Ester Industries Limited's rating outlook revised to 'Positive', ratings reaffirmed

CRISIL Ratings has revised its outlook on the long-term bank facilities of Ester Industries Limited (Ell} to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL A-'. The short term rating and commercial paper programme of the entity reaffirmed at 'CRISIL A2+'.

The revision in outlook reflects a belief that the credit risk profile of Ell will improve over the medium term with sustenance of operating performance driven by benefits of a diverse product portfolio and timely commissioning of the ongoing projects. Operating performance improved significantly over the past two fiscals driven by continuation of favourable demand-supply dynamics in the packaging film business and maturing of products. The operating profit before depreciation, interest and taxes (OPBDIT} margin increased to 23.7% during fiscal 2021 from 11.0% during fiscal 2019. Cash accruals increased to Rs 139 crore from Rs 64 crore. The engineering plastics and speciality polymers segments have also seen healthy improvement in demand over the past six months. Therefore, despite the expected decline of margins in packaging films business, the overall OPBDIT margin of Ell is expected to sustain at around 15% over the medium term benefitting from a diverse product portfolio. Product mix and diversification should improve since the company is adding the capacities of value-added products, speciality polymers and engineering plastics for Rs 225 crore, which is expected to be completed by the first quarter of fiscal 2023. Furthermore, scale of packaging films business is expected to improve with the new greenfield BOPET (biaxially-oriented polyethylene terephthalate) line (48,000 tpa in Telangana) commissioning in the middle of next fiscal. The progress of the project implementation would remain a monitorable.

The ratings continue to factor established market position along with long track record in packaging films business, healthy operating efficiency supported by strong capacity utilisation and diversified product profile. These strengths are partially offset by susceptibility to volatile raw material costs and realisations driven by demand-supply dynamics and large, debtfunded ongoing projects.

Shares of Ester Industries Ltd., was last trading in BSE at Rs. 136.55 as compared to the previous close of Rs. 133.65. The total number of shares traded during the day was 15219 in over 538 trades.

The stock hit an intraday high of Rs. 136.6 and intraday low of 133.65. The net turnover during the day was Rs. 2052521.

Source : Equity Bulls

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