Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 85.07 Crs. of POCL Enterprises Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (26 Jul 2021) |
Present | ||
Fund Based | 55.18 | 60.77 | Long Term |
BWR BBB- /Stable
Reaffirmation |
BWR BBB
/Stable Upgrade |
(0.00) | (25.00) | ||||
(0.00) | (10.00) | ||||
13.00 | 13.00 | Short Term |
BWR A3
Reaffirmation |
BWR A3 +
Upgrade |
|
Non Fund Based | 11.30 | 11.30 | Short Term |
BWR A3
Reaffirmation |
BWR A3 +
Upgrade |
(0.00) | (25.00) | ||||
(0.00) | (25.00) | ||||
Grand Total | 79.48 | 85.07 | (Rupees Eighty Five Crores and Seven lakhs Only) |
The rating action for POCL Enterprises Ltd. ('POEL' or 'the company') reflects the better-than-expected performance in fiscal 2022, driven by demand recovery and cost efficiency measures. Brickwork Ratings (BWR) believes that the business and financial profile shall continue to be maintained over the medium term supported by steady demand for its products. BWR also notes the company's ability to secure incremental orders from one of its key existing clients, augmenting the company's growth plans. The improvement in business performance is reflected in 56% YOY growth in revenue to Rs.498 Crs in FY22 backed by volumetric growth across all the business segments. The improved scale of operations and firmed up prices have supported ~44% YOY growth in EBITDA in FY22.
The ratings continue to be supported by the experience of the management, established track record in the industry with a long association with its suppliers and customers. However, the ratings remain constrained due to susceptibility of margins to fluctuation in raw material prices, vulnerability to global demand-supply, cyclicality of end user industries and geopolitical scenario, regulatory risk, foreign exchange rate fluctuations and working capital intensive operations.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR believes POCL's business risk profile will be maintained over the medium term. The outlook may be revised to 'Positive' if a sustained increase in the scale of operations, higher than envisaged profitability, efficient management of its working capital and improved gearing and debt coverage metrics result in an improved financial risk profile. The outlook may be revised to 'Negative' if lower than expected revenue or profitability, stretch in liquidity, sizeable and unanticipated Capex or weakening gearing adversely impact the financial risk profile.
KEY RATING DRIVERSCredit Strengths:
The management is experienced in the metals and chemicals sector. The company has an established track record of over three decades in manufacturing of metals, metal oxides and other chemicals. The reputation and extensive experience of the management among the industry peers is expected to support the company's operations.
The company started with trading of chemicals in 1980s and gradually became an established player in the metals, metal oxides and plastic additives segment. The company has been able to establish long and stable relationships with reputed clientele, both domestic and overseas. The company has been able to secure repeat orders from these clients. The company also has long term contracts with many of these companies.
Despite the impact of Covid-19 induced disruptions in Q1FY22, the company's scale of operations improved significantly in FY22. Operating income increased from ~Rs. 319 crores in FY21 to ~Rs. 498 crores in FY22. EBITDA and PAT increased over the period on account of increase in sales and improvement of the prices of lead and zinc in domestic and international markets. The TNW improved to Rs.38.63 Crs and which resulted in improvement in Total Debt/ TNW to 2.21 times as on 31Mar2022. Debt coverage metrics given by ISCR and DSCR are adequate as on 31Mar2022. ISCR improved from 1.42 times as on 31Mar21 to 1.69 times as on 31Mar22. DSCR declined from 1.58 times as on 31Mar21 to 1.4 times as on 31Mar22.
The company operates primarily in the commodity sector which is characterized by high volume, low margins and dependence of the revenue and profitability on global growth scenario, global demand-supply conditions, international trade environment, strength of dollar vs. other currencies and domestic growth scenario. The company’s profitability is also affected by the other raw materials used in the company’s manufacturing process.
The company gets ~42% of its revenue from exports and imports ~74% of its raw material consumed. The company has a natural hedge and additionally, it hedges the foreign exchange risk by availing forward contract limits. Furthermore, the company's operations are working capital intensive leading to reliance on external borrowings with associated finance costs. BWR notes the improvement in the working capital cycle to ~2 months as on 31 Mar 22. The sustainability of the working capital cycle at these levels continues to be a key monitorable.
The company faces strong competition from both organized and unorganized players. Often, the competition is based upon margins, and there is limited bargaining power with both suppliers and customers. Also, the commodity nature of the products limits the pricing power of the company.
The primary product of the company is Lead which is hazardous in nature and hence, requires the requisite certifications and renewals thereof from the State Pollution Control Board. Although the company has the appropriate clearances, the company's operations remain susceptible in case of any violations of such regulatory norms.
For arriving at its ratings, Brickwork Ratings has applied its rating methodology as detailed at the end of the document. The company does not have any subsidiary, associate or holding company as on 31Mar2022.
RATING SENSITIVITIES
The ability of the company to significantly increase its scale of operations while also improving its profitability and gearing on a sustainable basis would be key rating sensitivity. Keeping in view the ongoing capex through internal accruals and increase in debt repayments, the proposed improvement in the company's EBIDTA and net cash accrual remains a key monitorable.
Upward:
Downward:
The liquidity profile is considered adequate as reflected in moderate working capital utilisation, net cash accruals and cash & cash equivalents. The EBITDA was adequate to cover the finance charges in FY22. Net cash accruals in FY22 is adequately covering the debt repayments and a similar trend is expected in FY23 and FY24. The average working capital limit utilization was ~70% in the past 6 months. Cash & cash equivalents were modest at ~Rs. 3.20 Crs. as on 31Mar2022. The current ratio improved to 1.22 times as on 31Mar22 from 1.20 times as on 31Mar21. The cash conversion cycle improved from 79 days as on 31Mar21 to 59 days as on 31Mar22
ABOUT THE ENTITYPOCL Enterprises Limited ('POEL' or 'The company') was initially established on 20May1988 for trading of chemicals in Chennai. POEL is an ISO 9001:2015 company and specializes in manufacturing and trading of various metals, metal oxides and plastic additives. The company has manufacturing units in Puducherry (two), Kakkalur – Thiruvallur and Maraimalai Nagar, Tamil Nadu. The company’s shares are listed on BSE Ltd. Exports contributed ~42% of total sales in FY22. Metals, plastic additives and metal oxides contributed ~73%, ~12% and ~15% of net sales in FY22.
Mr. Harish Kumar Lohia is the Non-Executive Chairperson. Mr. Devkar Bansal and Mr. Sunil Kumar Bansal are the Managing Directors.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 21-22 (Audited) |
FY 20-21 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 497.83 | 318.88 |
EBITDA | Rs.Crs. | 11.31 | 7.85 |
PAT | Rs.Crs. | 3.37 | 1.45 |
Tangible Net Worth | Rs.Crs. | 38.63 | 35.18 |
Total Debt/TNW | Times | 2.21 | 2.41 |
Current Ratio | Times | 1.22 | 1.20 |
The terms of sanction include standard covenants normally stipulated for such facilities.
Not applicable
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 | 60.77 |
BWR BBB/Stable
(Upgrade) |
26Jul2021 |
BWR BBB- Stable
(Reaffirmation) |
27Nov2020 |
BWR BBB- Stable
(Reaffirmation) |
15Apr2019 |
BWR BBB- Stable
(Reaffirmation) |
FB SubLimit | LT | (25.00) |
BWR BBB/Stable
(Upgrade) |
26Jul2021 |
BWR BBB- Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
(10.00) |
BWR BBB/Stable
(Upgrade) |
26Jul2021 |
BWR BBB- Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
||
Fund Based | ST | 13.00 |
BWR A3+
(Upgrade) |
26Jul2021 |
BWR A3
(Reaffirmation) |
27Nov2020 |
BWR A3
(Reaffirmation) |
15Apr2019 |
BWR A3
(Reaffirmation) |
Non Fund Based | ST | 11.30 |
BWR A3+
(Upgrade) |
26Jul2021 |
BWR A3
(Reaffirmation) |
27Nov2020 |
BWR A3
(Reaffirmation) |
15Apr2019 |
BWR A3
() |
NFB SubLimit | ST | (25.00) |
BWR A3+
(Upgrade) |
26Jul2021 |
BWR A3
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
(25.00) |
BWR A3+
(Upgrade) |
26Jul2021 |
BWR A3
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
||
Grand Total | 85.07 | (Rupees Eighty Five Crores and Seven lakhs Only) |
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 CriteriaAnalytical Contacts | |
---|---|
Vineet Krishnan Nair Senior Ratings Analyst vineet.kn@brickworkratings.com |
Saakshi Kanwar Senior Manager Ratings saakshi.k@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 | Canara Bank | Cash CreditSanctioned | 17.70 | _ | 17.70 | |
Sub-Limit (WCDL) Sanctioned | (10.00) | |||||
2 | Canara Bank | PC/PCFC/FDB/BRD/FBESanctioned | _ | 13.00 | 13.00 | |
3 | Canara Bank | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 6.70 | _ | 6.70 | |
4 | Canara Bank | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 3.49 | _ | 3.49 | |
5 | Canara Bank | ILC/FLC/BGSanctioned | _ | 5.30 | 5.30 | |
6 | HDFC Bank | Standby LC/ILC/FLC/BGSanctioned | _ | 6.00 | 6.00 | |
7 | HDFC Bank | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 2.74 | _ | 2.74 | |
8 | HDFC Bank | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 5.14 | _ | 5.14 | |
9 | HDFC Bank | Cash CreditSanctioned | 25.00 | _ | 25.00 | |
Sub-Limit (Post Shipment Finance) Sanctioned | (25.00) | |||||
Sub-Limit (Pre Shipment Finance) Sanctioned | (25.00) | |||||
Sub-Limit (Working Capital Demand Loan) Sanctioned | (25.00) | |||||
Total | 60.77 | 24.30 | 85.07 | |||
TOTAL (Rupees Eighty Five Crores and Seven lakhs Only) |
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About Brickwork RatingsBrickwork 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 12,000 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.
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