RATING RATIONALE
12May2022
Aakash Polyfilms Ltd
Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 140.43 Crs. of Aakash Polyfilms Ltd
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (03 Mar 2022) |
Present | ||
| Fund Based | 54.43 | 132.63 | Long Term |
BWR BBB- /Stable
Reaffirmation/ISSUER NOT COOPERATING* |
BWR BBB -
/Stable Reaffirmation |
| (0.00) | (28.00) | ||||
| (0.00) | (50.55) | ||||
| (0.00) | (5.05) | ||||
| (0.00) | (4.00) | Short Term |
|
BWR A3
Reaffirmation |
|
| Non Fund Based | 7.63 | 7.80 | Short Term |
BWR A3
Reaffirmation/ISSUER NOT COOPERATING* |
BWR A3
Reaffirmation |
| Grand Total | 62.06 | 140.43 | (Rupees One Hundred Forty Crores and Forty Three lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
Note: * Rating is removed from "issuer not cooperating" category.
RATING ACTION / OUTLOOK
BWR has considered the standalone financials of the Company (Or hereinafter referred as "APL") and essentially relied upon the audited financial statements up to FY21, Provisional financials up to 9MFY22, Management certified provisional sales as on 31st March 2022, Projected financial statements up to FY25 and publicly available information and clarifications provided by the entity management.
The rating reaffirmation is based on improvement in scale of operation during the last fiscal, moderate financial risk profile, adequate liquidity position and promoters financial support. Also, the rating favorably factor in the extensive experience of promoters in the packaging industry and the enhanced capacity which is expected to drive the company’s revenue growth going forward. BWR expects the positive outlook for the packaging film industry given the strong demand post covid pandemic. The ratings are however constrained by the project execution risk for the ongoing expansion, vulnerability of APL to the volatility in the raw material prices, forex rates, which can lead to pressure on realizations and margins.
The stable outlook of the rating reflects that the company will continue to benefit from its established position in the industry and expansion of operations.
KEY RATING DRIVERSCredit Strengths:
-
Experienced promoters and established market position: :
Mr. Pavan Tulsania, Managing Director is handling the operation of the company, and having understanding of the dynamics of the industry will continue to support the business risk profile. The Company manufacturing products for FMCG and other packaging industries. Over the period of time, it has established market position in different geographies and longstanding relations with international and domestic customers.
-
Improvement in operations and moderate financial risk profile : :
APL witnessed a substantial improvement in total operating income (TOI)on the back of increased sales volume and realization. The company achieved a TOI of Rs. 196.22 Crs on a provisional basis for FY22 against Rs. 107.62 Crs in FY21. The revenue comprises export around 20% to Gulf ,African countries and rest is domestic sales. The leverage is moderate with analyzed gearing stood at 0.62x in FY20 and 0.70x in FY21. Promoters financial support in interest free unsecured loans extended from Rs. 12.73Crs in FY20 to Rs. 19.55 Crs in FY21. . Owing to the improved operating profits, reflected in comfortable debt protection metrics with ISCR at 3.78x and DSCR at 1.47x as on 31 March 2021. While the financial risk remains comfortable however, new debt-funded capex is likely to impact the credit metrics and remains a key monitorable.
-
Positive outlook of BOPET and BOPP films industry: :
During the covid pandemic, the demand of specialty biaxially-oriented polypropylene (BOPP) films, steady increased in the domestic and global markets. As a result, APL has been able to maintain steady operating performance during the pandemic times. Given, the positive outlook of the BOPP & BOPET industry, along with healthy demand by other packaging industries, should result in revenue growth of the company in the medium term.
-
Ongoing debt funded capex: :
APL has undertaken capex pertaining to entering into manufacturing of BOPET (biaxially-oriented polyethylene terephthalate) films commencing trial run from November 2022 and optimum utilization of capacities from April 2023. The total cost of this project is Rs 278.94 crs, funded in a debt-to-equity mix of 74:26. The company has significant repayment obligation around Rs. 19-23 crore FY24 onwards which will exert pressure on it cash flows. However, the ability of APL to successfully execute its capital expenditure projects without any cost & time overrun, promoters financial support and stabilization of the operation would be the key rating sensitivities.
-
Vulnerability of profitability to volatility in raw material prices and forex rates : :
BOPP/BOPET industry is highly fragmented and exposed to stiff competition by large players. Profitability is also vulnerable as key raw material, is a derivative of crude and hence, susceptible to volatility in crude prices. APL imports 35% to 50% of raw material, which exposes to foreign exchange fluctuation risks. However, the risk is mitigated through cross heading against the export sales.
BWR has considered standalone audited financials of the company and applied its rating methodology as detailed in the Rating Criteria.
RATING SENSITIVITIES
Positive :
- Significant increase in operating income, thereby profitability and cash accruals while maintaining healthy working capital cycle and liquidity .
- Promoters financial support, timely completion, stabilization and ramp up of capacity expansion project.
Negative :
- Deterioration in the credit metrics and stressed liquidity position.
- Significant time and cost overrun in the ongoing capex and any adverse effect on existing operation.
APL's liquidity position is adequate with surplus in cash accruals against the term liabilities. Net Cash accruals improved to Rs. 5.83 Crs in FY21 against Rs. 4.74 Crs in FY20. Average Cash credit utilization remained minimal, however mostly letter of credit is being utilized. The company enjoys the one way interchangeability from cash credit to letter of credit, which provides the financial flexibility. Further, the GECL of Rs. 7.38 Crs will provide the additional cushion to the liquidity. Receivables are comfortable with 50 days and current ration is healthy at 1.44x as on 31st March 2021. Ongoing capital expenditure of ~Rs. 278.94 crs, is funded from a term loans & external borrowings of Rs. 206 crores. Though the company’s cash flow from operations are impacted in 2024 onwards owing to upcoming repayments. The ability of the company to ramp up the scale of operations and ensure steady cash inflows will be key to maintain a comfortable liquidity position.
ABOUT THE ENTITYIncorporated in 1994, Aakash Polyfilms Limited (APL), is promoted and managed by Mr. Pavan Tulsiani & family. The company is engaged in the manufacturing of metalized CPP films & BOPP films in two units situated at Bharuch and Surat, Gujarat with total manufacturing capacity of 15600 metric ton per annum. APL proposed to set up capex unit for manufacturing of BOPET film with installed capacity of 42000 ton per annum (TPA) at Jhagadia, Bharuch district, Gujarat. The trail run production is expected to commence from November 2022 and expecting to utilize the optimum capacities from April 2023.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 107.62 | 112.49 |
| EBITDA | Rs.Crs. | 7.37 | 6.10 |
| PAT | Rs.Crs. | 2.05 | 1.50 |
| Tangible Net Worth | Rs.Crs. | 20.65 | 18.60 |
| Total Debt/Tangible Net Worth | Times | 2.32 | 1.72 |
| Current Ratio | Times | 1.44 | 1.12 |
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
Not Applicable
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2022) | 2022 (History) | 2021 | 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 132.63 |
BWR BBB-/Stable
(Reaffirmation) |
03Mar2022 |
BWR BBB- Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
22Sep2020 |
BWR BB+ Stable
(Downgrade/ISSUER NOT COOPERATING*) |
31Jan2019 |
BWR BB Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
| 0.00 |
NA
|
NA |
NA
|
NA |
NA
|
03Dec2020 |
BWR BBB- Stable
(Upgrade) |
06May2019 |
BWR BBB- Stable
(Upgrade) |
||
| FB SubLimit | LT | (28.00) |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (50.55) |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| (5.05) |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| FB SubLimit | ST | (4.00) |
BWR A3
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Non Fund Based | ST | 7.80 |
BWR A3
(Reaffirmation) |
03Mar2022 |
BWR A3
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
22Sep2020 |
BWR A4+
(Downgrade/ISSUER NOT COOPERATING*) |
31Jan2019 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
| 0.00 |
NA
|
NA |
NA
|
NA |
NA
|
03Dec2020 |
BWR A3
(Upgrade) |
06May2019 |
BWR A3
(Upgrade) |
||
| Grand Total | 140.43 | (Rupees One Hundred Forty Crores and Forty Three lakhs Only) | |||||||||
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Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Axis Bank Ltd. | Term LoanOut-standing | _ | _ | 0.00 | |
| 2 | Axis Bank Ltd. | Cash CreditSanctioned | 5.05 | _ | 5.05 | |
| Sub-Limit (EPC/FBD) Sanctioned | (5.05) | |||||
| Sub-Limit (Letter of Credit) Sanctioned | (4.00) | |||||
| 3 | Punjab National Bank | Bank GuaranteeSanctioned | _ | 3.00 | 3.00 | |
| 4 | Punjab National Bank | Letter of CreditSanctioned | _ | 4.00 | 4.00 | |
| 5 | Punjab National Bank | Forward ContractSanctioned | _ | 0.80 | 0.80 | |
| 6 | Punjab National Bank | GECLOut-standing | 3.62 | _ | 3.62 | |
| 7 | Punjab National Bank | GECLSanctioned | 3.66 | _ | 3.66 | |
| 8 | Punjab National Bank | Term LoanOut-standing | 15.43 | _ | 15.43 | |
| 9 | Punjab National Bank | Term LoanSanctioned | 45.00 | _ | 45.00 | |
| 10 | Punjab National Bank | Term LoanSanctioned | 9.32 | _ | 9.32 | |
| 11 | Punjab National Bank | Cash CreditSanctioned | 50.55 | _ | 50.55 | |
| Sub-Limit (Negotiation/Discounting Limit for Inland LC & FLC) Sanctioned | (50.55) | |||||
| Sub-Limit (PC/PCFC/FDBP/FUDBP) Sanctioned | (28.00) | |||||
| Total | 132.63 | 7.80 | 140.43 | |||
| TOTAL (Rupees One Hundred Forty Crores and Forty Three lakhs Only) | ||||||
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