Mi Ratings - Yash Pakka · Yash Pakka Limited (the name of the company was changed from Yash Papers...
Transcript of Mi Ratings - Yash Pakka · Yash Pakka Limited (the name of the company was changed from Yash Papers...
Mi Ratings Professional Risk Opinion
No. CARE/DRO/RR/2019-20/1784
Mr. U.U.V. Ravikanth
Chief Financial Officer Yash Pakka Limited
Yash Nagar, Faizabad-224135 Uttar Pradesh
February 14, 2020
Dear Sir,
Credit rating of Yash Pakka Limited for Rs.205.23 Cr.
Please refer to our letter dated January 15, 2020 on the above subject.
The rationale for the rating is attached as an Annexure-I.
We request you to peruse the annexed document and offer your comments, if any. We are doing this as a matter of courtesy to our clients and with a view to ensure that no factual inaccuracies have inadvertently crept in. Kindly revert as early as possible. In any case, if we do not hear from you by
February 15, 2020, we will proceed on the basis that you have no comments to offer.
If you have any further clarifications, you are welcome to approach us.
Thanking you, Yours faithfully,
JOU' kt)
Akanksha Dutta Manek Narang Analyst Associate Director [email protected] [email protected]
Encl.: As above
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Rating Rationale
Yash Pakka Limited
Ratings
Facilities Amount (Rs. crore)
Rating' Rating Action
Long terrn Bank Facilities-Term Loan
114.74 (enhanced from Rs.97.87 crores)
CARE BBB; Stable (Triple B; Outlook: Stable)
Reaffirmed
Long term Bank Facilities-Fund Based
64.73 CARE BBB; Stable (Triple B; Outlook: Stable)
Reaffirmed
Short term Bank Facilities- Non-Fund Based
25.76 CARE /0 (A Three)
. Reaffirmed
Total 205.23 (Rs. Two hundred and five crores and
twenty three lakhs only) Details of instruments/fac haes In Annexure-1
Detailed Rationale & Key Rating Drivers
The reaffirmation of the ratings assigned to the bank facilities of Yash Pakka Limited continue to derive
strength from the company's experienced promoters and its long track record of operations, moderate
financial risk profile, established customer relationships with robust selling and distribution network, cost
effective production set-up with Integrated operations along with the locational advantages.
However, the ratings are offset by the project execution risk associated with capacity enhancements in the
tableware segment along with certain other infrastructure improvements pertaining to environmental
compliances. Further, the ratings are constrained on account of volatility in the raw material prices and the
cyclical nature of the industry.
Rating Sensitivities Positive Factors:
If there is sustained improvement in the scale of operations above Rs.350 crores backed by operational
performance.
If there is sustained Improvement in capacity utilization of the tableware segment above 60%.
Negative Factors:
If there is deterioration in the scale of operations below Rs.200 crores and PBILDT margin below 15%.
If there is time and cost overrun with respect to expansion project currently being undertaken.
IComplete definitions of the ratings assigned are available at www.careratinas.com and in other CARE publications.
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Detailed description of the key rating drivers
Key Rating Strengths
Experienced Promoter and Professional Management team Yash Pakka Limited (YPL) (From September 11, 2019, the name of the company has been changed to Yash
Pakka Limited from Yash Papers Limited) was incorporated by late Mr. K.K. Jhunjhunwala in 1983. Mr. Ved
Krishna, son of Mr. K. K. Jhunjhunwala, is the executive chairman of the company. He has been associated with
the company for the last 15 years and therefore has a long experience in the paper industry. Mr.Ved Krishna
has a team of professionals such as Mr. Jagdeep Hira (Managing Director & CEO) who is currently looking after
day to day operations of the company.
Long track record of operations and established relationship with customer
YPL has a long track record of operations and has been engaged In the paper industry for over three decades.
As a result, YPL has established good relationship with various customers leading to repeat orders. The
company caters to various multinational companies in industries like tobacco packing, flexible packing for soap
manufacturing, food industry and pharmaceuticals etc.
It sells its products in the domestic market through an established distributor network across India. Export of
paper is carried out through merchant exports and agents appointed in various countries, to look after specific
regions.
Cost effective production set-up with integrated operations: Captive power generation capabilities and soda
recovery plant
YPL has cost-effective production set-up as characterized by captive power plant of 8.5 MW and a 145 TPD
soda recovery plant. The paper industry is capital and energy intensive in nature. Power cost constituted
17.56% of total operating income in FY19 (PY: 1586%). To source its power requirements, the company has a
captive power plant of 8.5-MW capacity (rice-husk based) which takes care of 100% power requirement of the
company.
Moderate Financial Risk Profile
The total operating income of the company has increased to Rs.254.46 crores during FY19 from Rs.204.03
crores during FY18 i.e. an increase of -25%. The same is on account of an increase in the domestic sales from
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tableware product segment and the main paper business. The company started the tableware project in
FY2017-18 and the revenue from the same has increased from Rs.1.66 crores in FY18 to Rs.16 crores in FY19
The PBIDLT margin of the company has remained stable at 19.47% in FY19 (PY: 19.68), whereas the PAT
margins of the company have increased to 8.14% in FY19 (PY: 6.11%) on account of creation of deferred tax.
The overall gearing of the company has improved to 1.27x as on March 31, 2019 as against 1.90x as on March
31, 2018 on account of decline in the total debt of the company along with improvement in the net worth of
the company due accretion of profits. Therefore, the Total Debt to GCA of the company has also come down
to 4.22x as on March 31, 2019 as against 5.79x as on March 31, 2018. However, the interest coverage ratio of
the company has reduced from 3.13x in FY19 as against 2.94x in FY18 on account of increase in the interest
expense. This is because that the company took the disbursement during the year FY2017-18 towards the
tableware project and the interest has been capitalized during the year with regards to the tableware
proposal.
The company reported a total operating income of Rs.133.59 crores during H1FY20 as against Rs.123.82 crores
during FY18 i.e. an increase of -̂8%. The PBILDT margin and the PAT margin of the company have improved to
23.24% and 10.40% in FY19 respectively (PY: 20.11% and 6.86% respectively).
Locational Advantages in the form of easy availability of raw materials
The main raw material used by the company in its manufacturing process is agro-based raw materials such as
bagasse. Bagasse accounted for 66% of the total raw material cost during FY19 (PY: 73%). The plant is located
in Uttar Pradesh, which is the sugarcane hub of India, thus ensuring adequate availability of bagasse. The
company has been dealing with its top 10 suppliers for over 15 years. The long association with these suppliers
provides comfort on the regular supply of raw materials to the company.
Key Rating Weaknesses
Project Execution and off-take risk
The company is planning to undertake a project at their existing plant at Faizabad, Uttar Pradesh for the
capacity enhancement in tableware/ moulded products division. The same s being undertaken for installing
the small-scale machinery such that the turnaround-around time (TAT) is higher and the production facilities
will also enhance, modifications in the paper plant which gives more quality products in addition to the
environmental compliance and also modernization of the power facility for efficiency improvements in the
power plant.
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The total project cost of this capex is Rs.80 crores (to be undertaken in two tranches in FY20 and FY21), which
will be funded using a term loan of Rs.56.61 crores and the remaining Rs.23.39 crores using internal accruals.
Given the size of the project compared to the net worth, successful completion of the
expansion/modernization projects within envisaged time and cost would remain crucial for the company and
remains to be seen. Furthermore, risk associated with project-offtake also remains there given the fact that
the existing tableware capacity is still under ramp-up phase. The above expansion has been envisaged in order
to meet the market requirements and also to ramp-up the existing facilities.
Price-Fluctuation Risk
The paper industry is highly competitive in nature with stiff competition from large number of organized as
well as unorganized players. This limits the pricing power of the manufacturers and puts further pressure on
profitability. YPL uses agro-based raw material, which is purchased mainly from the domestic markets and
there are limitations due to seasonal availability. Therefore, going forward, the ability of the company to
manage its profitability amid volatile raw material prices would be the key rating sensitivity.
Fragmented and competitive industry
The Kraft paper industry is competitive in nature with stiff competition from large number of organized as well
as unorganized players (small units account for -60% of the industry size). Given the fact that the entry
barriers to this industry are not very high, the players in this industry do not have pricing power and are
exposed to competition.
Liquidity : Adequate
The company is having an adequate liquidity characterized by sufficient cushion In cash accruals in the range
of Rs.30 crores to Rs.40 crores vls-a-vis the repayment obligations of around Rs.15 crores. The operating cycle
of the company improved to 121 days in FY19 (PY: 138 days), however, it continuous to remain on the higher
side. The average utilization for fund based limit for trailing 12 months ending December, 2019 stood
moderate at around 74% (Sept, 2017 to Aug, 2018: 88%). The current ratio of the company remained slightly
almost stable and stood at 1.05x as on March 31, 2019 (PY: 1.04x). The free cash and bank balance of the
company stood at Rs.0.13 crores in FY19 (PY: Rs.0.20 crores).
Analytical approach: Standalone
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Applicable Criteria
Criteria on assigning 'outlook' and 'credit watch' CARE S Policy on Default Recognition Criteria for Short-term Instruments Rating Methodology-Manufacturing Companies Financial ratios - Non-Financial Sector
About the Company
Yash Pakka Limited (the name of the company was changed from Yash Papers Limited w.e.f. September 11,
2019) was promoted in 1981 by Mr. KK Ihunjhunwala with an initial installed capacity of 1940 MT per annum
in 1983. The company Is engaged in manufacturing of machine glazed agro based 30 - 100 GSM paper of
unbleached Kraft, bleached Kraft and colored Kraft varieties. The company has also entered into the
manufacture of tableware products since 2018. The total installed capacity of the company's paper and pulp
plant is 40,260 TPA and the installed capacity of the tableware division is 11.50 TPD as on March 31, 2019.
Financial Performance: (Rs. crore)
For the period ended / as at March 2017 2018 2019
31,
(12m, A) (12m, A) (12m, A)
Working Results
Net Sales 182.24 201.75 250.26
Total Operating income 184.98 204.03 254.46
PBILDT 31.46 40.16 49.54
Interest 14.67 12.81 16.82
Depreciation 6.72 6.39 8.70
PBT 10.97 22.17 24.83
PAT (after deferred tax) 7.79 12.47 20.71
Gross Cash Accruals 15.66 23.76 28.10
Financial Position
Equity Capital/Partners' Capital 33.41 35.24 35.24
Networth 56.91 72.58 93.09
Total capital employed 190.63 210.20 211.72
Key Ratios
Growth
Growth in Total income (%) 6.04 10.29 24.72
Growth in PAT (after deferred tax) (%) 172.98 60.19 66.04
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Profitability
PBILDT/Total Op. income (%) 17.01 1968. 19.47
PAT (after deferred tax)/ Total income 4.21 6.11. 8.14
(%) ROCE (%) 14.98 1.7.45 19.75
Solvency
Debt Equity ratio (times) 1.43 1.15 0.75
Overall gearing ratio(times) 2.35 1.90 1.27
Interest coverage(times) 2.15 3.13 2.94
Term debt/Gross cash accruals (years) 5.19 3.61 2.61
Total debt/Gross cash accruals (years) 8.54 5.79 4.22
Liquidity
Current ratio (times) 1.05 1.04 1.05
Quick ratio (times) 0.31 0.29 0.30
Turnover
Average collection period (days) 27 23 21
Average inventory (days) 127 145 126
Average creditors (days) 25 30 27
Operating cycle (days) 129 138 121
A: Audited
Status of non-cooperation with previous CRA: Not Applicable
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
Name of the Instrument
Date of Issuance
Coupon Rate
Maturity Date
Size of the Issue (Rs. crore)
Rating assigned along with Rating Outlook
Fund-based - LT-Term Loan
March, 2029* 114.74 CARE BBB; Stable
Fund-based - LT-Cash Credit
64.73 CARE BBB; Stable
Non-fund-based - 51- BG/LC
19.35 CARE A3
Non-fund-based - LT-
Bank Guarantees
6.41 CARE BBB; Stable
*Inclusive of proposed debt
• Sr. Noinstrument/Bank
Name of the
Facilities
Current Ratings Rating history
Type Amount Outstanding
Rating Date(s) & Rating(s)
Date(s) & Rating(s)
Date(s) & Rating(s)
pate(s) & Rating(s)
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(Rs. crore) assigned In 2019-2020
assigned in 2018-2019
assigned In 2017-2018
assigned In 2016-2017
. Fund-based - LT-Term Loan
IT 114.74 CARE BBB; Stable
1)CARE BBB; Stable (04-Oct-18)
1)CARE BBB-;Stable (04-Dec-17) 2)CARE BBB-
Stable (17-Nov-17)
Fund-based - LT-Cash Credit
LT 64.73 CARE BBB; Stable
1)CARE BBB; Stable (04-Oct48)
1)CARE BBB-; Stable (04-Dec-17) 2)CARE BB8-; Stable (17-Nov-17)
Non-fund-based - ST- BG/LC
ST 19.35 CARE 43 1)CARE 43 (04-Oct-18)
1)CARE A3 (04-Dec-17) 2)CARE 43 (17-Nov-17)
Non-fund-based - LT- Bank Guarantees
IT 6.41 CARE BBB; Stable
1)CARE BBB; Stable (04-Oct-18)
1)CARE BBB-; Stable (04-Dec-17)
Annexure-3: Details of Rated Facilities
1. Long-term facilities
LA. Facility 1 (Secured rupee term loans)
Sr. No. Lender Rated Amount (Rs. Crore)
Remarks Debt Repayment Terms
United Bank of India
5.48 Outstanding 32 Structured Quarterly Installments started
from 30.09.2013
UCO Bank 3.30 Outstanding
32 Structured Quarterly Installments started
from 30,09.2013
Union Bank of
India 4.18 Outstanding
32 Structured Quarterly Installments started
from 30.09.2013
SBI 6.96 Outstanding
32 Structured Quarterly Installments started
from 30.09.2013
United Bank of India
21.92 Outstanding 28 Structured Quarterly Installments starting
from 30.06.2018
UCO Bank 12.90 Outstanding
28 Structured Quarterly Installments starting
from 30.06.2018
7, Proposed 60 00 Proposed I
Total Facility 114.74
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LB. Fund Based limits sanctioned by Consortium of bankers (Rs. crore)
Sr. No. Name of Bank Fund Based Limits CC* Others (SLC)* Total fund-
based limits 1 United Bank of India 8.56 8.56
2 UCO Bank 4.85 4.85
3 Union Bank of India 6.08 6.08
4 581 45.24 4.00 45.24
TOTAL 64.73 4.00 64.73 *CC=Cash credit; LC=Letter of credit, BG=Bank guarantee SLC=Standby Letter of C edit
Total long-term facilities (1.A.+1.B.+1.C.) = Rs. 179.47•crores
2. Short-term facilities
2.B. Facility 2 (Non fund based limits)
Sr. No.
Name of Bank Non Fund Based Limits
LC* Others (EIG*) Tenure as per sanction letter 1 United Bank of India 0.99 LC: 180 days usance, BG as per request 2 UCO Bank 1.11 6.41 LC: 180 days usance, BG as per request
3 Union Bank of India 1.00 LC: 180 days usance, BG as per request
4 5131 10.94 LC: 180 days usance, BG as per request
5 Proposed 5.31
TOTAL 19.35 6.41 *LC=Letter of credit; BG=Bank guarantee
Total short-term facilities = Rs. 25.76 crores
Note on complexity levels of the rated Instrument: CARE hos classified instruments rated by It on the basis of complexity. This classification is available at www.coreratings.com. Investors/market Intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
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About CARE Ratings:
CARE Ratings commenced operations In April 1993 and over two decades it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (EGA° by the Reserve Bank of India (RBI). CARE Ratings Is proud of Its rightful place In the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.
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