The ratings agency has also revised its rating on the short term bank facilities worth Rs 252 crore from CARE A3+ to CARE A2+.
CARE Ratings said that the revision in ratings assigned to the bank facilities of Prince Pipes Fittings (PPFL) factors in the improvement in its leverage indicators post conclusion of initial public offer (IPO).
The rating also factors in the fact that going forward the debt requirement would be to the extent of working capital only as the IPO proceeds would also be utilized towards the envisaged capex.
Thus, the leverage and debt coverage indicators are expected to remain comfortable going forward. The liquidity witnessed improvement during 9MFY20 marked by elevation in gross cash accruals with expansion in operating profit margins coupled with reduction in long term debt (through scheduled repayment and prepayments).
The rating continues to favorably factor in the diversified product portfolio with strategically located manufacturing units, wide distribution network with nationwide presence, and improved brand recall post elevated advertisement efforts witnessed during FY19 and 9MFY20. The ratings also factor in experience of the promoters and professional management team with long track record of the company’s operations.
The above rating strengths are, however, tempered by project risks arising from large size planned capex, susceptibility of its operating profit margin to fluctuation associated with key raw materials and foreign exchange as the key raw materials are derivatives of crude oil and import dependency on raw material is to extent of 40% of total raw material consumption. Ratings also continue to factor in the PPFL’s presence in highly competitive industry setup with intense competition being faced from both organized and unorganized sector.
The polymer pipes and fittings manufacturer reported 40.8% jump in net profit to Rs 24.28 crore on a 9.7% rise in net sales to Rs 395.90 crore in Q3 December 2019 over Q3 December 2018.
Prince Pipes and Fittings is recognized as one of the leading polymer pipes and fittings manufacturers in India in terms of number of distributors. The company markets its products under two brand names: Prince Piping Systems and Trubore. The company has more than 30 years experience in the polymer pipes segment.
Shares of PPFL were currently down 1.62% at Rs 178.75. It traded in the range of Rs 175.75 and Rs 179.95 so far during the day.