Prince Pipes and Fittings Limited ratings upgraded to 'CRISIL A/Positive/CRISIL A1'

CRISIL Ratings has upgraded its ratings on the bank loan facilities of Prince Pipes and Fittings Limited (PPFL) to 'CRISIL A/Positive/CRISIL A1' from 'CRISIL A-/Stable/CRISIL A2+'.

The rating upgrade reflects CRISIL's expectation that PPFL's business risk profile will continue to strengthen over the medium term backed by steady top-line growth and profitability. The company registered almost 27% y-o-y growth in revenue in fiscal 2021, primarily driven by average realization rising by almost 22% y-o-y, and supported by volumetric growth of almost 4%. Sharp increase in raw material prices mainly that of polyvinyl chloride (PVC), drove the realization in the year. Increased revenue and inventory gains led to sharp jump in operating profitability at 17.6% in fiscal 2021 up from 14.1% in fiscal 2020. Notwithstanding moderation in raw material prices, steady demand from affordable housing segment, plumbing and SWR segments, driven by government's focus on providing water supply and higher budgetary allocations for urban development will continue to drive the revenue growth for the company over the medium term. The company is focusing on increasing the revenue share from higher value added products, however spends on branding, advertisement and distribution network could see some moderation in its operating profitability over the medium term. Nevertheless it is expected to remain strong at around 15%. The upgrade also takes into account the stated posture of PPFL management towards capex, and dividend payouts, thus ensuring that the overall financial risk profile remains robust. Gearing is expected to remain well below 0.5 times on a sustained basis over the long term.

The ratings reflect improving business risk profile marked by its market position in domestic plastic pipe industry supported by diverse product portfolio, geographical presence, and end-user industry, extensive experience of promoters, and a robust financial risk profile. These rating strengths are partially offset by presence in a highly competitive industry, moderate capacity utilization, susceptibility to volatility in raw material prices, and moderate working capital requirements.

Source : Equity Bulls

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