Annapurna Pet Pvt Ltd

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 35.26 Crs. of Annapurna Pet Pvt Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (30 Jan 2020)	Present
Fund Based	27.58	24.26	Long Term	BWR B (Stable) Downgrade	BWR BB - /Stable Upgrade
Fund Based	(3.00)	(3.00)	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
Non Fund Based	11.00	11.00	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
Grand Total	38.58	35.26	(Rupees Thirty Five Crores and Twenty Six lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

BWR has revised the rating of Annapurna Pet Private Limited ("APPL" or "The Company") to BWR BB- (Stable)/BWR A4. The rating revision factors in the extensive experience of the promoters, moderate capital structure, moderate profitability margins of the comany, association with reputed clientele and improved liquidity of the company. The rating is constrained on account of the working capital intensive nature of operations, weak debt service indicators and presence in the highly competitve industry with regulatory risk. BWR believes that APPL’s 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 revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

BWR has essentially relied upon the Audited Financials of the company for FY20, Management Certified Provisional Financials for FY21, projected financials for FY22, publicly available information and information/clarifications provided by the entity’s management.

KEY RATING DRIVERS

Credit Strengths:

Established track record of promoters in the industry :
The promoters of the company have been involved in the business of preform for over two decades. Mr. Sunil Goyal, one of the promoter directors, is founder of Ladderup Group, which is into financial services and corporate advisory. Moreover, the top management is ably supported by the experienced tier II management in managing the operations of the entity.
Reputed clientele :
The entity has been dealing with established and reputed clientele since inception. The customer base includes companies engaged in producing aerated drinks, packaged drinking water and edible oils (PET bottles). The company caters to the domestic as well as international market.
Modest Scale of operations :
Despite the pandemic-led lockdown, the company has been able to maintain the revenue in line with FY20. The company has recorded revenue of Rs 67.03crs during FY20 and ~ Rs 56crs during FY21 (Prov). The scale of operations have remained modest and the company is relatively a smaller player in the market. Thus, intense competition in the market continue to contrain the scalability.
Moderate Capital Structure :
The company's capital structure is moderate due to retention of profits & infusion of funds by the promoter. The Net worth stood at Rs 23.44crs as of March 20 and ~Rs 23.52crs as of March 21 (Prov). The overall gearing stood at 1.32x for FY20 declining marginally to 1.71x in FY21 (Prov). The promoters are in a position to infuse additonal funds, if need be.
Moderate profitability :
The operating margins, although declined over the past year, stood moderate at 7.76% during FY20 (A) and ~7.21% during FY21 (Prov). Further, the company has taken certain measures to cut down the transportation and freight cost, along with an increase in the bargaining power due to reduction in the cash outflows on account of closure of three term loans, the company would be able to procure raw materials at a bargained price, improving the profitability going ahead. The profit margins of the company remain susceptible to the fluctuating raw material prices as PET resin is a crude oil derivative and its pricing is determined by international macro economic factors. Further, the company is also exposed to the forex fluctuation risk with no formal hedging policy in place.

Credit Risks:

Working capital intensive operations :
The operations of the company are working capital intensive huge funds remain blocked in the debtors and receivables. The company maintains high inventory levels to counter the fluctuating raw material prices. The elongated inventory holding period impacts the overall working capital cycle.
Weak Debt Service Indicators :
The debt service indicators of the company has remained modest. The ISCR stood at 1.31x during FY20 (A) and 1.32x during FY 21 (Prov). The DSCR also stood low at 0.69x in FY20 and 1.15x in FY214 (Prov). Going ahead, as the company has repaid its three term loans, thus improving the overall liquidity, the debt service indicators are estimated to improve and the DSCR is estimated to stay above 1x for FY22. The Net Cash accruals for FY22, are estimated to stay at Rs 2.25 crs, which is sufficient to discharge the maturing debt obligations of Rs 2.15crs.
Intense competition in the industry with regulatory risk :
The industry is characterised by intense competition due to presence of many organised as well as unorganised players on account of low entry barriers. Further, increasing awareness about the negative impact of plastics and allied products on the environment is a key weakness for the plastic and PET industry at large. Hence, the business is highly susceptible to various Government regulations. However, the increased awareness among people to consume bottled beverages with hygenic and safe packaging, would support the business profile of the company.

ANALYTICAL APPROACH

For arriving at its ratings, BWR has considered the Standalone Financials of the company and applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward, the ability of the company to improve its scale of operations and profitability with improvement in the overall financial risk profile and efficient working capital management would remain a key rating sensitivity.

Positive: The rating may be upgraded if there is a sustained improvement in the company's revenue and the profitability as well as a significant improvement in the financial risk profile, and improvement in the overall liquidity position and working capital management of the company.

Negative: The rating may be downgraded if there is significant decline in the revneue and profiitabiltiy, impacting the financial risk profile and deteroration in the liqudity of the company.

LIQUIDITY INDICATORS - Adequate

The overall liquidity profile of the company is adequate. The working capital limits are utilised to the extent of 85% on average. The current ratio of the company stood at 1.09x during FY20 and is estimated at ~1.19x during FY21. The cash and cash equivalents balance stood at Rs 0.06crs as of March 2021. The company's net cash accruals are estimated to be sufficient around ~Rs 2.25crs against maturing debt obligations of ~ Rs 2.15 crs during FY22.

ABOUT THE ENTITY

Annapurna Pet Pvt Ltd (APPL) is a Mumbai based company incorporated in 2011 and is into manufacturing of wide range of Pet Preforms in variety of weights, colors and sizes which are used for packaging in industries like packaged water, carbonated soft drinks, edible oils, juices, etc. It also manufactures bottle caps. The company has a manufacturing plant situated at Umbergaon in the State of Gujarat. The plant has an installed capacity of 11,000 tones preforms per annum, with 60% capacity utilisation. The company caters to the domestic as well as the international market.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	67.28	66.48
EBITDA	Rs.Crs.	5.22	6.80
PAT	Rs.Crs.	0.21	0.07
Tangible Net Worth	Rs.Crs.	23.44	23.23
Total Debt/Tangible Net Worth	Times	1.32	1.54
Current Ratio	Times	1.09	1.07

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

CARE Ratings has migrated the rating of the company under Issuer Not Co-operating category as the company has not shared the information for monitoring the ratings.

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	24.26	BWR BB-/Stable (Upgrade)	30Jan2020	BWR B (Stable) (Downgrade)	NA	NA	23Jul2018	BWR BB- (Stable) (Assigned)
FB SubLimit	ST	(3.00)	BWR A4 (Reaffirmation)	30Jan2020	BWR A4 (Reaffirmed)	NA	NA	23Jul2018	BWR A4 (Assigned)
Non Fund Based	ST	11.00	BWR A4 (Reaffirmation)	30Jan2020	BWR A4 (Reaffirmed)	NA	NA	23Jul2018	BWR A4 (Assigned)
Grand Total		35.26	(Rupees Thirty Five Crores and Twenty Six lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Srishti Kaushik Rating Analyst srishti.k@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Annapurna Pet Pvt Ltd

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	11.00	_	11.00
Sub-Limit (Packing Credit) - Sanctioned		(3.00)
2	Letter of Credit - Sanctioned	_	10.00	10.00
3	Bank Guarantee - Sanctioned	_	1.00	1.00
4	Term Loan - Sanctioned	8.73	_	8.73
5	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	4.53	_	4.53
Total		24.26	11.00	35.26
TOTAL (Rupees Thirty Five Crores and Twenty Six lakhs Only)

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