Shitla Papers Private Limited

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.15.00 Crs. of Shitla Papers Private Limited

Particulars

Facilities**	Amount(Rs.Crs)	Tenure	Rating*
Fund Based	15.00	Long Term	BWR BB (Pronounced as BWR Double B ) (Outlook: Stable)
Total	15.00	(Rupees Fifteen Crores Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

Rating Outlook: Stable
BWR believes the business risk profile of Shitla Papers Private Limited 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 the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

BWR has essentially relied upon the Audited Financials upto FY18, Provisional Financials of FY19, publicly available information and information / clarification provided by the Company’s management.
The ratings are strengthened by the extensive experience of more than two decades of the Promoter Mr. Sanjeev Kumar Mittal. The ratings are, however, constrained by moderate coverage ratios, lower profitability margins, high gearing level and intense competition in the business of trading and fragmented nature of the paper trading industry. Going forward the company’s ability to improve their profitability and gearing ratios would be the Key Rating Sensitivities.

Strengths

• Experienced promoters:

  SPPL is currently being managed by Mr. Sanjeev Kumar Mittal(Chartered Accountant) and Mr. Ayush Mittal (son of Mr. Sanjeev Kumar Mittal). Mr. Sanjeev Kumar Mittal has an experience of around 20 years through his association with this company. Mr. Ayush Kumar Mittal is an B.tech by qualification and has an experience of 7 years. They both are actively engaged in the business of SPPL.

Weakness

• Low Profit Margins:

  Profitability margins continue to remain low because of low pricing power. Higher interest and depreciation cost continue to dent PAT margins.

• High Gearing Level:

  TOL/TNW remains high at 4.77 for FY 2018 as compared to 4.19 for FY 2017. The Debt/TNW ratio stands at 2.59 as on 31.03.2018. Low profit margins continue to impact the gearing ratio.

• Intense Competition:

  Competition remains intense due to trading nature of business and low entry barriers.

• Moderate Conversion Cycle:

  Despite being a Trading Concern ,the conversion cycle remained moderate at 36 days. The average collection period stood around 81 days during FY18. The Company maintained inventory of finished goods for around 4 days during FY18 and average payable period of the company stood around 49 days.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For ariving 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).

LIQUIDITY POSITION

1. The firm has nil associate concerns.
2. The Company  has cash balances of  Rs. 6.41 Lacs as on 31.03.2018 as compared to Rs. 5.96 Lacs as on 31.03.2017
3. The firm has utilization of 82.85% of their cash credit limit from Oriental Bank of Commerce from the month of December,18 to May,2019.
4. The Firm has  Interest service coverage ratio of 1.66 times and  Debt Service Coverage Ratio of 1.23 times in FY18.
5. The current ratio stood 1.31  as at 31.03.2018 against 1.17 as on 31.03.2017.
6. Conversion Cycle is at 36 days in FY18 due to high receivable days at 81.Average Inventory days remain at 4 days and payable days at 49 days.
7. Total Long term borrowings as on 31.03.2018 amounts to Rs.7.73 Cr. Current portion of Long Term Debt stood at Rs. 0.68 Cr for F.Y 18. The Company has  provided Cash Flow Statement along with Audited Balance Sheet for FY 17 and FY 18.
 

PROFILE

Shitla Papers Private Limited (SPPL) formerly known as Shitla Paper Trading Co. Pvt. Ltd. was established in the year 1997 having registered office at Unit No. 205, Jaksons Crown Heights Plot No-3B1, District Centre, Sector-10, Rohini Delhi North West  110085. The Company is engaged in Trading of all kinds of Paper for Packaging which includes Kraft Paper, Paperboard, Duplex Paper & Boards and stitching wires. The Company is currently being managed by Mr. Sanjeev Kumar Mittal and Mr. Ayush Mittal. 

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs	160.40	98.18
EBITDA	Rs.Crs	2.65	1.17
PAT	Rs.Crs	0.37	0.33
Tangible Net Worth	Rs.Crs	7.34	7.06
Total Debt/Tangible Net Worth	Times	2.59	1.56
Current Ratio	Times	1.31	1.16

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
1	Fund Based	Long Term	15.00	BWR BB (Pronounced as BWR Double B ) (Outlook: Stable)	NA	NA	NA
Total			15.00	(Rupees Fifteen Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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 :

• General Criteria
• Approach to Financial Ratios
• Trading Entities

For More Information Contact:

Analytical Contacts	Investor Contacts
Gunsahib Singh gunsahib.s@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
V.K.Kukreja Associate Director-Ratings kukreja.vk@brickworkratings.com
1-860-425-2742

SL.No.	Name of the Bank	Long Term(Rs.Crs)		Short Term(Rs.Crs)	Total(Rs.Crs)
		CC	TL
1	OBC Bank	8.6			8.6
2	OBC Bank(Proposed)	5.67			5.67
3	OBC Bank		0.73		0.73
	TOTAL (Rupees Fifteen Crores Only)	14.27	0.73	0	15