Anand Triplex Board Ltd

Brickwork Ratings downgrades the ratings for the Bank Loan Facilities of Rs. 38.00 Crs. of Anand Triplex Board Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (07 Sep 2020)	Present
Fund Based	32.00	32.00	Long Term	BWR BBB /Negative Reaffirmation and change in Outlook	BWR BBB - /Negative Downgrade
Non Fund Based	6.00	6.00	Short Term	BWR A3+ Reaffirmation	BWR A3 Downgrade
Grand Total	38.00	38.00	(Rupees Thirty Eight Crores 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 downgraded the long term and short term ratings of Anand Triplex Board Limited at BWR BBB- (Outlook: Negative)/ A3. The downgrade of ratings is on account of decline in revenues, EBITDA, PAT, ROCE, operating profit margins and net profit margins. The current year estimates are also on a lower side as compared to FY21. ATBL has a prestigious client base from the newspaper industry. The investment grade rating is strengthened by a strong networth position, very low gearing level as contributed by a very low level of debt and above average debt protection indicators i.e. ISCR & DSCR. The rating has also factored the customer concentration risk the company faces and a highly competitive paper industry in India. The rating is affected by highly volatile raw material prices and adverse impact on demand due to the Covid-19 pandemic on the paper industry. The negative outlook factors the decline in the company’s topline in FY20 and FY21(Prov.), a subdued performance in the current fiscal till date and an adversely affected paper industry due to the coronavirus pandemic which may affect the company’s performance in the short to medium term.

KEY RATING DRIVERS

Credit Strengths:

Experience of the Promoters, diversified customer base :
ATBL is promoted by Mr. Naman Vats and Mr. Daman Vats, who have been involved in the manufacturing of newsprint paper business for more than three decades. The Company has a strong past-track record of operations with major players in the North Indian market viz. Hindustan Times, Amar Ujala, Dainik Jagran, Dainik Bhaskar, and Rajasthan Patrika. among others. The established relationships with the customers has enabled the company to receive repetitive orders.
Comfortable financial risk profile :
The company has a strong tangible networth of Rs.110.37 Crores as on 31 March 2021. The company had a total debt of just Rs.0.57 Crores as on FY21 end due to which its gearling was quite low at 0.01 times. Overall gearing of the company, TOL/TNW, continues to remain low at 0.33x in FY21. Coverage indicators are also healthy as reflected in ISCR & DSCR of FY20 at 4.63 times & 4.47 times respectively.

Credit Risks:

High customer concentration risk :
Top 5 customers comprise ~94% of the total sales of the company. It is a high customer concentration risk, since movement of one customer can adversely affect the operating income of the company to a large extent.
Increase in competition :
Presence of high level of competition in the vicinity which can be mitigated only by economies of scale or lower prices of product offerings which might squeeze the profit margins.
Susceptible to volatility in raw material prices due to the Covid-19 Pandemic. :
Paper is one of those industries which has been adversely affected by the Covid-19 pandemic. Indian paper recycling industry is largely dependent on imported waste paper from various countries. The price of waste paper mainly determines the price of finished paper. Waste paper imports meet nearly 70 per cent of the raw material demand for the country’s industry. “The Western world generates a lot of waste as its per capita paper consumption is higher at 350 kg, while India's consumption is 20-30 kg a year”. There has been a major disruption in waste paper collection since the coronavirus pandemic set in and it has had a major impact on imports. Price of imported waste paper or OCC has touched an all-time high due to self-consumption of exporting countries, earlier entirely exported.

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

Positive: Ability of the company to regain the earlier topline levels (As in FY18, FY19) along with profit margins, improve ROCE, ISCR, DSCR, manage Inventory days, Payables days, Receivables days, improve Conversion cycle, improve Net Cash Accruals and mitigate the risks posed by the current situation caused by the pandemic.

Negative: Any further fall in its topline and deterioration in profit margins along with any debt related delays and irregularities.

LIQUIDITY INDICATORS - Adequate

The company has generated net cash accruals of Rs. 8.22 Crores for FY20 which is less than FY19's cash accruals of Rs. 14.54 Cr. owing to lesser sales in FY20. The company has provisionally generated net cash accruals of Rs. 5.44 Cr. in FY21 which is lesser than FY20's accruals. The company is projecting to generate net cash accruals of Rs. 6.92 Cr. in FY22(Proj.), which as per the analyst estimates may remain around Rs. 3.83 Cr. on 31st Mar 22. The debt coverage indicators are strong in FY20 where ISCR & DSCR stands at 7.08 times & 5.93 times respectively. However, both the ratios have further deteriorated to 4.63 times and 4.47 times in FY21(Prov.). Current ratio for FY20 was 2.30 times as compared to 2.39 times in FY19. Current ratio in FY21(Prov.) stands at 3.14 times. Conversion cycle of the company has almost doubled in FY20 as it reached 98 days in the fiscal as compared to 46 days in FY19. Conversion cycle in FY21(Prov.) has further increased to 143 days. Average cash credit limit utilization was around 33% in the six months period of Apr 2021 to Sept 2021. In the absence of any substantial term loan repayment obligations, a low leveraged capital structure and availability of unutilized bank lines, the liquidity profile of ATBL seems adequate in the short to medium term.

ABOUT THE ENTITY

ATBL, incorporated in 1994, manufactures waste-paper-based newsprint and writing and printing paper, along with a 10-megawatt power generating unit for captive power usage and also to be sold to its sister concern. The sister concern Anand Duplex Limited (ADL) was set up in 1989. ADL manufactures duplex boards from waste paper. The company is promoted by Mr. Nikhil Vats and Mr. Daman Vats, and has its manufacturing unit in Meerut, Uttar Pradesh. The installed capacity of the company is 64800 MT per annum. The company plans to have a CAPEX of Rs. 45 Crores in FY22 involving addition of Plant & Machinery resulting in diversification by adding new products Writing Printing Paper and Kraft Paper.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	150.00	218.33
EBITDA	Rs.Crs.	10.89	24.23
PAT	Rs.Crs.	3.25	11.75
Tangible Net Worth	Rs.Crs.	109.68	106.43
Total Debt/Tangible Net Worth	Times	0.20	0.06
Current Ratio	Times	2.30	2.39

KEY COVENANTS OF THE FACILITY RATED

Nil

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

CRISIL B/Stable/A4 : Issuer Non Cooperating on 13th Aug'20 for Rs. 41.4 Cr.

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	32.00	BWR BBB-/Negative (Downgrade)	07Sep2020	BWR BBB Negative (Reaffirmation and change in Outlook)	12Jun2019	BWR BBB Stable (Upgrade)	01Jun2018	BWR BBB-Stable (Assignment)
Non Fund Based	ST	6.00	BWR A3 (Downgrade)	07Sep2020	BWR A3+ (Reaffirmation)	12Jun2019	BWR A3+ (Upgrade)	01Jun2018	BWR A3 (Assignment)
Grand Total		38.00	(Rupees Thirty Eight Crores 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

Anand Triplex Board 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	State Bank Of India (SBI)	Cash Credit	30.00	_	30.00
2	State Bank Of India (SBI)	Bank Guarantee	_	2.00	2.00
3	State Bank Of India (SBI)	Letter of Credit	_	4.00	4.00
4	State Bank Of India (SBI)	Working Capital Demand Loan	2.00	_	2.00
Total			32.00	6.00	38.00
TOTAL (Rupees Thirty Eight Crores Only)

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