Rating Rationale Paswara Papers Ltd 28 May 2018

Transcription

1 Rating Rationale Paswara Papers Ltd 28 May 2018 Brickwork Ratings revises the ratings for the Bank Loan Facilities of Crores of Paswara Papers Ltd. Particulars Facility Amount ( Crs) Rating* Previous Present Tenure Previous(Nov, 2017) Present Fund based Long Term BWR BB+ (Pronounced as BWR Double B Plus) Outlook: Stable BWR BBB- (Pronounced as BWR Triple B Minus) Outlook: Stable Upgrade Total INR Two Hundred Fourteen Crores and Sixty Four Lakhs Only *Please refer to BWR website for definition of the ratings Ratings: Upgraded Rationale/Description of Key Rating Drivers/Rating sensitivities: BWR has essentially relied upon the audited financial results up to FY17, provisional upto FY18, publicly available information and information/clarification provided by the company s management. The rating continues to take into account the significant improvement in PPL s financial performance in FY2018 (Provisional). wherein its revenue is increased by % in FY18 as compared to preceding year and cash accrual increased to Rs Crs in FY18 as compared to Rs Crs in FY17. The capacity utilisation of the PPL s existing plant remained high at 100% with additional new unit being operational. We take into account PPL s diversified product profile comprising Paper Board, Kraft Paper and Multi Layer Kraft Paper along with healthy plant utilization levels for all the three products. PPL commenced production of multi layer kraft paper in FY17 and registered a significant scaling up of operations during FY2018 resulting into increase in revenue. The rating continues to consider the established track record of the promoters in the paper industry and the presence of an established marketing setup by way of agents who sell PPL s products to established customers May 2018

2 The rating continues to be constrained by intense competition to which the company is exposed, owing to the presence of numerous small paper mills in the unorganized sector, along with a few large sized players. The rating also takes into account the vulnerability of the company s profitability to any increase in raw material prices. Key Rating Drivers Established Track Record: M/s Paswara Papers Limited is a closely held Public Limited Company (unlisted) initially incorporated as Private Limited Company on It was later converted into Public Limited Company w.e.f The company is engaged in manufacture of Kraft Paper & Grey Board and is in existence for more than three decades with satisfactory business performance. The company has its registered office at Paswara House, Baghpat Road, Meerut. The company runs the paper mill as a family run business where Mr. Arvind Kumar, Mr. Vinod Kumar and Mr. Kapil Kumar are the key functionaries. Revenue Growth : PPL's revenue is improved to Rs Crores in fiscal 2018 from Rs Crores in fiscal 2017 on account of capacity enhancement. Cash accruals are significantly improved resulting into improvement in debt coverage metrics. Improvement in Financial Risk Profile : Networth of the company has improved on account of retention of profits resulting into improvement in gearing profile. Also, promoter s support in terms of unsecured loans has further lowered the gearing level Working capital intensive nature of operations: PPL s operations remain working capital intensive in nature due to high credit offered to customers as well as strict payment terms adhered to with its suppliers, leading to necessity of reliance on high cost external borrowings to fund working capital requirements. Furthermore, the liquidity position remained slightly weak marked by below unity current ratio levels. Analytical Approach 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 Outlook: Stable BWR believes the Paswara Papers 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 2 28 May 2018

3 sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures. About the Company Incorporated in 1980, Paswara Papers Ltd is engaged in manufacture of Kraft Paper & Grey Board and is in existence for more than three decades. The company is being managed by Mr. Arvind Kumar, Mr. Vinod Kumar and Mr. Kapil Kumar, well supported with the able team of qualified personnel. The Company embarked upon the expansion program during FY16 and FY17; which enabled the company, to boost the revenue substantially. Company s Financial Performance Key Parameters Units FY17 FY18 Result Type Audited Unaudited Operating Revenue In Crores EBITDA In Crores PAT In Crores Tangible Net worth In Crores Total Debt/Tangible Net worth Times Current Ratio Times Rating History for the last three years S.No Instrument /Facility Current Rating (2018) Rating History Type (Long Term/ Short Term) Amount ( Crs) Rating Nov Fund Based Long Term BWR BBB-/Stable Upgrade BWR BB+/Stable NA NA Total Two Hundred Fourteen Crores and Sixty Four Lakhs Only 3 28 May 2018

4 Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios For any other criteria obtain hyperlinks from website Analytical Contacts Satvinder Kumar Gakhar DGM-Ratings Media Relationship Contact Phone: For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: BWR complexity levels are meant for educating investors. The BWR complexity levels are available at Investors queries can be sent to info@brickworkratings.com. About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, has also been accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a Nationalized Bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. BWR has rated debt instruments/bonds/bank loans, securitized paper of over 10,00,000 Cr. In addition, BWR has rated over 6300 MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over 24,440 Cr have been rated May 2018

5 DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons May 2018