On Monday, CRISIL has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2' ratings on the company's bank facilities. Adding CRISIL states that the rating action continues to reflect the Ruchira's established position in the paper industry and its comfortable financial risk profile. These strengths are partially offset by moderate profitability and exposure to cyclicality in the paper industry.
Crisil points out two major strengths of Ruchira. These are:
Established market presence and diversified product profile:
The four-decade-long experience of the promoters, in the industrial paper industry, their strong understanding of market dynamics, and established relationships with suppliers and customers, will continue to support the business risk profile. The company has a manufacturing capacity of 250 tonnes per day (tpd) of kraft paper and 150 tpd of WPP. Strong market position and the countrywide marketing and distribution network, have helped sales grow to Rs481cr in fiscal 2020.
Comfortable financial risk profile:
Capital structure has been healthy, aided by low reliance on external debt, also reflected in low total outside liabilities to tangible net worth (TOLTNW) ratio during the four fiscals ended March 31, 2020. Gearing and TOLTNW ratio was at 0.27 time and 0.52 time, respectively, as on March 31, 2020. Debt protection metrics were above average, reflected in interest coverage and net cash accrual to total debt ratio of 6.4 times and 0.58 time, respectively, in fiscal 2020, aided by low debt and moderate operating profitability.
Also, in Crisil's opinion, Ruchira does not have plans to undertake major, debt-funded capital expenditure (CAPEX) for fiscal 2021, and planned CAPEX of Rs30cr will be funded through debt of Rs22cr and via internal accrual. Any large, debt-funded CAPEX that weakens the capital structure and has significant repayments, will remain a key rating sensitivity factor.