TK Paper Mills

Brickwork Ratings revises the Long term rating and reaffirms the Short term Rating for the Bank Loan Facilities of Rs. 6.39 Crs. of TK Paper Mills

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (21 Jun 2021)	Present
Fund Based	5.39	5.39	Long Term	BWR B+/Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB - /Stable Upgrade
Non Fund Based	1.00	1.00	Short Term	BWR A4 Reaffirmation/ISSUER NOT COOPERATING*	BWR A4 /Stable Reaffirmation
Grand Total	6.39	6.39	(Rupees Six 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

BWR upgraded the long term rating to BWR BB-/Stable and reaffirms the short term rating at BWR A4 of T K Paper mills.

The rating draws comfort from experienced management, established track record in paper manufacturing business with long standing established relationships with clients ensuring repeat business. However the rating is constrained by relatively volatility in profitability and competitive nature of business.

BWR believes that the business risk profile of “T K Paper mills” 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 there is significant improvement in revenues and profit margins of the company. The rating outlook may be revised to “Negative” if there is any deterioration in the financial risk profile including liquidity of the company.

KEY RATING DRIVERS

Credit Strengths:

Management Experience : :
The promoters carry rich experience of more than a decade in the pulp and paper industry. The company benefits from the vast experience of the promoter to forge healthy relationships with its customers and also to scale up its operations have seen complete business cycles.
Moderate Financial Risk Profile :
The firm has moderate financial risk profile with total operating income of Rs 39.24 Crs in FY 19, which marginally increased to Rs. 40.66 crs. in FY20 (Aud.). which further increased to Rs. 48.16 crs. in FY21 (Provisional). The total operating income of the firm projected for FY22 stood at Rs. 50.57 crs. against which the firm has already achieved revenue of Rs. 32 crs. till November 2021. The operating profit margin of the firm has decreased on a year-on year basis in FY20 (Aud.) to 3.85% from 4.31% in FY19 (Aud.). The net profit margin of the firm improved marginally to 1.08% in FY20 (Aud.) from 1.02% in FY19 (Aud.).The tangible net-worth of the firm stood at Rs. 3.18 crs. in FY20 (Aud.) which has increased from Rs 2.75 in FY 19 (Aud), which has further increased to Rs 3.96 Crs in FY 21 (Prov). The tangible net worth (Analyzed) stood at Rs 3.27 Crs as on 31st March, 2020, increased from Rs 3.11 Crs in FY 19(Aud)., further increased to Rs 4.09 Crs in FY 21 (Prov). The Total Debt/TNW ratio stood 1.69 times in FY20 (Aud.), increased from 2.38 times in FY 19(Aud). The total debt/TNW (Analyzed) was 1.62 times in FY 20 (Aud) and 1.99 times in FY 19 (Aud).The ISCR ratio is 2.58 times in FY 20 (Audited) and 2.33 times in FY 19 (Aud). The DSCR 2.03 times in FY 20 (Aud) and 2.07 times in FY 19 (Aud).

Credit Risks:

Competition in the Industry : :
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability. This limits the pricing power of the manufacturers in terms of flexibility to pass on the raw material price fluctuation to its customers. Further, the demand for paper is directly correlated to the level of economic activity, as higher industrial output leads to increased demand for industrial paper for packaging; increased marketing spend benefits the newsprint and value-added segments; and greater education and office activities raises the demand for Writing and Printing Paper
Stretched Working Capital :
The firm is working capital intensive, CC Utilization stood at 75% for the past 6 months and has low current ration at 1.03 times in FY 20.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has 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 revenues and Financial Risk Profile including current ratio would remain the key rating sensitivities.

Positive: Rating may be upgraded in case of substantial improvement in revenues and profit margins going forward.

Negative: Rating may be downgraded in case there is deterioration in financial risk profile including the liquidity ratios of the company.

LIQUIDITY INDICATORS - Adequate

The firm has cash and bank balances of Rs 0.07 Cr as on March 31, 2020 (Aud). The current ratio stood of the firm stood at 1.03 times in FY 20 (Audited). The working capital cycle of the firm stood at 28 Days as on March 31, 2020 (Audited). The firm has long term borrowings of Rs 0.37 Crs ,which comprises vehicle loan from J & K Bank Rs 0.15 Crs, unsecured loan from friends and family of directors Rs 0.22 Crs as on March, 2020. The firm has not submitted the cash flow statement. The average CC Utilization of last 6 months stood at 75 % for the last 6 months. The ISCR is 2.58 times in FY 20 (Audited) and DSCR is 2.03 times in FY 20 (Aud).

ABOUT THE ENTITY

TK Paper Mills is partnership firm, managed in equal partnership by the current partners, Mr. Nitin Mahajan and Ms. Ashi Mahajan, is located in Chack Sakta, Jammu & Kashmir. The firm is indulged in manufacturing of Kraft Board, Duplex and Kraft papers and its manufacturing facility with a total of 27,000 MT per Annum capacity is located in Chack Sakta, Jammu & Kashmir where the firm produces Kraft Boards.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Provisional)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	48.16	40.66
EBITDA	Rs.Crs.	1.42	1.56
PAT	Rs.Crs.	0.53	0.44
Tangible Net Worth	Rs.Crs.	3.96	3.18
Total Debt/Tangible Net Worth	Times	1.31	1.69
Current Ratio	Times	1.21	1.03

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Status of Non Cooperation with any other CRA : CRISIL B/ Stable as on 16.03.21

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	5.39	BWR BB-/Stable (Upgrade)	21Jun2021	BWR B+Stable (Downgrade/ISSUER NOT COOPERATING*)	NA	NA	12Dec2019	BWR BB-Stable (Assignment)
Non Fund Based	ST	1.00	BWR A4/Stable (Reaffirmation)	21Jun2021	BWR A4 (Reaffirmation/ISSUER NOT COOPERATING*)	NA	NA	12Dec2019	BWR A4 (Assignment)
Grand Total		6.39	(Rupees Six 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.

Analytical Contacts
Upma Verma Ratings Analyst upma.v@brickworkratings.com	V.K.Kukreja Associate Director - Ratings Board : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

TK Paper Mills

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	Jammu and Kashmir Bank	Cash Credit - Sanctioned	5.39	_	5.39
2	Jammu and Kashmir Bank	Foreign Letter of Credit (FLC) - Sanctioned	_	1.00	1.00
Total			5.39	1.00	6.39
TOTAL (Rupees Six Crores and Thirty Nine lakhs Only)

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