Press Release

Nahar Poly Films Limited

March 12, 2019
Ratings
Amount 1
Facilities Rating Rating Action
(Rs. crore)
Long-term Bank Facilities (Term -
- Withdrawn*
Loan)
Long-term Bank Facilities (Fund CARE A-; Stable
Based) 42.00 (Single A minus; Outlook: Reaffirmed
Stable)
Short-term Bank Facilities CARE A2+
21.00 Reaffirmed
(A Two Plus)
63.00
Total Facilities
(Rupees Sixty Three crore only)
Details of instruments/facilities in Annexure-1
*CARE has withdrawn the rating assigned to the term loan facility of Nahar Poly Films Limited, with immediate effect since
there is no amount outstanding under the facility

Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of Nahar Poly Films Limited (NPFL) continue to derive strength from its
experienced promoters, high financial flexibility being part of the Nahar group, diversified product profile and reputed
client base. The ratings further derive strength from the established brand name, efficient working capital management
and comfortable overall solvency position.
The ratings are, however constrained by the declining profitability margins, susceptibility of margins to raw material price
fluctuations, product mix sold and foreign exchange fluctuations and highly competitive nature of the industry.
Going forward, the ability of the company to profitably scale-up its operations, maintain its overall solvency position and
any significant debt funded capex impacting the credit profile shall remain the key rating sensitivities.

Detailed description of the key rating drivers

Key Rating Strengths
Experienced promoters with high financial flexibility being part of the Nahar group: NPFL belongs to the Nahar Group
which was established by late Mr. Vidya Sagar Oswal with business interests in textiles, retail, BOPP films, renewable
power, real estate, sugar and financial services. Currently, Mr. J.L. Oswal, son of Mr. Vidya Sagar Oswal is the Chairman of
the group and also holds the chairman position on the board of directors of NPFL and other group companies. He has
more than 50 years of experience in the textile and woollen industry. Furthermore, Mr. J.L. Oswal is assisted by his sons,
Mr. Kamal Oswal and Mr. Dinesh Oswal, who have an industry experience of 24 years and 25 years, respectively.
Moreover, the promoters of the company are supported by well qualified professionals with separate General Managers
for each department. Furthermore, long operational history of the group and NPFL has enabled the company to establish
strong relations with its customers and suppliers. Being a part of the Nahar group, the company enjoys ample financial
flexibility with investments to the tune of Rs.123 cr., as on March 31, 2018, majorly in the group companies.

Comfortable overall solvency position: The capital structure of the company remained comfortable and improved further
with debt-to-equity (D:E) and overall gearing ratios of 0.04x and 0.12x respectively, as on March 31, 2018 (0.11x and
0.13x respectively, as on March 31, 2017) on the back of scheduled repayment of term debt obligations. The debt
coverage indicators also remained comfortable with total debt to GCA ratio of 1.34x, as on March 31, 2018 which
deteriorated marginally from 1.16x as on March 31, 2017 due to lower profitability generated during the year. The
interest coverage ratio, however, improved in FY18 due to decline in interest expenses incurred by the company on
account of scheduled repayment of the term debt obligations. In 9MFY19 (UA), also the interest coverage remained
comfortable and improved to 9.45x during the period (9.03x; in same period last year), on the back of lower interest
expenses incurred.

Reputed client base and diversified product profile: NPFL supplies BOPP films to various reputed clients spread across
India through established network of its own marketing personnel and dealers. NPFL’s product profile is diversified as it
manufactures BOPP films of varied grades and thickness which find applications in lamination, reverse printing,
packaging, decoration, tapes and textile bags.
Comfortable liquidity position: The average cash credit limit utilization of the company remained at a comfortable level
of ~20% for the last 12 months period ended January 2019. The working capital cycle of NPFL also remained at a

1
Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
1 CARE Ratings Limited
 Press Release

comfortable level of 62 days as on March 31, 2018 (PY: 50 days). The company had a total debt repayment obligation of
Rs.8.59 cr. in FY19, which was completely repaid in Q2FY19. As on March 31, 2018, NPFL also had free cash & investments
(majorly in group companies) amounting to ~Rs.123.78 Cr. The current and quick ratios continued to remain comfortable
at 2.03x and 1.50x, respectively, as on March 31, 2018 (Previous Year: 1.91x and 1.42x, respectively).

Key Rating Weaknesses

Declining profitability margins with susceptibility to fluctuations in raw material prices, foreign exchange fluctuations
and product-mix sold: The raw material cost constituted ~70% on an average (of the total income) for the last three years
with prices of the key raw materials viz. BOPP resins and additives (polypropylene) fluctuating in nature and also
dependent on crude oil prices which are highly volatile in nature. The PBILDT margins of the company have declined in
FY18 to 9.11% from 13.23% in FY17. This was mainly on account of higher raw material prices incurred which were not
passed on to its customers due to competitive nature of industry. In 9MFY19 (Prov.), though the operating income
increased by ~6% on a y-o-y basis to Rs.197.30 crore, the PBILDT margins declined to 4.22% compared to 9.47% achieved
in the same period last year. The profitability margins are also vulnerable to changes in product mix sold since BOPP films
of non-tape/metalized grade (generally customized as per client requirements) delivers better margins as compared to
tape grade. The margins of the company are also exposed to foreign exchange fluctuations as the company earned
approximately 2% of its total income from exports in the past while it imported around 5% of its raw material
requirements. Though it provides natural hedge to a certain extent, the profitability margins of the company are exposed
to any adverse fluctuation in the foreign exchange prices, in the absence of any hedging mechanism.

Highly competitive and fragmented nature of the industry; albeit established brand name: The Indian packaging
industry is a combination of organised large Indian and International companies and the unorganised small and medium
local companies. NPFL operates in a competitive segment of the packaging industry which is affected by the low
profitability due to highly fragmented industry, high raw material prices, low entry barriers, presence of large number of
unorganized players with capacity additions by existing players as well as new entrants. This situation is likely to increase
the level of competition which might put further pressure on profitability of packaging products manufacturers. However,
this risk is mitigated to some extent as the company sells its products under the brand name of “Nahar” which is widely
recognized in market.

Analytical Approach: Standalone

Applicable Criteria
Criteria on assigning Outlook to Credit Ratings
Financial ratios – Non-Financial Sector
CARE’s policy on default recognition
CARE’s methodology for manufacturing companies
Policy on Withdrawal of ratings
Criteria for Short Term Instruments

Company Background
Incorporated in the year 1988 and based in Ludhiana (Punjab), Nahar Poly Films Limited (NPFL) is a part of the Nahar
Group of Industries (Nahar Group), which is managed by Mr. J L Oswal and his family members. Earlier, the company was
engaged in textile and investments business under the name of Nahar Exports Ltd (NEL). Pursuant to the scheme of
Arrangement and Demerger in 2006, the textile division of NEL demerged from it and merged into Nahar Spinning Mills
Limited (NSML). The residual activity (investment division) of NEL was later renamed as Nahar Investments & Holding Ltd
(NIHL). Subsequently, in June 2008, the name of the company changed to NPFL. Later on, NPFL commissioned a biaxially-
oriented polypropylene (BOPP) plant with an installed capacity of 30,000 tonne per annum (TPA) in Madhya Pradesh
which commenced operations in May 2010. The company belongs to the 69 year old Nahar Group which is diversified into
various business such as textiles, retail, BOPP films, renewable power, real estate, sugar and financial services through its
various companies including Oswal Woollen Mills Limited and Vanaik Spinning Mills Ltd., Monte Carlo Fashions Ltd.,
Nahar Spinning Mills Ltd. (NSML), Nahar Industrial Enterprises Ltd., among others.

Brief Financials (Rs. crore) FY17 (A) FY18 (A)

Total operating income 257.45 254.69
PBILDT 34.06 23.19
PAT 10.05 5.10
Overall gearing (times) 0.13 0.12
Interest coverage (times) 7.54 8.85
A: Audited
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 Press Release

Status of non-cooperation with previous CRA: Not Applicable

Any other information: NA

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

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.

Analyst Contact:
Name: Mr Sudeep Sanwal
Tel: 0172-4904002
Cell: +91 9958043187
Email: [email protected]

**For detailed Rationale Report and subscription information, please contact us at www.careratings.com

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
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Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the
concerned bank facilities or to buy, sell or hold any security. 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.
In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is 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.

Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Rating assigned along
Instrument Issuance Rate Date Issue with Rating Outlook
(Rs. crore)
Fund-based - LT-Term - - - - Withdrawn
Loan
Non-fund-based - ST- - - - 21.00 CARE A2+
BG/LC
Fund-based - LT-Working - - - 42.00 CARE A-; Stable
Capital Limits

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 Press Release

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history

No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) &
Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s)
(Rs. crore) assigned in assigned in assigned in assigned in
2018-2019 2017-2018 2016-2017 2015-2016
1. Fund-based - LT-Term LT - - - 1)CARE A-; 1)CARE A- -
Loan Stable (11-Apr-16)
(12-Mar-18)
2)CARE A-;
Stable
(17-Apr-17)
2. Non-fund-based - ST- ST 21.00 CARE A2+ - 1)CARE A2+ 1)CARE A2+ -
BG/LC (12-Mar-18) (11-Apr-16)
2)CARE A2+
(17-Apr-17)
3. Fund-based - LT-Working LT 42.00 CARE A-; - 1)CARE A-; 1)CARE A- -
Capital Limits Stable Stable (11-Apr-16)
(12-Mar-18)
2)CARE A-;
Stable
(17-Apr-17)

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 Press Release

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