Mithila Plywood Pvt Ltd

Brickwork Ratings reaffirms the long term and short term ratings for the Bank Loan Facilities of Rs. 22.39 Crs. of Mithila Plywood Pvt Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (30 May 2020)	Present
Fund Based	16.91	18.89	Long Term	BWR BB /Stable Reaffirmed	BWR BB /Stable Reaffirmation
Fund Based	3.00	3.00	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
Non Fund Based	0.50	0.50	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
Grand Total	20.41	22.39	(Rupees Twenty Two Crores and Thirty Nine 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

Brickwork rating has reaffirmed the long-term and the short term rating of Mithila Plywood Pvt. Ltd. at BWR BB/Stable and BWR A4 respectively, on account of wide experience of management, moderate capital structure and uptrend in revenues. The ‘stable’ outlook indicates a low likelihood of a rating change in the medium term. BWR expects that the company’s performance is likely to be maintained in the medium term. The rating, however, is constrained by risk of fluctuation in raw material prices, intense competition and fragmented nature of the industry.

KEY RATING DRIVERS

Credit Strengths:

Experience of the Directors in the industry. :
Mr. Anil Kumar Agarwal, Mr. Ashok Kumar Agrawal and Mr. Ayush Agarwal are directors in the company. They have been involved in the similar line of business for more than a decade. The vast experience of the Directors has enabled them to establish relations with customers & suppliers and to understand the intricacies of the business.
Moderate Capital Structure :
The company has reported moderate capital structure with Tangible Net Worth of Rs. 11.89 Cr. in FY20 owing to which Gearing is low at 1.27 in FY20. Tangible net worth of the company in FY21(Prov.) is Rs.13 Crs. The company has projected a tangible net worth of Rs. 15.47 Crs. in FY22(Proj.).
Uptrend in revenues, moderate installed capacity. :
The firm reported Total Operating Income amounting Rs.69.71 Cr. and Rs. 71.79 Crs. in FY19 and FY20 respectively, registering a growth of 3% in FY20. The provisional P&L account shows a revenue of Rs. 77.46 Crs. in FY21, which is a growth of 8% over FY20. As informed by the management, the company has achieved a revenue of Rs.36.22 Cr. April-July' of FY22, and it is certain that the company will be able to meet its target of Rs. 93.67 Crs. in FY22. The company has an installed capacity of 11466 MT per annum and it has been utilized upto 6890 MT in FY21. Capacity Utilization in FY21 has been at the same level as of FY20 i.e. 60%

Credit Risks:

Profitability remains exposed to fluctuations in raw material prices. :
The basic raw material for the company is PP granules which is a derivative of crude oil the price of which is determined by global crude oil price. Hence, the profitability remains exposed to fluctuations in raw material prices. The Profitability Margins are thin i.e. Net Profit Margin and Operating Profit Margin are low at 0.77% and 3.89% in FY20.
Intense Competition and fragmented nature of the industry - :
The packaging industry is dominated by numerous independent, small-scale enterprises. High degree of fragmentation due to the presence of a large number of unorganized players has led to high competitive intensity in the processing segment thereby impacting the profit margins.
Interest/Debt coverage :
Interest/debt protection metrics are low and are just enough to meet the interest and debt obligations. In FY20, ISCR is at 1.68X against an interest obligation of Rs. 1.66 Cr. The DSCR in FY20 is at 1.51X. which is tight. However, the ratios are improving in FY21(Prov.) and FY22(Proj.).

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone financials 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

Going forward, the ability of the company to improve its capital structure & profitability and manage liquidity would be key rating sensitivities:

Positive: A healthy growth in revenue and improvement in the profitability margins. Infusion of capital to boost the networth and bring down the company’s gearing level.

Negative: Any substantial decline in sales or profitability margins, deterioration in debt protection metrics and gearing profile of the company or any delay in the debt servicing by the company.

LIQUIDITY INDICATORS - Adequate

The cash and cash accruals of the company stood at Rs. 1.66 Crs. in FY20 . The cash accruals in FY21(Prov.) and FY22(Proj.) is Rs. 2.24 Crs. and Rs. 3.25 Crs. respectively. The company is generating an average EBITDA of Rs. 2.86 Crs. for FY20 and FY21 as against the average interest cost of Rs. 1.47 Crs. in both the financial years. Current ratio of the company is at 1.53X in FY20, the same is above the ideal benchmark. The CC limit has been utilized to the extent of 78% over the past six months. Liquidity position of the firm is adequate, marked by a comfortable conversion cycle of 76 Days in FY20, which has declined from 78 Days in FY19. Conversion cycle in FY(Prov.) is rising to 81 days. Other Liquidity indicators are stretched marked by low Cash and Cash Equivalents at Rs.0.53 Cr. in FY20 which has decreased from Rs. 0.65 Cr. in FY19. It is further decreasing to Rs. 0.48 in FY21(Prov.). However, cash and cash equivalents are rising in FY22(Proj.) to Rs. 1.49 Crs.

ABOUT THE ENTITY

Mithila Plywood Pvt. Ltd was incorporated as a Private Limited Company in September, 1988. The company is based in Varanasi, Uttar Pradesh. Mr. Anil Kumar Agrawal, Mr. Ashok Kumar Agrawal and Mr. Ayush Agarwal are the Directors of the company. All three directors have a combined experience of over 40 years. The company was incorporated to manufacture plywood and continued in the same line of business till September 2002. Thereafter, looking into the future growth prospects of the packaging industry, the promoters decided to set up a 1440 MT plant for manufacturing PP Woven Sacks. Since then the promoters have been in the same line of business. Principal raw materials for the company are PP granules / HDPE and Master Batch (MB). The raw material is majorly procured from Reliance Industries and Haldia Petrochemicals Ltd. Earlier the Unit-II had been used to manufacture Normal Bags only. The promoters have reviewed the business plan and decided to make some changes and improvement in the existing plan by starting manufacturing FIBC Bags also. Presently, the company has two manufacturing units for woven sacks in Chandauli, Uttar Pradesh, having combined installed capacity of 11466 MT per annum and it has been utilized upto 6890 MT in FY20. Capacity Utilization in FY20 has been at the same level as of FY19 i.e. 60%.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	71.79	69.71
EBITDA	Rs.Crs.	2.79	3.58
PAT	Rs.Crs.	0.55	0.47
Tangible Net Worth	Rs.Crs.	11.89	11.28
Total Debt/Tangible Net Worth	Times	1.27	1.56
Current Ratio	Times	1.53	1.54

KEY COVENANTS OF THE FACILITY RATED

Nil

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Nil

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	18.89	BWR BB/Stable (Reaffirmation)	30May2020	BWR BB/StableStable (Reaffirmed)	NA	NA	12Dec2018	BWR BB/StableStable (Upgrade)
Fund Based	ST	3.00	BWR A4 (Reaffirmation)	30May2020	BWR A4 (Reaffirmed)	NA	NA	12Dec2018	BWR A4 (Reaffirmed)
Non Fund Based	ST	0.50	BWR A4 (Reaffirmation)	30May2020	BWR A4 (Reaffirmed)	NA	NA	12Dec2018	BWR A4 (Reaffirmed)
Grand Total		22.39	(Rupees Twenty Two Crores and Thirty Nine 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
Arjun Gupta Ratings Analyst arjun.g@brickworkratings.com	Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Mithila Plywood Pvt Ltd

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Indian Bank	Cash Credit	11.50	_	11.50
2	Indian Bank	Term Loan	7.39	_	7.39
3	Indian Bank	Packing Credit (PC)	_	1.20	1.20
4	Indian Bank	Foreign Bill Purchase	_	1.80	1.80
5	Indian Bank	Bank Guarantee	_	0.50	0.50
Total			18.89	3.50	22.39
TOTAL (Rupees Twenty Two Crores and Thirty Nine lakhs Only)

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