RATING RATIONALE
02 Mar 2022
Shivay Kraft Papers Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.39.88 Crs. of Shivay Kraft Papers Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Term Loan
Out-standing
Cash Credit Sanctioned |
19.88
14.00 |
Long Term | BWR B (Stable) |
| Sub Total | 33.88 | ||
| Non-Fund Based | |||
| ILC/FLC/BG Sanctioned | 06.00 | Short Term | BWR A4 |
| Sub Total | 06.00 | ||
| Grand Total | 39.88 | (Rupees Thirty Nine Crores and Eighty Eight lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Shivay Kraft Papers Pvt. Ltd. business risk profile 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 financial statements of Shivay Kraft Papers Pvt. Ltd. of FY20-21,FY21 provisionals upto Jan 22 and projected financial statements of FY22,FY23, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the director/s, and timely funding support by promoters. However, the rating is constrained by the scale of operations due to its nascent satge, and high competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities
Credit Strengths:
- Extensive industry experience of the partners :
The partners have an experience of over decades in industrial paper industry. This has given them an understanding of the dynamics of the market, and enabled them to establish relationships with suppliers and customers.
- Favourable repayment structure of project loan :
Long tenure of the term loan with moratorium of six months may aid liquidity in the initial years.
- Timely funding support of directors :
Directors timely, need-based funding support will continue to aid the business. In FY20-21 the USL was of Rs 59 lacs and in FY21-22 ending Jan 22 the unsecured loan as per provisional numbers is Rs 10.94 crs.
Credit Risks:
- Exposure to timely project implementation and stabilisation of operations thereafter :
Commercial production of kraft paper is expected to commence from March 22. Timely implementation, and stabilisation and commensurate ramp-up in sales during the initial phase of operations, remain critical, and hence will be closely monitored.
- Profitability susceptible to volatility in waste paper prices and exposure to nascent stages of operations :
Operating margin is expected to susceptible due to volatile raw material prices, which are directly linked to international prices. Since the firm started its commercial operation in March 22, it has limited track record. Consequently, scalability is constrained. Nascent stage will continue to limit scalability over the medium term.
- Susceptibility to intense competition and cyclicality in the industrial paper industry :
The Indian industrial paper industry is highly fragmented with several organized and unorganized players. The level of fragmentation is even higher in the industrial paper segment (which accounts for a major portion of the total paper industry) where unorganized players hold majority of the market share. Rapid growth in the number of small mills has been because of the low entry barriers (the cost of setting up an industrial paper plant is relatively low as most smaller capacities are waste-paper-based, and involve low investment in technology) and government policies (several excise concessions and other benefits to small paper mills granted from time to time).
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
Positive
- Significant ramp-up in production and Improvement in overall liquidity
- Improvement in TOL/TNW
Negative
- Any large debt funded capital expenditure adversely impacting the financial risk profile
- Major delay in commencement of operations
LIQUIDITY POSITION
Liquidity Indicators: Stretched
Shivay Kraft Papers Pvt Ltd liquidity is expected to remain stretched over the medium term due to its nascent stages of operation. Cash accrual is projected at Rs 6.69 crore for FY22-21 and as per provisional shared by company ending Jan 22 the same is negative Rs 2.93 crs However, liquidity may be supported by the long tenure of loan and the need-based funds extended by the partners. The bank limit utilization is average at around 40% percent for the past month ended Jan 22 as the cash credit is sacntioned on 20/12/21.
Note: The below provisional financial numbers reflecting in key financial indicators are from April21-Jan22. The turnover achieved of the entity is Rs 0.00 Crs/Nil in FY21 and for FY 2022 ending Jan 22. The company projects to achieve sales of Rs 93.35 Crs for FY 2023.
PROFILEM/s. SHIVAY KRAFT PAPERS PRIVATE LIMITED is incorporated on 26/11/2020 with the objective of Manufacturing of Kraft Papers with the capacity of 120 MT per day at Mehsana. The directors of Shivay Kraft Papers Private Limited are Mr. Hareshkumar Shankarbhai Patel, Ghanshyambhai Keshavlal Patel, and Naimesh Haribhai Patel. The commercial production is expected to be start by March 2022. The registered office of company is in Mehsana situated at 47/ Narmade Residency, Dediyasan, Village dediyasan (Part) Mehsana, Gujarat 384002 India and the factory is situated at Survey No. 1322, (Old Block/ Survey No. 1204 paiki -3), Palaj, Mehsana.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 22-23 (Projected) |
FY 21-22 (Provisional) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 93.35 | 0.00 |
| EBITDA | Rs.Crs. | 11.45 | -1.34 |
| PAT | Rs.Crs. | 2.46 | -2.93 |
| Tangible Net Worth | Rs.Crs. | 9.51 | 6.05 |
| Total Debt/Tangible Net Worth | Times | 5.50 | 4.97 |
| Current Ratio | Times | 1.71 | 4.40 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
| Fund Based | ||||||||||
| 1 | Term Loan - Out-standingCash Credit - Sanctioned | Long Term | 19.8814.00 | BWR B(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | ILC/FLC/BG - Sanctioned | Short Term | 06.00 | BWR A4 | NA | NA | NA | |||
| Total | 39.88 | (Rupees Thirty Nine Crores and Eighty Eight 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 Criteria : For More Information Contact:| Analytical Contacts | |
|---|---|
|
Tripti Sharma Lead Analyst tripti.s@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 | The Mehsana Urban Co-operative Bank | Term LoanOut-standing | 19.88 | _ | 19.88 |
| 2 | The Mehsana Urban Co-operative Bank | Cash CreditSanctioned | 14.00 | _ | 14.00 |
| 3 | The Mehsana Urban Co-operative Bank | ILC/FLC/BGSanctioned | _ | 6.00 | 6.00 |
| Total | 33.88 | 6.00 | 39.88 | ||
| TOTAL (Rupees Thirty Nine Crores and Eighty Eight lakhs Only) | |||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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