Press Release Diach Chemicals & Pigments Private Limited


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Press Release

Ratings

Diach Chemicals & Pigments Private Limited
April 12, 2021

Facilities/Instruments

Amount (Rs. crore)

Ratings

Long Term Bank Facilities

21.60

CARE B+; Stable; ISSUER NOT COOPERATING* (Single B Plus; Outlook: Stable ISSUER NOT COOPERATING*)

Short Term Bank Facilities

11.00

CARE A4; ISSUER NOT COOPERATING*
(A Four ISSUER NOT COOPERATING*)

Total Bank Facilities

32.60 (Rs. Thirty-Two Crore and Sixty Lakhs Only)

Details of instruments/facilities in Annexure-1

Rating Action
Rating continues to remain under ISSUER NOT COOPERATING category
Rating continues to remain under ISSUER NOT COOPERATING category

Detailed Rationale & Key Rating Drivers CARE had, vide its press release dated March 05, 2020, placed the rating(s) of Diach Chemicals & Pigments Private Limited (DCPPL) under the ‘issuer non-cooperating’ category as DCPPL had failed to provide information for monitoring of the rating and had not paid the surveillance fees for the rating exercise as agreed to in its Rating Agreement. DCPPL continues to be noncooperative despite repeated requests for submission of information through phone calls and emails dated March 25, 2021; March 30, 2021 & April 02, 2021. In line with the extant SEBI guidelines, CARE has reviewed the rating on the basis of the best available information which however, in CARE’s opinion is not sufficient to arrive at a fair rating. Users of this rating (including investors, lenders and the public at large) are hence requested to exercise caution while using the above rating(s). Detailed description of the key rating drivers At the time of last rating on March 05, 2020 the following were the rating strengths and weaknesses (updated for the information available from Registrar of Companies)

Key Rating Weaknesses Reputed clientele albeit concentration risk & low bargaining power DCPPL’s customers include reputed industrial battery manufacturing entities. However, the company is exposed to customer concentration risk, as ~89% of revenue for FY18 accounted from Exide Industries Ltd resulting in low bargaining power. However, long standing relationship with Exide Industries Ltd ensures healthy orders and stable revenue. Moreover, to mitigate with such risk company is diversifying its customer base through exports in Bangladesh, Korea, Vietnam, Singapore, etc. Low profitability along with moderate financial risk profile The PBILDT margin and PAT margins deteriorated to 1.69% and 0.26% in FY19 vis-à-vis 2.05% and 0.54% in FY18, respectively. The debt equity ratio and overall gearing ratio of the company is 0.05x and 2.03x as on March 31, 2019 vis-à-vis 0.04x and 5.18x as on March 31, 2018. However, the debt equity and overall gearing ratios are not comparable as the total debt as on March 31, 2019 is exclusive of LC and Bill Discounting (on account on unavailability of the outstanding balances of the same as on March 31, 2019) while total debt as on March 31, 2018 is inclusive of LC and bill discounting. In FY20, the PBILDT & PAT margins have improved to 2.43% and 0.60%. Further, overall gearing stood at 1.75x as on March 31, 2020 while debt equity continued to remain stable. The TD/GCA has improved from 10.52x in FY19 to 6.85x in FY20 and Interest coverage ratio remained stable. Profitability vulnerable to raw material price fluctuation DCPPL does not have any lead ore mines and manufactures refined lead through the secondary recycling process. Hence, it is completely dependent on the supply of raw lead/discarded battery scrap from the open market. Since the raw material (lead scrap) for which prices are linked to the prevailing London Metal Exchange prices, revenue and operating margins remain susceptible to changes in lead prices, as these are highly volatile in nature.

Adherence to strict pollution control norms Lead, which is a highly toxic and polluting material, is the primary raw material in manufacturing batteries. Hence handling lead requires adherence to strict pollution-control norms and companies have to incur additional costs for managing the environmental impacts of the material.

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CARE Ratings Limited

Press Release

Key Rating Strengths Experienced promoters & long track record of operations in lead manufacturing industry Diach Chemicals & Pigments Pvt Ltd (DCPPL) was incorporated on September 2004 under Mr. Diach Ghosh and his son Mr. Dipak Ghosh. The promoters have around two decades of experience in the lead manufacturing industry. The day to day affairs of the company is looked after by Mr. Dipak Ghosh. Satisfactory scale of operations in a fragmented industry DCPPL is operating in a fragmented industry marked by presence of several players which indicates low entry barriers. However, with an installed capacity of 37480 MT for Refine & Antimonial lead ingots and 21003 MT for Lead ingot from Rotary furnace and with an operating income of Rs. 357.18 cr for FY18, DCPPL has attained satisfactory scale of operations of having several players in the Eastern Region. The company supplies 2000 MT per month out of Exide Industries Ltd total requirement of 35000 MT per month in Eastern region. DCPPL’s total operating income increased at a CAGR of 25.15% to Rs.357.18 cr between FY16-FY18 on account of increased demand from Exide Industries Ltd. However, the scale of operations of the company in FY19 vis-à-vis FY18 remained at similar level. The company reported a turnover of Rs. 358.62 crore in FY19 as against Rs. 357.18 crore in FY18. In FY20, the turnover has declined to Rs 308.54 crore

Analytical approach: Standalone Applicable Criteria Policy in respect of Non-cooperation by issuer Criteria on assigning Outlook & Credit watch to Credit Ratings CARE's Policy of Default Recognition Liquidity Analysis of Non-financial sector entities Financial ratios – Non-Financial Sector Rating Methodology -Manufacturing Companies Criteria for Short Term Instruments

About the Company

Diach Chemicals and Pigments Private Limited (DCPPL) was incorporated on 08 September 2004 by Mr. Diach Ghosh and his

son, Mr. Dipak Ghosh to set up a manufacturing unit of lead alloys and lead-based products such as red lead, refined lead,

antimonial lead and grey oxide. The manufacturing facility is located at Dhulagarh, West Bengal and it commenced operations

in 2009. The installed capacities for Refine & Antimonial lead ingot is 37,480 MT and 21,003 MT per annum for Lead ingot from

Rotary furnace. The products find applications in battery, paint, glass and ceramic industry.

Brief Financials (Rs. crore)

FY19 (A)

FY20 (A)

Total operating income

358.62

308.54

PBILDT

6.08

7.49

PAT

0.94

1.85

Overall gearing (times)

2.03^

1.75^

Interest coverage (times)

1.44

1.69

A: Audited

^exclusive of LC backed acceptances & Bill discounting as their outstanding balances as on March 31, 2019 & March 31, 2020

are not available.

Status of non-cooperation with previous CRA: ICRA had placed the ratings of DCPPL under ‘Issuer Not Cooperating’ category vide PR dated December 30, 2020.

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

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CARE Ratings Limited

Press Release

Annexure-1: Details of Instruments/Facilities

Name of the Instrument

Date of Issuance

Coupon Rate

Maturity Date

Fund-based - LT-Cash

-

-

-

Credit

Non-fund-based - ST-

-

-

-

Letter of credit

NGuonar-afunntede-bsased - ST-Bank - - -

Fund-based - ST-Packing

-

-

-

Credit in Indian rupee

*Issuer did not cooperate; Based on best available information

Size of the Issue
(Rs. crore)
21.60

Rating assigned along with Rating Outlook
CARE B+; Stable; ISSUER NOT COOPERATING*

CARE A4; ISSUER NOT

3.50

COOPERATING*

CARE A4; ISSUER NOT

1.00

COOPERATING*

CARE A4; ISSUER NOT

6.50

COOPERATING*

Annexure-2: Rating History of last three years Current Ratings

Sr. Name of the Type Instrument/Bank

Amount

Outstanding

No.

Facilities

(Rs. crore)

Rating

1. Fund-based - LT- LT Cash Credit

21.60

CARE B+; Stable; ISSUER NOT COOPERATING*

Date(s) & Rating(s) assigned in 2021-
2022
-

Rating history

Date(s) & Rating(s) assigned in 2020-
2021

Date(s) & Rating(s) assigned in 2019-2020

1)CARE B+; Stable; ISSUER - NOT COOPERATING* (05-Mar-20)

Date(s) & Rating(s) assigned in 2018-
2019
1)CARE BB; Stable (08-Mar19)

2. Non-fund-based - ST ST-Letter of credit

CARE A4; ISSUER

3.50 NOT

-

COOPERATING*

1)CARE A4;

1)CARE

ISSUER NOT

A4+

- COOPERATING* (08-Mar-

(05-Mar-20)

19)

Non-fund-based -

3. ST-Bank

ST

Guarantees

Fund-based - ST4. Packing Credit in ST
Indian rupee

CARE A4; ISSUER

1.00 NOT

-

COOPERATING*

CARE A4; ISSUER

6.50 NOT

-

COOPERATING*

1)CARE A4;

1)CARE

- ISSUER NOT

A4+

COOPERATING* (08-Mar-

(05-Mar-20)

19)

1)CARE A4;

1)CARE

ISSUER NOT

A4+

- COOPERATING* (08-Mar-

(05-Mar-20)

19)

*Issuer did not cooperate; Based on best available information

Annexure 3: Complexity level of various instruments rated for this company

Sr. No.

Name of the Instrument

1. Fund-based - LT-Cash Credit

2. Fund-based - ST-Packing Credit in Indian rupee

3. Non-fund-based - ST-Bank Guarantees

4. Non-fund-based - ST-Letter of credit

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Complexity Level Simple Simple Simple Simple

CARE Ratings Limited

Press Release
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
Contact us
Media Contact Mradul Mishra Contact no. – +91-22-6837 4424 Email ID – [email protected]
Analyst Contact Group Head Name- Anil More Group Head Contact no.- 033-4018 1623 Group Head Email ID- [email protected]
Relationship Contact Name- Lalit Sikaria Contact no.- 033- 4018 1607 Email ID- [email protected]
About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.
Disclaimer CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. CARE is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE’s rating. Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

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Press Release Diach Chemicals & Pigments Private Limited