Chiripal Industries Ltd.

Brickwork Ratings reaffirms the ratings for the Enhanced Bank Loan Facilities of Rs. 490.65 Crs. of Chiripal Industries Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (04 May 2020)	Present
Fund Based	366.92	392.65	Long Term	BWR A+ / stable	BWR A + /Stable Reaffirmation
Non Fund Based	98.00	98.00	Short Term	BWR A1	BWR A1 Reaffirmation
Grand Total	464.92	490.65	(Rupees Four Hundred Ninety Crores and Sixty Five 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

Rating reaffirmation takes in to account the sustained operational performance of the Company despite disruptions caused by covid19, promoters’ (Chiripal Group) strong industry experience, economies of scale with large facilities, established customers with strong domestic distribution network, satisfactory financial profile marked by healthy net worth and comfortable debt protection metrics. The Rating is however constrained by impact of Covid19 on its performance, susceptibility of its operating margins to raw material price volatility, working capital intensive nature of its  operations and its presence  in cyclical, fragmented and competitive industry.

The Stable outlook on the long-term rating reflects BWR’s belief that Chiripal Industries Ltd. will benefit from the extensive experience of its management and established relationships with its customers. Revision in outlook from ‘Positive’ to ‘Stable’ in May2020 was mainly on account of expected adverse impact of pandemic on the Company's performance. BWR notes that while the sales velocity moderated in H1FY21, on account of Covid-19 impact, it has recovered September 2020 onwards. With the risk of lockdown during the second/third wave of Covid-19 pandemic, ability to sustain the sales velocity and profitability over near to medium term will be a key rating monitorable.

KEY RATING DRIVERS

Credit Strengths:

• Experienced promoters with long operational track record :

  The company belongs to Chiripal Group, which is an established player in textile industry and has been in operations for over three decades. The group is promoted by Mr. Ved Prakash Chiripal .It has over the years regularly invested in the capacity expansion and has been able to maintain healthy relations with its customers resulting in repeat orders from them.

• Established market presence & strong product portfolio :

  CIL is primarily engaged in the manufacturing of Partially oriented filament yarn, fully drawn yarn, texturized yarns and other type of synthetic yarns. It also produces different processed fabrics. The Company operates through 2 divisions – Fiber division and Fabrics Division. It has a processing capacity of 4 Lakh meter fabrics per day.

• Improved financial risk profile :

  Scheduled loan repayments has resulted in significant decline in debt levels of the company thereby improving the gearing levels from 0.69x as on March 31, 2019 to 0.59x as on March 31, 2020. Total outside liabilities to net worth improved from 0.96x as on March 31, 2019 to 0.85x as on March 31, 2020. Interest coverage improved 2.63x in FY19 to 2.76x in FY20. Current ratio improved from 1.57x as on March 31, 2019 to 1.71x as on March 31, 2020.

Credit Risks:

• Intense competition :

  Intense competition in highly fragmented and cyclical polyester based textile industry. Further, The domestic polyester yarn and fabric industry is highly capital-intensive and players have to regularly carry out capacity expansion activities. Also, the industry is dominated by large manufacturers who may influence the pricing g flexibility of players operating in the industry. However, CIL has managed to sustain the profitability amidst competing with other large players.

• Susceptibility of operating margins to raw material price volatility :

  Raw materials are derivate of crude oil and its price is dependent on movement of crude oil prices. Further, higher inventory period and raw material contributing more than 80% of the cost of materials consumed coupled with low bargaining power with large raw material suppliers adversely affects profitability. Hence, any adverse volatility in the raw material prices may affect the company’s margins.

• Decline in revenue in FY20 :

  The scale of operations has stagnated over the years on account of fluctuation in sales realization. Lower realizations during FY20 coupled with revenue lost for almost 15 days during March 2020 owing to Covid-19 pandemic, CIL’s revenue has declined by ~5. BWR takes note of performance of the company during FY21. Despite Covid crisis, the company was able to maintain the topline at around Rs. 1200 Crs with EBIDTA margin between 8-9%. Overall performance of the company was improved in FY21.

ANALYTICAL APPROACH - Standalone

Analytical Approach : Standalone

While assigning the ratings, BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale). 

RATING SENSITIVITIES

Positive:

• EBIDTA margins of 11% and more on sustained basis coupled with consistent growth in its turnover levels y-o-y
• Improvement in financial risk profile and liquidity profile;  increase its DSCR above 1.5x over the medium term;

Negative:

BWR may revise the ratings downwards, if CIL’s current ratio deteriorates below 1.5 times and profitability levels decline further over the medium term.

• Current ratio not less than 1.50x
• Interest coverage ratio should not be less than 2.7x

LIQUIDITY INDICATORS - Adequate

CIL has adequate liquidity reflected by satisfactory net cash accruals/ total debt at 0.21  times in FY20. The company has sufficient cushion in accruals vis-à-vis repayment obligations. The Company has debt repayment obligation of Rs. 46.49 Crs in FY20 and Rs. 36.25 crs in FY21 against which the company has recorded cash accruals of Rs. 70.53 Crs in FY20 and expected to record cash accruals of  Rs. 63.97 Crs in FY21. Working capital utilization was moderate at around 75% for last 12 months. Both the debt protection metrics are  comfortable reflected by ISCR at 2.76 times and DSCR at 1.20 times in FY20.

ABOUT THE ENTITY

Chiripal Industries Limited is part of Ahmedabad based 'Chiripal Group'. CIL was incorporated in Ahmedabad, Gujarat, in 1994. The Company was originally started as Chiripal Twisting & Sizing Private Limited. In 2003, the Company was reconstituted to a public limited company and changed its name to Chiripal Petrochemicals Ltd. It further changed its name to Chiripal Industries Ltd in 2005, post amalgamation of group entities Shanti Processors Ltd and Priti Processors Pvt Ltd. The Company is promoted by Mr.Ved Prakash Chiripal. CIL is a vertically integrated textile company with manufacturing facilities for Polyester yarns & texturizing yarn, knitting, home furnishing and processing of all types of fabrics. The Company has its own lignite based captive power plant to meet the total power requirements. The Company has well established relationships with its customers and suppliers owing to its long existence in this industry. Chiripal group is one of the largest integrated textile group in India. It has manufacturing abilities for POY, texturizing, cotton spinning, denim weaving, knitting and processing. The group is also diversified into petrochemicals, education, real estate and infrastructure. The group companies have several operational linkages with each other and these companies operate in various downstream and upstream activities in the Textile industry.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	1221.47	1286.56
EBITDA	Rs.Crs.	113.62	126.03
PAT	Rs.Crs.	22.37	26.41
Tangible Net Worth	Rs.Crs.	557.27	533.94
Total Debt/Tangible Net Worth	Times	0.59	0.69
Current Ratio	Times	1.71	1.57

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

NA

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	392.65	BWR A+/Stable (Reaffirmation)	04May2020	BWR A+ / stable ()	26Mar2019	BWR A+ / Positive ()	18Jan2018	BWR A+ / Positive ()
Non Fund Based	ST	98.00	BWR A1 (Reaffirmation)	04May2020	BWR A1 ()	26Mar2019	BWR A1 ()	18Jan2018	BWR A1 ()
Grand Total		490.65	(Rupees Four Hundred Ninety Crores and Sixty Five lakhs Only)

Rating Advisory, as on 12May2021
Press Release, as on 12May2021
https://www.brickworkratings.com/Admin/PressRelease/Chiripal-Industries-12May2021.pdf

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
• Manufacturing Companies
• Short Term Debt

Analytical Contacts
Priya Depala Senior Rating Analyst priya.d@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@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	Bank of India	GECL - Sanctioned	7.97	_	7.97
2	Bank of India	Cash Credit - Sanctioned	25.75	_	25.75
3	Bank of India	Letter of Credit - Sanctioned	_	6.30	6.30
4	Canara Bank	Term Loan - Out-standing	14.29	_	14.29
5	Canara Bank	GECL - Sanctioned	3.60	_	3.60
6	IDBI Bank	GECL - Sanctioned	2.26	_	2.26
7	IDBI Bank	Cash Credit - Sanctioned	12.89	_	12.89
8	IDBI Bank	Letter of Credit - Sanctioned	_	12.50	12.50
9	Karnataka Bank Ltd	Term Loan - Out-standing	13.16	_	13.16
10	Karnataka Bank Ltd	Cash Credit - Sanctioned	13.85	_	13.85
11	Karnataka Bank Ltd	GECL - Sanctioned	4.68	_	4.68
12	Karnataka Bank Ltd	Bank Guarantee - Sanctioned	_	6.00	6.00
13	Punjab National Bank	GECL - Sanctioned	2.18	_	2.18
14	Punjab National Bank	Cash Credit - Sanctioned	17.00	_	17.00
15	Punjab National Bank	Letter of Credit - Sanctioned	_	13.00	13.00
16	State Bank Of India (SBI)	Term Loan - Out-standing	81.61	_	81.61
17	State Bank Of India (SBI)	GECL - Sanctioned	35.00	_	35.00
18	State Bank Of India (SBI)	Cash Credit - Sanctioned	74.85	_	74.85
19	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	44.60	44.60
20	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	1.10	1.10
21	Tamilnadu Mercantile Bank Limited	Term Loan - Out-standing	16.00	_	16.00
22	Tamilnadu Mercantile Bank Limited	Cash Credit - Sanctioned	15.80	_	15.80
23	Union Bank of India	GECL - Sanctioned	6.90	_	6.90
24	Union Bank of India	Cash Credit - Sanctioned	44.86	_	44.86
25	Union Bank of India	Letter of Credit - Sanctioned	_	14.50	14.50
Total			392.65	98.00	490.65
TOTAL (Rupees Four Hundred Ninety Crores and Sixty Five lakhs Only)