Texmo Pipes & Products Ltd.

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 122.20 Crs. of Texmo Pipes & Products Ltd (TPPL or the Company).

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (07 Dec 2020)	Present
Fund Based	63.61	66.20	Long Term	BWR BBB /Stable Reaffirmation	BWR BBB + /Stable Upgrade
Non Fund Based	63.77	56.00	Short Term	BWR A3 Reaffirmation	BWR A2 Upgrade
Grand Total	127.38	122.20	(Rupees One Hundred Twenty Two Crores and Twenty 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

The ratings upgrade reflects the continued improvement in the business and financial performance of the company in FY21 despite Covid-19 induced disruptions and expectation of steady improvement over the medium term, supported by fair revenue growth and effective working capital management. The ratings also factor in the enhanced financial risk profile of the company, marked by a sustained improvement in net worth and improvement in profitability leading to improved capital structure and debt protection metrics over the past few years including in H1FY22.

The ratings, however, are constrained by the company’s relatively moderate scale of operations though growing year on year. The ratings are further constrained by customer concentration in revenue, susceptibility to volatility in raw material prices, and exposure to intense competition. BWR has taken note of the planned capex plan of Rs. 24.46 Crs by the company.

KEY RATING DRIVERS

Credit Strengths:

Established operations in plastic pipes and fittings business :
TPPL has over a decade of track record in the plastic pipe industry coupled with a well-established regional presence, brand recall and the extensive experience of the promoter. TPPL is also working as a retail centric company with ~52% of sales in FY21 through trade partners who retail to the consumers. It has a wide distribution network of approximately 400 distributors and 4000 retailers.
Financial risk profile :
The operating margin remained stable at around 6.89% in FY21 (6.88% in FY20) led by better realisations across most of the product categories and healthy demand. Networth and gearing were healthy and improved to Rs. 106.1 Crs (FY20: Rs 91.38 Crs) and 0.26 times (FY20: 0.55 times) , respectively, as on March 31, 2021; total outside liabilities to tangible networth ratio was comfortable at 1.02 times (FY20: 1.42 times). Debt protection metrics were robust with year on year improvement, as reflected in ISCR and DSCR of 3.06 times (FY20: 2.14 times and FY19: 1.78 times) and 2.31 times (FY20: 1.58 times and FY19: 1.38 times), respectively, in fiscal 2021.
Sustained improvement in scale of Operations :

Total operating income (TOI) of TPPL grew by 29% on y-o-y basis to Rs. 421.66 Crs during FY21 mainly on account of increase in the sales volume and improvement in avg. realization across most of the product categories. TPPL achieved TOI of Rs. 257.97 Crs during H1FY22 which grew by ~58% y-o-y. Overall, TPPL continued to operate on a moderate scale of operation. The company has reported total operating income of Rs. 257.97 Crs for H1FY22 vis-à-vis Rs. 162.94 Crs for H1FY21 with PAT of Rs. 8.79 Crs for H1FY22 vis-à-vis PAT of Rs. 3.05 Crs for H1FY21.

Credit Risks:

High customer concentration risk, though mitigated to an extent by established relationship with the customers :
The Company remains highly dependent on its top three customers for its revenues, increasing its susceptibility to order volatility risks. However, the risk is mitigated to some extent by the relatively strong credit profile of some counterparties and also since TPPL has an established relationship with the aforesaid clients.
Volatility in raw material prices and intense competition :

Profitability remains susceptible to volatility in the price of the key raw material, which is linked to petrochemical prices. Moreover, intense competition from large players continues to constrain the business risk profile.
Investments/Loans & Advances extended to wholly owned subsidiary and stretch receivables in the same from some of the counterparties :

The company had made investments in the wholly owned subsidiary i.e. viz; Tapti Pipes and Products Limited FZE, UAE which as of 31-March-2021 stood at Rs. 11.62 Crs (FY20: 11.62 Crs) and the company has also extended loans and advances to the subsidiary amounting to Rs. 5.87 Crs (FY20: Rs. 5.90 Crs). There are certain stretched receivables in this entity however there are no litigations in any of these receivables as reported by TPPL and they are not expecting any write off in the medium term. The Company is expecting to realize all the aforesaid amounts and timely realization of the same would be a key rating monitorable.
Capex Plan :

The company has a planned capex of around Rs. 24.46 Crs, which is expected to be funded by a debt of Rs.18 Crs (yet to be tied up) and balance from internal accruals (Rs. 13.3 crs infused as on 15-Nov-2021, higher than the projected infusion of Rs. 6.46 Crs). ~54% of the cost has been incurred as on 15-Nov-2021. On account of the on-going capex there would be some moderation in the capital structure however the same is expected to be at comfortable levels. Timely execution of the capex within the estimated time and cost would be a key rating sensitivity.

ANALYTICAL APPROACH - Standalone

BWR has factored in the company’s standalone business and financial risk profile to arrive at the rating. Reference may be made to the Rating Criteria hyperlinked below. BWR has taken on record the consolidated financials.

RATING SENSITIVITIES

Positive Factors

Significant revenue growth and sustenance of the operating margin along with prudent working capital management resulting in sizeable net cash accrual
Moderation in customer concentration risk

Negative Factors

Decline in revenue and/or operating margin on sustained basis along with adverse impact on its debt coverage indicators
Any significant delay in the planned capex and/or larger than expected project cost, stretch in working capital cycle or any cash outflow weakening the capital structure
Any significant write offs on account of investments/receivables in UAE subsidiary

LIQUIDITY INDICATORS - Adequate

The liquidity position of the company stands adequate in relation to the size of the business. As of 30-Sep-2021, cash on hand stood at Rs. 0.03 Crs and investment in fixed deposits stood at Rs. 9.7 Crs (fully pledge). The net cash accruals are expected to be adequate vis-a-vis the debt repayment obligations of ~Rs. 2.91 Crs and ~Rs. 5.7 Crs in fiscals 2022 and 2023. Utilised Fund Bank limits were in the range of 50-60%, on average, in the 12 months ending Sep 2021. Further, with 76.86% of non-fund based limits utilised as on 30 Sep, 2021, the company has adequate cushion available in terms of working capital limits.

ABOUT THE ENTITY

TPPL is a public limited company and was incorporated on 3rd July 2008. TPPL is engaged in manufacturing of PVC Pipes, UPVC Casing Pipes, Plumbing Pipes, SWR Pipes, HDPE Pipes, Permanently Lubricated Pipes and HDPE Sprinkler Pipes, Moulded Fittings, etc. Manufacturing facility of TPPL is located in Burhanpur, Madhya Pradesh. Mrs. Rashmi Devi Agrawal is the Chairperson & Whole Time Director of the company. Mr. Sanjay Kumar Agrawal is the Managing Director of the company. TPPL is listed on NSE & BSE. TPPL has a wholly owned subsidiary Tapti Pipes and Products Limited FZE, UAE which is debt free and is non-operational.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	421.66	327.95
EBITDA	Rs.Crs.	29.04	22.55
PAT	Rs.Crs.	11.23	4.33
Tangible Net Worth	Rs.Crs.	106.71	91.38
Total Debt/Tangible Net Worth	Times	0.26	0.55
Current Ratio	Times	1.80	1.47

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

ANY OTHER INFORMATION

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	66.20	BWR BBB+/Stable (Upgrade)	03Feb2020	BWR BBB Stable (Reaffirmation)	29Jan2019	BWR BBB Stable (Reaffirmation)	NA	NA
		NA	NA	07Dec2020	BWR BBB Stable (Reaffirmation)	NA	NA	NA	NA
Non Fund Based	ST	56.00	BWR A2 (Upgrade)	03Feb2020	BWR A3 (Reaffirmation)	29Jan2019	BWR A3 (Reaffirmation)	NA	NA
		NA	NA	07Dec2020	BWR A3 (Reaffirmation)	NA	NA	NA	NA
Grand Total		122.20	(Rupees One Hundred Twenty Two Crores and Twenty 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
Satish Jaiprakash Jewani Ratings Analyst satish.j@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Texmo Pipes & Products 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	Bank of Baroda	Cash Credit - Sanctioned	7.00	_	7.00
2	Bank of Baroda	Bank Guarantee - Sanctioned	_	7.00	7.00
3	Bank of Baroda	Letter of Credit - Sanctioned	_	10.00	10.00
4	Central Bank of India	Letter of Credit - Sanctioned	_	9.00	9.00
5	Central Bank of India	Bank Guarantee - Sanctioned	_	5.00	5.00
6	Central Bank of India	Cash Credit - Sanctioned	6.00	_	6.00
7	Central Bank of India	Term Loan - Sanctioned	1.20	_	1.20
8	HDFC Bank	Term Loan - Sanctioned	1.10	_	1.10
9	Punjab National Bank	Term Loan - Sanctioned	3.50	_	3.50
10	Punjab National Bank	Cash Credit - Sanctioned	7.00	_	7.00
11	Punjab National Bank	Bank Guarantee - Sanctioned	_	5.00	5.00
12	Punjab National Bank	Letter of Credit - Sanctioned	_	5.00	5.00
13	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	10.00	10.00
14	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	5.00	5.00
15	State Bank Of India (SBI)	Cash Credit - Sanctioned	20.00	_	20.00
16	State Bank Of India (SBI)	Common Covid Emergency Line of Credit (CCECL) - Sanctioned	2.40	_	2.40
17	Un tied portion	Term Loan - Proposed	18.00	_	18.00
18	Un tied portion	Letter of Credit - Proposed	_	_	0.00
Total			66.20	56.00	122.20
TOTAL (Rupees One Hundred Twenty Two Crores and Twenty lakhs Only)

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