Xpro India Ltd

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 185.74 Crs. of Xpro India Ltd., and also revises the Outlook; from BWR BBB- (Stable)/A3 to BWR BBB (Positive)/A2

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (15 Mar 2021)	Present
Fund Based	178.34	148.74	Long Term	BWR BBB- /Stable Reaffirmation	BWR BBB /Positive Upgrade
Non Fund Based	37.00	37.00	Short Term	BWR A3 Reaffirmation	BWR A2 Upgrade
Grand Total	215.34	185.74	(Rupees One Hundred Eighty Five Crores and Seventy Four 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 Ratings (BWR) upgrades the ratings of Xpro India Limited (XIL), factoring in increasing scale of operations and improved profitability margins in FY21 and H1FY22 (UA), coupled with improvement in the solvency position and debt protection metrics during the same period. The ratings continue to derive strength from the adequate liquidity profile, established market presence of the company as a major producer and supplier of co-extruded sheets, refrigerator liners for the white goods industry and dielectric films in India, and adequate track record of its promoters to provide need-based financial support. The ratings are, however, constrained by the susceptibility of margins to any adverse movements in the foreign exchange and commodity prices.

RATING OUTLOOK: Positive

The change in outlook from 'Stable' to 'Positive' reflects that the company is expected to show healthy profitability in the medium term, which, coupled with the repayment of the term debt liability is expected to lead to improved solvency position going forward.

KEY RATING DRIVERS

Credit Strengths:

Increasing scale of operations and improvement in profitability :
Despite subdued performance in Q1FY21 (UA), the Company's TOI increased ¬5% y-o-y during FY21, primarily supported by improved sales performance in the remaining part of the year and increase in sales realisations. This also led to an improvement in the company's EBITDA and PAT margin to 11% (PY:8.6%) and 2.12% (PY: 0.34%), respectively in FY21. During H1FY22 (UA), the revenue of the company stood at Rs.217.67 cr. The same increased by a healthy ¬75%, compared to the same period last year on the back of revival of industry demand. The PBILDT and PAT margins also improved considerably to 13.45%, from 7.27%, respectively, in H1FY22 (UA) [from 8.50% and (-) 6.36%, in the same period last year], on account of better operational performance.
Improvement in the overall solvency position: :
The solvency position and debt coverage indicators of the company improved, marked by ISCR and Debt to EBITDA ratio of 2.37x (PY: 1.66x) and 2.70x (PY: 5.45x) for FY21. The overall gearing ratio (Total Debt/ TNW) stood at 1.23x, as on March 31, 2021 which also improved from 2.04, as on March 31, 2020. The improvement was on account of healthy generation of profitability during the year. Furthermore, the ISCR stood at 3.99x in H1FY22 (UA), which improved from 1.13x, in H1FY21 (UA), on the back of better profitability and lower interest expenses. In the near future, the company plans to raise a total capital of ~Rs.150 cr., through preferential issue of warrants of up to 19,68,000 warrants at an exercise price of Rs. 762 each (face value of Rs. 10 each). The proceeds from the same are projected to be used to meet the Company's capital expenditure, to reduce the Company's borrowings, to enhance its long term resources and thereby strengthening of the financial structure of the Company, for meeting working capital requirements and for other general corporate purposes, etc.
Experienced promoters with established track record :

XIL is promoted by Mr. Sidharth Birla, his family members, and entities controlled by them, which collectively hold more than 50% of the total shares in the company. Mr. Sidharth Birla, Chairman, looks after the matters relating to corporate governance, communicating with stakeholders, holding of high level of strategy/plans etc. Mr. C Bhaskar is the M.D. and CEO of the company who looks after its overall operations with support of Mr. H. Bakshi, Chief Operating Officer and Mr. Vinay K. Agarwal as Chief Financial Officer of the company. The board has a majority of independent and professional directors.

XIL is an established player in the polymer processing industry. As per management, XIL is a sole manufacturer of di-electric films in India enjoying close to one-third of the domestic market share. The company is also one of the leading players in the co-extruded cast films and sheets, in the domestic market, and has close to 70% of the merchant market share. The company also produces cast films which are high clarity films including stretch wrap and cling, especially formulated films for medical disposables, hygiene films & other applications.
Adequate track record of its promoters to provide financial support :
The company derives benefit from the continuous financial support of Siddharth Birla Group which holds majority shareholding in the Company. It has shown a track record of raising funds either by way of selling its unviable units and unsecured loans in the past from the promoters to meet its immediate liquidity requirements, if any.

Credit Risks:

Susceptible to fluctuation in its raw material prices :
The company’s operations are highly susceptible to fluctuations in its raw material prices (which are crude oil linked), and this factor has resulted in decline of its EBITDA margins in the past. Any significant adverse movement in the prices of the raw material is expected to have an adverse impact on the margins of the company going forward also.
Margins susceptible to any adverse fluctuations in the foreign currency prices :
Major raw material requirements for dielectric films are met through imports and thus, the Company is exposed to raw material price volatility and foreign exchange rate fluctuations, in the absence of complete natural hedge provided by the business operations.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: The company’s ability to maintain growth in its turnover levels, improve its profitability margins and subsequently, show an improvement in its solvency position going forward, will be positive for the ratings.
Negative: Significant decline in its turnover and profitability margins and a lower-than-expected coverage ratios and debt protection metrics besides reporting lower current ratio could impact its credit metrics over the medium term. Any debt availment, which might lead to significant deterioration in the overall solvency profile will also be a negative for the ratings.

LIQUIDITY INDICATORS - Adequate

For FY21 and H1FY22 (UA), the company reported cash flow from operations amounting to Rs.47.90 cr. and Rs.21.64 cr., respectively. Further, in H1FY22 (UA), the company reported internal cash accruals of Rs. 21.96 cr., vis-a-vis debt repayment obligation of Rs.24.16 Cr. in FY22. The company was also able to dispose-off its unviable unit (Borjara Unit 1) from which it has already received Rs.3.50 Cr. (compared to total payment of Rs. 6.78 cr. expected to be received in CY22.. On the back of healthy cash accrual generation, the company has also made some pre-payments for its term debt obligations in FY21 and FY22 (so far). The operating cycle of the company also remained comfortable at 20 days, as on March 31, 2021, while the bank limit utilizations also remained in a comfortable range of 60-70%, on an average. The current ratio, however, stood at a moderate level of 1.02x, as on March 31, 2021. Going forward, the company plans to double its existing capacity for di-electric films. The total capex implementation is likely to take 2-4 years and will require significant investment. As of now, the company is exploring its capital mix options. BWR will keep a close watch on the capex plans of the company, which, along with the funding-mix, will remain a key rating sensitivity going forward.

ABOUT THE ENTITY

Xpro India Ltd is listed on both BSE and NSE and is engaged in the manufacturing of BOPP films, Dielectric capacitor films, cast films, coextruded plastic sheets, refrigerator sheets, liners and cabinets. Presently, XIL runs three manufacturing facilities located at Barjora (West Bengal), Greater Noida (UP) & Ranjangaon (Maharashtra). The manufacturing facilities operate under two division viz. Biax Division (Di-electric films) and Coex Division (Coextruded films). The company is a part of the Sidharth Birla Group (the Birla family owns 50.02 percent share in the Company). The total installed capacity of Biax Division and Coex Division is 4000MT and 30300MT, respectively.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	373.35	354.84
EBITDA	Rs.Crs.	41.11	30.86
PAT	Rs.Crs.	7.91	1.21
Tangible Net Worth	Rs.Crs.	89.88	82.37
Total Debt/Tangible Net Worth	Times	1.23	2.04
Current Ratio	Times	1.02	0.98

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

Facilities	Current Rating (2021)			2021 (History)		2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	148.74	BWR BBB/Positive (Upgrade)	15Mar2021	BWR BBB- Stable (Reaffirmation)	04Dec2020	BWR BBB- Credit Watch with Developing Implications (Reaffirmation and change in Outlook)	NA	NA	10Dec2018	BWR BBB- Stable (Upgrade)
		NA	NA	NA	NA	22Jan2020	BWR BBB- Stable (Reaffirmation)	NA	NA	NA	NA
Non Fund Based	ST	37.00	BWR A2 (Upgrade)	15Mar2021	BWR A3 (Reaffirmation)	04Dec2020	BWR A3 (Reaffirmation)	NA	NA	10Dec2018	BWR A3 (Upgrade)
		NA	NA	NA	NA	22Jan2020	BWR A3 (Reaffirmation)	NA	NA	NA	NA
Grand Total		185.74	(Rupees One Hundred Eighty Five Crores and Seventy Four 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
Kanwalpreet Singh Ratings Analyst kanwalpreet.s@brickworkratings.com	Sudeep Sanwal Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Xpro India 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	Term Loan - Sanctioned	8.15	_	8.15
2	Indian Bank	Corporate Loan - Sanctioned	_	_	0.00
3	Indian Bank	Cash Credit - Sanctioned	8.37	_	8.37
4	Indian Bank	GECL - Sanctioned	4.30	_	4.30
5	Indian Bank	ILC/FLC - Sanctioned	_	9.00	9.00
6	OLB Bank	External Commercial Borrowings - Sanctioned	24.83	_	24.83
7	Punjab National Bank	Cash Credit - Sanctioned	6.71	_	6.71
8	Punjab National Bank	Term Loan - Sanctioned	5.23	_	5.23
9	Punjab National Bank	Term Loan - Sanctioned	2.90	_	2.90
10	Punjab National Bank	ILC/FLC - Sanctioned	_	6.00	6.00
11	Punjab National Bank	GECL - Sanctioned	2.30	_	2.30
12	State Bank Of India (SBI)	ILC/FLC - Sanctioned	_	21.00	21.00
13	State Bank Of India (SBI)	Term Loan - Sanctioned	45.98	_	45.98
14	State Bank Of India (SBI)	Cash Credit - Sanctioned	23.97	_	23.97
15	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	1.00	1.00
16	State Bank Of India (SBI)	GECL - Sanctioned	16.00	_	16.00
Total			148.74	37.00	185.74
TOTAL (Rupees One Hundred Eighty Five Crores and Seventy Four lakhs Only)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR"s best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR"s opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user"s financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR"s ratings reflect BWR"s opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR"s public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR"s rating criteria are also generally made available without charge on BWR"s website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.