Brickwork Ratings assigns 'BWR BBB-' for Kanodia Technoplast Limited's long term Bank Loan Facilities and 'BWR A3' Rating for short term facility

Brickwork Ratings (BWR) has assigned the rating of BWR BBB- (Pronounced BWR TripleBminus) with a stable outlook for the various long term Bank Loan Facilities ofKanodia Technoplast Ltd. (KTL) of Rs. 78 cr(sanctioned and proposed additional amount included).The rating "BWR BBB-" stands for an instrument that is considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.

Brickwork Ratings (BWR) has also assigned the rating of BWR A3 (Pronounced BWR A three) for the short term Bank Loan Facilities of Kanodia Technoplast Ltd (KTL) of `10 Cr. The rating "BWR A3" stands for an instrument that is considered to have moderate degree of safety regarding timely payment of financial obligations. Such instruments carry higher credit risk as compared to instruments rated in the two higher categories.

The rating, inter alia, factors management's experience in the flexible packaging industry, Company's performance, low gearing, and efforts in backward integration adopted by the company.

However, the rating is constrained by the small size of the Company, customer/ segmental concentration in the revenue base, weak liquidity position and high competition from the unorganized players.

BWR has principally relied upon the audited financial results of KTLup to FY12, projected financials, publicly available information and information and clarification provided by the company management.

Kanodia Technoplast Limited (KTL), a Delhi based flexible packaging manufacturing company, was established in the year 1995 by Mr. ChetanKanodia who has an extensive Industry experience of about 22 years. The Company is closely held by the promoter and his family. The Board of Directors comprises of four directors, Mr. ChetanKanodia,the Managing Director Mrs. Meenu Kanodia, the executive director, and Mr. Ashok Kumar and Mr. Subhash Gupta who are the non-executive directors.

The Company was initially set up to convert PE films to flexible packaging material and later in 1998 it started production of PE films as a first step towards backward integration. In 2006 it also started production of rotogravure cylinders which was an extension of their backward integration. KTL's products are sold across various segments including Snacks, Tea, Salt, Biscuits Confectionary, Noodles, Ice Creams, Engine Oils & Lubricants, Shampoo, Edible Oils and Chemicals & Fertilizers.

Total revenues of KTL increased by 8.07% to Rs. 155.61 crore in FY 2012 from Rs 143.99 crore in FY 2011. Over the past four years (FY 2009-2012), revenues grew at a CAGR of 14%. The revenue from Ghutka segment accounts for 51.42% of the total revenues with the FMCG and windmill segment contributing the residual share. KTL generated profit after tax of Rs 10.05 Cr in FY12, as against PAT of Rs 5.08 Cr as of FY11; this was mainly due to significant fall in raw material prices compared to FY11. As on FY12, company has net-worth of Rs 72.05 Cr and total debt of Rs 59.46 Cr. KTL's DE ratio improved from 1.65x in FY 2011 to 0.85x in FY 2012 with the increased capital contribution during the year.

Source : Equity Bulls

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