11/3/2018 Rating Rationale
Rating Rationale
January 22, 2018 | Mumbai
Bhansali Engineering Polymers Limited
Ratings upgraded to 'CRISIL BBB/Positive/CRISIL A3+', removed from 'Watch Developing'
Rating Action
Total Bank Loan Facilities Rated Rs.210 Crore
CRISIL BBB/Positive (Upgraded from 'CRISIL BBB-';
Long Term Rating Removed from 'Rating Watch with Developing
Implications')
CRISIL A3+ (Upgraded from 'CRISIL A3'; Removed from
Short Term Rating
'Rating Watch with Developing Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale
CRISIL has upgraded its ratings on the bank facilities of Bhansali Engineering Polymers Limited (BEPL) to 'CRISIL
BBB/Positive/CRISIL A3+' from 'CRISIL BBB-/CRISIL A3' and removed the ratings from 'Rating Watch with Developing
Implications'. CRISIL has assigned its 'Positive' outlook to the long-term bank facilities.
CRISIL had, on July 24, 2017, placed the ratings on 'Watch with Developing Implications' following BEPL's announcement
that it would undertake a Rs. 300 crore capex ' to be funded only through internal accruals. The company subsequently, vide
its announcement dated January 14, 2018, substantially scaled down its capex plans to Rs. 70 crores ' to be funded only
through internal accruals.
The upgrade in the ratings and the revision in outlook reflects CRISIL's belief that BEPL will sustain its improved business
risk profile over the medium term. BEPL's capacity expansion coupled with increased offtake from its customers has led to a
steady volumetric growth for the company. Further increased sales of specialty grade ABS, has resulted in a sharp
improvement in the company's operating profitability. The rating upgrade also factors reduced project related risks because
of significant scaling down its immediate capex plans.
BEPL recorded revenues of about Rs. 730 crores for the nine month period through December 2017, a healthy 68 percent
growth compared to the corresponding time period in fiscal 2017. The sharp improvement in revenues is on account of
higher volumetric sales driven by expansion in Acrylonitrile Butadiene Styrene (ABS) compounding capacities from 51,000
MTPA to 80,000 MTPA. In the wake of increasing demand for ABS, the company plans to further expand the compounding
capacity from 80,000 MTPA to 137,000 MTPA by December 2018 at a cost of Rs. 50 crores, to be funded entirely through
internal accruals. Further, the company's operating profitability for the 9 month period through Dec 2017 improved to 16.31
percent from 9.9 percent (for 9 month period through fiscal 2016) majorly on account of increased contribution from sales of
specialty grade ABS.
The rating continue to reflect BEPL's established market position in the ABS industry and strong financial risk profile. These
strengths are partially mitigated by the company's exposure to volatility in raw material prices and forex fluctuations and
threat of imports.
Key Rating Drivers & Detailed Description
Strengths
* Established market position in the ABS industry
BEPL is a leading producer of ABS in India with technical expertise to manufacture over 50 grades of ABS in 1200 shades.
ABS is a versatile engineering plastic with superior product properties like better heat resistance, chemical resistance and
higher mechanical strength and hence finds applications in diverse range of industries. Consequently, the company has a
strong and diversified customer base spread across automotive, electrical, textile, household consumer durables industries
among others. The company has over 1000 customers including the likes of Samsung India Electronics Pvt Ltd, Honda
Trading Corporation India Pvt Ltd, Anchor Electrical Pvt Ltd, Videocon Industries Ltd etc. BEPL also benefits from access to
technology vide its tie up with Nippon A&L to manufacture specialty grade ABS, which further strengthens its market
position in the domestic ABS market. CRISIL believes that the company's position as a leading ABS manufacturer in India
would continue to benefit its business risk profile over the medium term.
* Strong financial risk profile
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BEPL's financial risk profile is strong marked by healthy net worth, absence of term debt and robust debt protection metrics.
The company's net worth increased to Rs. 200 crores as on Sep 30, 2017 vis- a -vis Rs. 158 crores as on March 31, 2017.
The company's total outstanding liabilities to tangible net worth (TOLTNW) is comfortable at 1.53 times as on Sep 30, 2017
vis- a -vis 1.66 times as on Mar 31, 2017.
Further, given the steady improvement in operating profitability, the company's interest coverage ratio improved to about 20
times for the nine month period through Dec 2017 vis- a -vis 7 times for fiscal 2017.
Weaknesses
* Exposure to volatility in raw material prices and forex fluctuations
Acrylonitrile, Butadiene and Styrene, the three major raw materials used in the manufacturing of ABS are derivatives of
crude and are subject to the risk of volatility in crude prices. Raw materials constitute 70 to 80 percent of the total operating
cost for BEPL. Further, given that the bulk of BEPL's raw materials are imported, with negligible export revenues, BEPL also
remains exposed to exchange rate fluctuations. As a result, BEPL's operating profitability in the past has been volatile in the
range of 3 to 12 percent during the period FY 2012 to FY 2017. While the operating profitability has improved to 16.3
percent for the nine month period through Dec 2017 ' the sustenance of the same, given the limited track record, would
remain a key rating sensitivity factor. CRISIL believes that BEPL will remain exposed to volatility in raw material prices and
forex fluctuations.
* Threat of imports
Sizeable portion of the domestic requirement of ABS is met through imports. Consequently, any increase in imports of ABS
in India may put pressure on realization of BEPL. However, this threat is partially offset by presence of BEPL in specialty
grade ABS segment and the increasing demand for ABS in India.
Outlook: Positive
CRISIL believes that BEPL's improved profitability and liquidity is likely to sustain over the medium term because of
increasing share of value-added products leading to higher profitability. The rating may be upgraded if BEPL demonstrates a
track-record of sustained double digit operating profitability. Conversely, the outlook may be revised to 'Stable', if BEPL's
profitability declines to historic levels or the company undertakes a significant debt funded capex, which could put pressure
on its liquidity.
About the Company
Incorporated in 1986, BEPL is a Mumbai based company engaged in manufacturing of ABS and Styrene-acrylonitrile (SAN)
resins. The company has two plants located at Satnoor (Madhya Pradesh) and Abu Road (Rajasthan). Abu Road plant
manufactures SAN resins and has a capacity to manufacture 80,000 Tonnes per Annum (TPA) of ABS resins. Satnoor unit,
is meant for backward integration and has a capacity to manufacture 15,000 TPA of High Rubber Graft (HRG).
The company is promoted by Mr. B. M. Bhansali. The company is listed on BSE and NSE.
Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs crore 625.5 530.9
Profit after tax (PAT) Rs crore 34.7 16.6
PAT margin % 5.6 3.1
Adjusted debt/Adjusted networth Times 0. 0.2
Interest coverage Times 7.0 3.4
Status of non cooperation with previous CRA
BEPL has not cooperated with India Ratings And Research Private Limited vide release dated May ,8th 2017. The reason
provided by India rating is non-furnishing of information required for monitoring of ratings.
Any other information: Not applicable
Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available
on [Link]/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for
investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
Date of Coupon Issue
Allotment Rate (%) Rating Assigned
ISIN Name of instrument Maturity date Size
with Outlook
(Rs. Cr)
NA Cash Credit NA NA NA 60 CRISIL BBB/Positive
NA Letter of Credit NA NA NA 150 CRISIL A3+
Annexure - Rating History for last 3 Years
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11/3/2018 Rating Rationale
Current 2018 (History) 2017 2016 2015 Start of
2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based No CRISIL
CRISIL CRISIL
Bank LT/ST 60 Rating 24-07-17 BBB-/Watch 28-06-16 -- --
BBB/Positive BBB-/Stable
Facilities Change Developing
Non Fund- No CRISIL
based Bank LT/ST 150 CRISIL A3+ Rating 24-07-17 A3/Watch 28-06-16 CRISIL A3 -- --
Facilities Change Developing
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Amount Amount
Facility Rating Facility Rating
([Link]) ([Link])
CRISIL
CRISIL
Cash Credit 60 Cash Credit 60 BBB-/Watch
BBB/Positive
Developing
CRISIL
Letter of Credit 150 CRISIL A3+ Letter of Credit 150 A3/Watch
Developing
Total 210 -- Total 210 --
Links to related criteria
CRISILs Approach to Financial Ratios
Framework for Assessing Information Adequacy Risk
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Recognising Default
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