CRISIL reaffirms \'AA-/Stable/P1+\' ratings of Time Technoplast

CRISIL's ratings on the bank loan facilities and short term debt programme of Time Technoplast continue to reflect the Time group's diverse customer profile and established market position in the polymer-based industrial packaging business, and s

CRISIL?s ratings on the bank loan facilities and short term debt programme of Time Technoplast continue to reflect the Time group?s diverse customer profile and established market position in the polymer-based industrial packaging business, and sound financial risk profile. These rating strengths are partially offset by the group?s exposure to intense competition from the unorganised segment, and its aggressive growth strategy.

The Time group has established products across five polymer application segments, with diverse end-user industries, such as chemicals, pharmaceuticals, fast-moving consumer goods, and automobiles. The group is a market leader in India?s polymer-based industrial packaging business, with a market share of around 75 per cent. Furthermore, the group has sustained its operating margin at around 20 per cent over the past five years and is expected to maintain it over the medium term. The Time group has a sound financial risk profile, marked by healthy debt protection metrics, and large net worth and cash accruals.

The Time group, however, faces intense competition from unorganised players, particularly in the lifestyle segment. This constrains its pricing flexibility. The group has continued to pursue its aggressive growth strategy through both organic and inorganic routes. It has a Rs.1.8-billion capital expenditure (capex) plan in 2010-11 (refers to financial year, April 1 to March 31) to establish new facilities across geographies. The Time group has recently completed three acquisitions: Bengaluru-based Powerbuild Batteries Ltd (60 per cent stake), a business division of US-based Solutia Ltd, comprising two brands, Astroturf and Clearpass, and Taiwan-based Yung Hsin, a market leader in plastic drums and has manufacturing facility for intermediate bulk containers. The total cost of the acquisitions was around Rs.1.25 billion. The group is not averse to further acquisitions, albeit of a smaller size. Given the Time group?s aggressive growth strategy, CRISIL expects its gearing to remain high, at around 1 time, over medium term. CRISIL, however, believes that the group?s overall financial risk profile will remain healthy over the medium term, because of strong cash accruals.

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of Time and its subsidiaries and joint ventures (JVs), together referred to as the Time group. This is because of significant managerial, operational, and financial linkages among the companies. The partly owned subsidiaries are TPL Plastech Ltd (rated ?A/Stable/P1? by CRISIL) and NED Energy Ltd (?A/Stable/P1?). The wholly owned subsidiaries are Schoeller Arca Time Material Handling Solutions Ltd (India), Elan Incorporated FZE (Sharjah), Nova Tech Spz OO (Poland), and Kampozit Praha SRO (Czech Republic). The JVs are Time Mauser Industries Ltd (?A/Stable/P1?) and Mauser Holding Asia (both are 49:51 JVs with Mauser Holding International GmbH).

Outlook: Stable

CRISIL believes that the Time group will maintain its business risk profile over the medium term on the back of its expanding product portfolio and dominant market position. The group is also expected to maintain its healthy financial risk profile over this period, supported by strong cash accruals. The outlook may be revised to ?Positive? in case the group generates more-than-expected revenues while maintaining its operating margin, thereby leading to considerable improvement in its financial risk profile. Conversely, the outlook may be revised to ?Negative? in case the Time group undertakes a large, debt-funded acquisition or a larger-than-expected capex programme, leading to significant deterioration in its capital structure, and consequently, its financial risk profile.