Hindprakash Chemicals Pvt. Ltd. (erstwhile Hindprakash Tradelink Pvt. Ltd.)

Brickwork Ratings reaffirms the long-term rating and revises the short-term ratings for the Bank Loan Facilities of Rs. 128.40 Crs. of Hindprakash Chemicals Pvt. Ltd. (erstwhile Hindprakash Tradelink Pvt. Ltd.)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (17 Apr 2020)	Present
Fund Based	65.00	88.40	Long Term	BWR BBB+ (Stable) Reaffirmed	BWR BBB + /Stable Reaffirmation
	(22.00)	(22.00)	Short Term	BWR A3 Reaffirmed	BWR A2 Upgrade
	(7.00)	(7.00)
	(3.50)	(3.50)
	(9.00)	(9.00)
	(5.50)	(5.50)
	(6.00)	(6.00)
	(2.50)	(2.50)
Non Fund Based	40.00	40.00	Short Term	BWR A3 Reaffirmed	BWR A2 Upgrade
	(2.00)	(4.00)
	(0.75)	(0.75)
Grand Total	105.00	128.40	(Rupees One Hundred Twenty Eight Crores and Forty 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

The ratings of Hindprakash Chemicals Pvt Ltd (erstwhile Hindprakash Tradelink Pvt Ltd) (‘HCPL’ or the ‘Company’) have been reaffirmed and upgraded to BWR BBB+/A2 on account of the experience of the promoters, increase in the scale of operations, average financial risk profile, and locational advantage. The ratings have also taken into consideration the weak profitability margins, dependence on imports resulting in susceptibility of the margins to the volatility in commodity prices, exposure to forex risks, and competition in the industry, which constrain the ratings.

The ratings have been assigned a stable outlook on account of the increased demand for dye and dye intermediates which is expected to grow at the CAGR of 4.7%. BWR believes that Hindprakash Chemicals Pvt Ltd's (erstwhile Hindprakash Tradelink Pvt Ltd) business risk profile will be maintained over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Locational Advantage :
THe Company has two units viz. SEZ Trading Unit and SEZ Warehousing Unit at Kandla Special Economic Zone (KASEZ), Gandhidham, Gujarat which helps the Company hedge naturally.
Group Support :
The Company has invested in companies like Hindprakash Overseas Private limited, Orio Shanghai Colours Private Limited which have an already existing strong financial profile and also in companies like Clairvoyance Industries Private Limited, Ecofine Colourchem Private Limited, Ecofine Colourchem Private Limited which is backed by established business groups like Indo Colchem Ltd and BR group respectively.
Qualified and experienced promoters/Proprietor, :
Adequate experience of promoters in the line of activity with established track record in the business as the Company is active for more than three decades.
Increasing trend in the revenue of the company/firm for the last 3 years/Y-O-Y growth in the revenue during past 3 years :
The scale of operations of the Company have shown an increasing trend with the total operating income standing at Rs 837.84 Cr in FY21 provisionals as compared to Rs 736.15 Cr in FY20. The revenues in FY20 got slightly impacted on account of COVID-19.
Average financial risk profile :
The Company has a moderate gearing with the total debt/TNW standing at 0.67x as per FY21 provisionals as compared to 0.38x in FY20 and TOL/TNW standing at 2.18x in FY21 provisionals as compared to 2.02x in FY20. Adequate debt protection metrics with the ISCR and DSCR standing at 2.67x and 2.51x respectively have been reported in FY21 provisionals as opposed to 2.65x and 2.78x respectvely in FY20. However, the Company has minimal long-term debt repayment obligations. Average liquidity profile with the current ratio at 1.31x in FY20.

Credit Risks:

Thin profit margins :
Lean margins with the OPM and NPM standing at 2.23% and 0.46% respectively in FY20 and the same stand at 2.33% and 0.41% respectively in FY21 provisionals.
Susceptibility of margins :
The Company is considerably dependent on import of raw materials (~35%) and exports of finished goods, which results in exposure to the foreign exchange fluctuation risk; however, the Company’s policy of hedging through booking forward contracts mitigates the same to a large extent. The prices of key products, such as H-acid and vinyl sulphone (VS), have witnessed significant fluctuation in the past. The ability to manage volatility and sustain profitability remains critical. Further the prices of key inputs-sulphur, aniline, caustic, ethyl oxide, PNC, naphthalene, and coal-are volatile, which also puts a pressure on the margins.
Intense Competition :
Low entry barriers for initial investment and ease of operations have led to proliferation of innumerable small entities in the intermediate dyes industry. Intense competition from these players limits the pricing flexibility and bargaining power of players.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone performance of Hindrakash Chemicals Pvt Ltd (erstwhile Hindprakash Tradelink Pvt Ltd). BWR has applied its rating methodology as detailed in the Rating Criteria.

RATING SENSITIVITIES

Going forward the Company’s ability to improve the scale of operations, improve and maintain profitability, the debt servicing capability & liquidity will be the key rating sensitivities.

Positive: The rating may be upgraded if the Company is able to achieve significant growth in revenue and profitability backed by a favourable industry scenario and optimum utilisation of capacities, and sustained improvement in working capital management.

Negative: The rating may be downgraded if there is lower than expected revenues affecting the profitability margins, coverage ratios, liquidity and gearing ratios adversely.

LIQUIDITY INDICATORS - Adequate

The curent ratio stands at 1.31x in FY20 and at 1.19x in FY21 provisionals. The cash accruals stand at 9.96 Cr in FY20 and Rs 11.61 Cr in FY21 provisionals, however, the Company has no immediate long-term debt repayment obligations. The Company also has cash and cash equivalents amounting to Rs 9.27 Cr in FY20 and Rs 6.49 Cr in FY21 provisionals. To add to it HTPL (now HCPL) also has additional GECL limits of ~Rs 8.40 Cr to provide additional liquidity cushion.

ABOUT THE ENTITY

The promoter group commenced business in 1942 by the name of Ahmedabad Chemicals Pvt Ltd which was into trading and distribution of paper and chemicals. Later, Hindprakash Tradelink Pvt Ltd (HTPL), incorporated in May 1972, mainly engaged in trading of dyes, dyes intermediates, chemicals and grey fabric.In FY17, Hindprakash Tradelink Pvt Ltd was amalgamated with Ahmedabad Chemicals Pvt Ltd and the resultant company was renamed as Hindprakash Tradelink Pvt Ltd.
The corporate office of the Company is located at Vatva, Ahmedabad. It has a pan-India presence and is one of the largest stockists of multi-application dyes and dye intermediates with strategic locational advantages of SEZ warehousing unit at Kandla Special Economic Zone, Gandhidham, Gujarat.
The company has various international connections for procuring and supplying of products with some of the big international players of the trade. HTPL has started two units viz. SEZ Trading Unit and SEZ Warehousing Unit at Kandla Special Economic Zone (KASEZ), Gandhidham, Gujarat which helps the company hedge naturally. The company has a policy of hedging through the booking of forward contracts which helps them mitigate the fluctuation risk to a large extent.
Further, the Company has opened a Branch of Hindprakash Tradelink Pvt. Ltd. in Ras AL Khaimah Free Trade Zone, UAE. The operating name of the said Branch is “Hindprakash Tradelink Pvt. Ltd., (RAKFTZ Branch)”.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	736.15	765.55
EBITDA	Rs.Crs.	16.40	17.40
PAT	Rs.Crs.	3.41	3.24
Tangible Net Worth	Rs.Crs.	82.48	71.90
Total Debt/Tangible Net Worth	Times	0.38	0.59
Current Ratio	Times	1.31	1.27

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

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

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	88.40	BWR BBB+/Stable (Reaffirmation)	17Apr2020	BWR BBB+ (Stable) (Reaffirmed)	11Feb2019	BWR BBB+ (Stable) (Reaffirmed)	NA	NA
Fund Based	ST	NA	NA	17Apr2020	BWR A3 (Reaffirmed)	NA	NA	NA	NA
FB SubLimit	ST	(22.00)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(7.00)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(3.50)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(9.00)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(5.50)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(6.00)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(2.50)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	40.00	BWR A2 (Upgrade)	17Apr2020	BWR A3 (Reaffirmed)	11Feb2019	BWR A3 (Reaffirmed)	NA	NA
NFB SubLimit	ST	(4.00)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
		(0.75)	BWR A2 (Upgrade)	NA	NA	NA	NA	NA	NA
Grand Total		128.40	(Rupees One Hundred Twenty Eight Crores and Forty lakhs Only)

Rating Advisory, as on 05May2021
Press Release, as on 05May2021
As 12 months have lapsed since the last rating BWR informs that it has not been possible to review the rating within stipulated time, mainly due to non receipt of information required for review.

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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
Saloni Ramprakash Singh Rating Analyst Board : +91 22 2831 1426, +91 22 2831 1439 saloni.s@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Hindprakash Chemicals Pvt. Ltd. (erstwhile Hindprakash Tradelink Pvt. Ltd.)

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	Central Bank of India	Cash Credit - Sanctioned	12.00	_	12.00
	Sub-Limit (EPC/FBD) - Sanctioned		(2.50)
	Sub-Limit (ILC/FLC) - Sanctioned		(6.00)
2	Central Bank of India	Cash Credit - Proposed	4.00	_	4.00
3	Central Bank of India	ILC/FLC - Sanctioned	_	6.50	6.50
	Sub-Limit (Forward Contract / LER) - Sanctioned		(0.75)
4	Central Bank of India	ILC/FLC - Proposed	_	5.65	5.65
5	Central Bank of India	GECL - Sanctioned	1.60	_	1.60
6	Punjab National Bank	Cash Credit - Sanctioned	34.00	_	34.00
	Sub-Limit (EPC/FBD) - Sanctioned		(7.00)
	Sub-Limit (ILC/FLC) - Sanctioned		(22.00)
7	Punjab National Bank	GECL - Sanctioned	4.20	_	4.20
8	Punjab National Bank	ILC/FLC - Sanctioned	_	11.00	11.00
	Sub-Limit (Forward Contract limit / LER) - Sanctioned		(3.50)
9	State Bank Of India (SBI)	Cash Credit - Sanctioned	22.00	_	22.00
	Sub-Limit (EPC/ FBD) - Sanctioned		(5.50)
	Sub-Limit (ILC/FLC) - Sanctioned		(9.00)
10	State Bank Of India (SBI)	Cash Credit - Proposed	8.00	_	8.00
11	State Bank Of India (SBI)	GECL - Sanctioned	2.60	_	2.60
12	State Bank Of India (SBI)	ILC/FLC - Sanctioned	_	15.50	15.50
	Sub-Limit (Forward Contract/ LER) - Sanctioned		(4.00)
13	State Bank Of India (SBI)	ILC/FLC - Proposed	_	1.35	1.35
Total			88.40	40.00	128.40
TOTAL (Rupees One Hundred Twenty Eight Crores and Forty lakhs Only)

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