99	107.77
PAT	Rs. Cr.	3.23	1.74
PAT Margin	(%)	3.13	1.61
Total Debt/Tangible Net Worth	Times	8.62	32.35
PBDIT/Interest	Times	2.68	2.32

Status of non-cooperation with previous CRA (if applicable)

­None.

Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite)

Not applicable

Any other information

­None

Applicable Criteria

• 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

­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.

Rating History :

­Not Applicable

Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Canara Bank Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 15.00 Simple ACUITE BB- | Stable | Assigned Canara Bank Not avl. / Not appl. Covid Emergency Line. Not avl. / Not appl. Not avl. / Not appl. 24 Aug 2025 1.19 Simple ACUITE BB- | Stable | Assigned Canara Bank Not avl. / Not appl. Covid Emergency Line. Not avl. / Not appl. Not avl. / Not appl. 17 Aug 2026 1.48 Simple ACUITE BB- | Stable | Assigned Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 0.39 Simple ACUITE BB- | Stable | Assigned Canara Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 20 Nov 2028 10.65 Simple ACUITE BB- | Stable | Assigned Canara Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 18 Mar 2027 0.72 Simple ACUITE BB- | Stable | Assigned Canara Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 21 Nov 2028 1.94 Simple ACUITE BB- | Stable | Assigned Canara Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 19 Dec 2025 1.13 Simple ACUITE BB- | Stable | Assigned

Contacts

Mohit Jain Senior Vice President - Rating Operations Sayali Parab Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.