RATING RATIONALE
23Jan2025
Konkan Speciality Poly Products Pvt. Ltd.
Brickwork Ratings reaffirms the long term and short-term ratings for the Bank Loan Facilities of Rs. 93.70 Crs. of Konkan Speciality Poly Products Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (26 Dec 2023) |
Present | ||
| Fund Based | 55.06 | 50.70 | Long Term |
BWR BBB /Stable
removal from ISSUER NOT COOPERATING* category/Upgraded |
BWR BBB
/Stable Reaffirmation |
| (4.00) | (4.00) | ||||
| (10.00) | (10.00) | ||||
| Non Fund Based | 43.00 | 43.00 | Short Term |
BWR A3+
removal from ISSUER NOT COOPERATING* category/Upgraded |
BWR A3 +
Reaffirmation |
| Grand Total | 98.06 | 93.70 | (Rupees Ninety Three Crores and Seventy lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
Brickwork Ratings has reaffirmed the long-term and short-term rating at 'BWR BBB/Stable/BWR A3+' for the bank loan facilities of Konkan Speciality Poly Products Pvt. Ltd.
BWR reaffirmed the rating to the company based on its established track record and the extensive industry experience of its promoters, which provide operational stability and strategic direction. The rating also factors in the company’s improving profitability margins and enhanced operating performance, reflecting its ability to manage costs effectively and sustain growth. However, the rating also considers the challenges posed by raw material price volatility and the competitive industry dynamics, which exert pressure on profitability and require high working capital investments. Additionally, the company’s increasing leverage ratios, driven by a higher reliance on external borrowings.
The rating outlook has been assigned as "Stable" as BWR believes that Konkan Speciality Poly Products Pvt. Ltd, the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenue and profitability margins show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.
KEY RATING DRIVERSCredit Strengths:
-
Established track record and extensive industry experience of the promoters :
The company was incorporated in 1987 and has an operational track record of over three decades. The extensive experience of the promoters in the chemical industry and their understanding of the dynamics of the industry are expected to continue to support the business risk profile.
-
Improving Profitability Margins :
The company has demonstrated consistent improvement in its profitability margins over the years, reflecting strong operational efficiency and effective cost management. The operating profit margin (OPM) increased from 7.47% in FY 22-23 to 7.68% in FY 23-24, showcasing the company's ability to maintain profitability despite potential cost pressures and market fluctuations.
This consistent upward trend in OPM suggests the company is leveraging economies of scale, optimizing production processes, and benefiting from improved pricing strategies. Moreover, the net profit margin (NPM) is also improving, rising from 1.82% in FY 22-23 to 1.95% in FY 23-24.
The strengthening profitability metrics reinforce the company’s ability to generate sufficient internal accruals, which not only support growth plans but also reduce reliance on external funding, thereby enhancing its overall credit profile.
-
Improved Operating Performance :
The company's operating profit before depreciation, interest, and tax (OPBDIT) increased from Rs 17.07 crore in FY 22-23 to Rs 19.70 crore in FY 23-24, showcasing improved operational efficiency. The operating margin also rose from 7.47% in FY 22-23 to 7.68% in FY 23-24, reflecting better cost management and profitability despite fluctuations in total operating income.
-
Impact of Raw Material Price Volatility on Profitability and Operations :
The company's key raw materials, including polymers, additives, and pigments, are predominantly derived from crude oil. As a result, fluctuations in crude oil prices, driven by regulatory changes or geopolitical factors, can significantly affect raw material costs, thereby impacting the company's revenues and profitability. However, the company's ability to pass on cost increases to customers helps mitigate this risk to some extent. Additionally, in FY 2024, the company sourced approximately 30% of its raw material requirements through imports, which further exposes it to exchange rate fluctuations and global supply chain dynamics.
-
Competitive Industry Dynamics and Working Capital Intensity :
The industry is highly competitive, comprising both organized and unorganized players, which limits the company's bargaining power and exerts pressure on profitability. Additionally, the company faces competition from imports, which further influences its performance. To meet customer demands promptly, the company maintains high inventory levels, ensuring product availability at short notice. Furthermore, bulk procurement of imported raw materials contributes to elevated raw material inventory levels, making the company's operations significantly working capital intensive.
-
Increasing Leverage Ratios :
The total debt-to-TNW ratio worsened from 1.93 times in FY 22-23 to 2.38 times in FY 23-24, and the TOL/TNW ratio rose from 3.57 times to 4.04 times during the same period. This indicates a higher reliance on external borrowings, which may increase financial risk if not managed effectively.
The company has no subsidiary, associate or joint venture as on 31Mar2024. BWR has taken a standalone approach for the bank loan rating review of the company. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
The company's ability to successfully stabilize its new product lines, timely enhancement of capacity, improve its revenue and profitability and thereby strengthen its business profile would be key rating sensitivities.
Upward Rating Factors:
1. Substantial growth in revenue along with improvement of profitability by 10% in the projected years.
2. Steady improvement in business risk profile, build-up of the order book size and accretion of new orders with the diversification of its geographic concentration on a sustained basis.
3. Further improvement in Long term liquidity ratio and debt protection metrics.
Downward Rating Factors:
1. Substantial decline in scale of operation along with decline in profitability by 20% in the projected years.
2. Deterioration in Long term liquidity ratio and debt protection metrics.
3. Any material impact on the business risk profile, order book size and accretion of new orders by the company on account of material unforeseen geopolitical events.
The liquidity of the company is adequate and the liquidity position has shown steady improvement with the current ratio rising from 1.21 in FY 22-23 to 1.22 in FY 23-24. Similarly, the quick ratio improved from 0.61 in FY 22-23 to 0.64 in FY 23-24, indicating stronger short-term financial health. Better working capital management is evident in FY 23-24, with reduced receivables (86 days) and inventory days (117 days). However, the cash conversion cycle increased slightly to 95 days in FY 23-24 reflecting moderate working capital pressures. The Company had high working capital utilization level of around 95%for FY 23-34. Additionally, while debt servicing obligations remain manageable in FY 23-24, they are expected to peak in FY 24-25, highlighting the need for effective liquidity planning. The Free cash generated by the company in FY 23-24 was ~ Rs 9.13 crs which was sufficient to cover its debt obligations of ~ Rs 4.90 crs. This trend is expected to be maintained for the current year too.
ABOUT THE ENTITY| Macro Economic Indicator | Sector | Industry | Basic Industry |
|---|---|---|---|
| Commodities | Chemicals | Chemicals & Petrochemicals | Commodity Chemicals |
Konkan Speciality Polyproducts Private Limited (KONSPEC) was incorporated in 1987 at Mangalore, Karnataka. It manufactures an entire range of masterbatches and compounds which are used for Household, Automotive, FMCG, Pharma packaging, Crates, Water tanks and many other products. KONSPEC meets the complete masterbatch and polymer compound requirements of all polymer processors. The company has seven manufacturing units – 6 units are located in Mangalore and 1 unit in Chennai. One unit in Mangalore is dedicated to production of Regulatory compliant masterbatches. The company has an installed capacity of 52,315 MT/annum with utilization at 35,526 MT/annum in FY24. Overall, the company deals with Masterbatch, Innovative products, Innovative and performance materials and Scientific Services.
The company has a set R&D process with the aim to accomplishing their vision of bring together nonrenewable and renewable eco-friendly resources to produce high performance materials with low carbon footprint. The company also offers many testing services, KONSPEC as a separate division-Scientific Services Group (SSG) consists of qualified and experienced professionals with expertise in analysis, development and providing solutions. SSG is equipped with the most modern testing equipment's & library of working standards like ASTM, ISO, DIN etc...
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 21 - 22 (Audited) |
FY 22 - 23 (Audited) |
FY 23 - 24 (Audited) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 231.86 | 228.45 | 256.45 |
| EBITDA | Rs.Crs. | 14.24 | 17.07 | 19.70 |
| PAT | Rs.Crs. | 4.90 | 4.15 | 4.99 |
| Tangible Net Worth | Rs.Crs. | 34.29 | 33.74 | 34.05 |
| Total Debt / Tangible Net Worth | Times | 1.44 | 1.93 | 2.38 |
| Current Ratio | Times | 1.26 | 1.21 | 1.22 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
Not Applicable
ANY OTHER INFORMATIONNot Applicable.
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2025) | 2024 | 2023 | 2022 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 50.70 |
BWR BBB/Stable
(Reaffirmation) |
NA |
NA
|
06Oct2023 |
BWR BB+ Stable
(ISSUER NOT COOPERATING* /Downgrade) |
26Aug2022 |
BWR BBB Stable
(Reaffirmation) |
| 0.00 |
NA
|
NA |
NA
|
26Dec2023 |
BWR BBB Stable
(removal from ISSUER NOT COOPERATING* category/Upgraded) |
NA |
NA
|
||
| FB SubLimit | LT | (4.00) |
BWR BBB/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (10.00) |
BWR BBB/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 43.00 |
BWR A3+
(Reaffirmation) |
NA |
NA
|
06Oct2023 |
BWR A4+
(ISSUER NOT COOPERATING* /Downgrade) |
26Aug2022 |
BWR A3+
(Reaffirmation) |
| 0.00 |
NA
|
NA |
NA
|
26Dec2023 |
BWR A3+
(removal from ISSUER NOT COOPERATING* category/Upgraded) |
NA |
NA
|
||
| Grand Total | 93.70 | (Rupees Ninety Three Crores and Seventy lakhs Only) | |||||||
| Analytical Contacts | |
|---|---|
|
Kishor G S Rating Analyst kishor.gs@brickworkratings.com |
Suryanarayan N Associate Director - Ratings suryanarayan.n@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| 1 | Canara Bank | Term LoanOut-standing | 1.45 | _ | 1.45 | Simple## |
| 2 | Canara Bank | Cash CreditSanctioned | 47.00 | _ | 47.00 | Simple## |
| Sub-Limit (Foreign Bill Discounting) Sanctioned | (10.00) | |||||
| Sub-Limit (Packing Credit) Sanctioned | (4.00) | |||||
| 3 | Canara Bank | GECLOut-standing | 2.25 | _ | 2.25 | Simple## |
| 4 | Canara Bank | Standby LC/ILC/FLC/BGSanctioned | _ | 43.00 | 43.00 | Simple## |
| Total | 50.70 | 43.00 | 93.70 | |||
| TOTAL (Rupees Ninety Three Crores and Seventy lakhs Only) | ||||||
## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| Nil | Nil | Nil | Nil |
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