AI assistant
EPL LIMITED Regulatory Filings 2021
60801_rns_2021-09-08_4dc50967-041c-4e5c-b65b-2d3512a9471a.pdf
Regulatory Filings
Open in viewerOpens in your device viewer
8 September 2021
| Corporate Service Department | The Listing Department |
|---|---|
| BSE Limited | National Stock Exchange of India Ltd |
| 25th Floor, Phiroze Jeejeebhoy Towers, | Exchange Plaza, Plot no. C/1, G Block, |
| Dalal Street, | Bandra-Kurla Complex, Bandra (E) |
| Mumbai 400 001 | Mumbai 400 051 |
| Scrip: Equity 500135. | Trading Symbol: EPL |
| NCDs 960308, 960310 & 960311. |
Ref.: EPL Limited (EPL)
Sub.: Reaffirmation of credit rating for Bank Facilities and NCDs.
We wish to inform you that the rating agency Credit Analysis & Research Limited (CARE) has reviewed/reaffirmed the following ratings to EPL Limited.
-
- Reaffirmed credit rating of"CARE AA", for Long Term Bank Facilities.
-
- Reaffirmed credit rating of "CARE Al+" for Short .Term Bank Facilities.
-
- Reaffirmed credit rating of "CARE AA"/"CARE Al+" for Long term/Short Term Bank Facilities.
-
- Reaffirmed credit rating of "CARE AA" for the Non-Convertible Debentures (NCDs) of the Company
Thanking You
Yours faithfully, For~ted .lJ Suresh Savaliya 1l SVP - Legal & Company
Encl.: As above
Filed online
EPL Limited (Formerly known as Essel Propack Limited) September 07, 2021 ·
| Long-term Bank Facilities | 150.00 | CARE AA; Stable(Double A; Outlook: Stable) | Reaffirmed |
|---|---|---|---|
| Long-term / Short-term Bank Facilities | 50.00(Enhanced from 47.00) | CARE AA; Stable/ CARE Al+(Double A; Outlook: Stable/ AOne Plus) | Reaffirmed |
| Long-term / Short-term Bank Facilities | 30.00(Enhanced from 25.00) | CARE AA; Stable/ CARE Al+(Double A; Outlook: Stable/ AOne Plus) | Reaffirmed andreclassified from Shortterm to Long Term/ ShortTerm |
| Long-term / Short-term Bank Facilities | 120.00 | CARE AA; Stable/ CARE Al+(Double A; Outlook: Stable/ A term to Long Term/ ShortOne Plus) | Reaffirmed andreclassified from LongTerm |
| Short-term Bank Facilities | 5.00 | CARE Al+(A One Plus) | Reaffirmed |
| Total Bank Facilities | 355.00(Rs. Three hundred fifty fivecrore only) | ||
| Non-Convertible Debentures50.00 | CARE AA; Stable(Doub.le A; Outlook: Stable) | Reaffirmed | |
| Non-Convertible Debentures | Withdrawn | ||
| Total Long-term Instruments | 50.00(Rs. Fifty crore only) |
Details of instruments/facilities in Annexure-1
Detailed Rationale & Key Rating Drivers
The reaffirmation of the ratings assigned to the bank facilities and instruments of EPL· Limited (hereinafter referred to as the company or EPL) takes into consideration the established global market position of the company in the laminated tubes segment and its long-standing relationship with reputed global clientele. The financial risk profile continued to remain strong, characterized by low overall gearing and healthy debt coverage indicators. The ratings assigned also factor in stable operational performance of EPL despite challenging macro-economic scenario owing to outbreak of COVID-19. The prospects are also favourable for the industry in which EPL operates with many product categories such as food, pharma, etc., shifting to laminated tubes, thereby replacing traditional packaging such as bottles and age-old aluminium tubes. Additionally, EPL is also benefitted from deep industry expertise of the Blackstone group.
These strengths are, however, tempered by limited pricing flexibility in oral care segment, where the profitability is constrained to an extent. Moreover, volatility in raw material prices and foreign exchange fluctuation risk are few of the risk/actors affecting EPL's profitability which management addresses through measures like pass through contracts and other forex risk
CARE Ratings has withdrawn the ratings assigned to the long-term instruments (non-convertible debentures), bearing /SIN number: INE255A08AV3 post redemption and receipt of No Dues Certificate from the Debenture Trustee.
Rating Sensitivities
management measures.
Positive Factors - Factors that could lead to positive rating action/upgrade
- Improvement in the scale of operations> Rs.5,000 crore and PBILDT margins in range of 22% 25% on a sustainable · basis
- Improvement in Overall Gearing below 0.25x
Negative factors- Factors that could lead to negative rating action/downgrade
- Increase in the operating cycle above 120 days on a sustained basis
- Decline in PBILDT margin in the range of 15%-17% on a sustainable basis
- Any large debt-funded organic or inorganic investment leading to deterioration in the overall gearing above 0.75x
Detailed description of the key rating drivers
Key Rating Strengths
Presence of strong promoter group, supported by experienced management
EPL's promoter is the Blackstone group which holds 51.96% stake in EPLas on March 31, 2021 (P.Y.74.99%) is one of the leading investment firms in the world with an AUM of around USO 511 billion across sectors like private equity, real estate, hedg~ fund solutions and credit businesses. The group has an exposure in the packaging industry through acquisition of varied companies such as the USA-based Graham Packaging, Owens-Illinois Inc, Ohio and China-based packaging firm, ShyaHsin. The onboarding of the Blackstone group has also improved the financial flexibility of Ef>L. Mr Anand Kripalu, who has been appointed as the MD & CEO of EPL has more than 30 years o_f experience in fast-moving consumer goods (FMCG) industry is supported by a team of experienced professionals. ·
Established global market position with a strong and diversified business profile
EPL is in the business of manufacturing of multilayer plastic-laminated collapsible tubes which are used in packaging of oral care, beauty and cosmetics, pharma, food, home and industrial products. It is engaged in an end-to-end backward-integrated process starting right from manufacturing of laminates to tubes followed by printing and capping. EPL is a global player with their facilities located across multiple geographies divided into regional setups such as AMESA (Africa, Middle East & South Asia including India), EAP (East Asia Pacific - China and Philippines), Americas (USA, Mexico and Colombia) and Europe (UK, Poland, Russia and Germany). Erstwhile catering'primarily to packaging in oral care segment, EPL has gradually diversified to other personal care segments such as Beauty & Cosmetics, Pharma & Health, Foods, etc. With heightened awareness on personal hygiene in the backdrop of Covid-19 pandemic, EPL started catering to tube-based hand sanitizer tubes and handwash segment in FY21 (refers to the period April 1 to March 31). In the oral care segment, EPL commands almost one-third of the market share globally and it is endeavouring to increase its share in the personal care segment where it foresees strong potential going forward. During FY21, EPL also acquired 72.46% stake in Creative Stylo Packs Ltd (CSPL, a reputed manufacturer of laminated tubes, plastic co-ex tubes, caps and corrugated boxes) to complement its existing product profile, categories and customers. The remaining 27.54% stake will be purchased through issuance of EPL shares to founders of CSPL post the merger process which is currently underway. EPL has long-standing relationship with reputed clientele such as P&G, Colgate, Unilever, GSK, Reckitt Benckiser, Johnson & Johnson, Dabur, Emami, Himalaya, Patanjali, etc.
Sustained stable operational performance, during challenging economic scenario
EPL has delivered a stable operational performance reporting a y-o-y growth of 12% in consolidated total operating income (TOI) from Rs.2,769 crore in FY20 to Rs.3100 crore in FY21. This was achieved despite challenging macroeconomic conditions and disruptions caused by the Covid-19 pandemic. Focus on higher-margin personal care segment, product innovation extended to hand sanitizers tube/handwash and improved performance in Europe were some of the key growth drivers. During FY21, personal care segment contributed to 46% of the total sales (P.Y. 45%) with the balance 54% (P.Y. 55%) being contributed by the oral care segment. Despite covid-related headwinds in Beauty & Cosmetics, personal care segment held its share owing to increased demand of Hygiene Products, i.e., tube-based sanitizers and hand wash. Personal Care has grown at a 15.70% compounded annual growth rate (CAG R) over the last ten years (v/s 10% CAGR for Oral Care over last ten years) and is expected to continue being major growth driver going forward. The PBILDT margins was maintained at around 20% during FY21, primarily supported by cost optimization and productivity improvement measures implemented post Blackstone's acquisition. During Q1FY22, the company's consolidated TOI increased at a comparatively lower rate of 7.80% (due to shutdown of Russia manufacturing operations and hand sanitizer pipe Ii ne filling in Q1FY21), as it was partly impacted by lingering effect and further uncertainty surrounding se,cond wave of outbreak. The PBILDT margins also moderated to 18.64% during Q1FY22 on account of steep increase in raw material prices and higher freight operating environment globally.
Strong financial risk profile
EPL's financial risk profile is supported by healthy profitability, strong cash flows and debt coverage indicators. Overall gearing (consolidated) improved to 0.42x as on March 31, 2021 (P.Y. 0.51x). Strong operating cash flows, prudent capital allocation and lower interest rates resulted in finance cost lower by 22.8% in FY21 compared with FY20. The interest coverage ratio thus improved to 14.45x during FY21 (P.Y. 10.18x). EPL follows the policy of keeping the average capex (which includes both replacement and capacity addition) for a year equal to the depreciation amount; except for some strategic opportunities such as M&A which may entail higher capital outlay. The acquisition of CSPL during FY21 was carried out through internal accruals. The company's overall gearing of below 0.S0x provides sufficient headroom for raising debt, if required although EPL does not have a high propensity of undertaking very aggressive debt-funded capex. EPL management has indicated likelihood of raising
CARE Ratings Limited
debt of around Rs.150 crore to incur modular capex over the next 1-2 years, subject to availability of competitive interest rates and prevailing market conditions.
Key Rating Weaknesses
Exposure to raw material volatility & forex fluctuation
The major raw material consumed is polymer granules (linear low-density polyethylene [LLDPE], high-density polyethylene [HOPE] which is a derivative of crude oil and is highly sensitive to any volatility in. crude oil prices, thereby exposing the . operating performance of the company. To mitigate such risk, the long-term contracts executed with the company's oral care customers have inbuilt a raw material cost escalation pass through clause albeit with a short lag of 3 months. The global nature of operations exposes the company's margins to fluctuations in foreign exchange rates . .Forex risk is mitigated by minimizing cross currency transactions, using natural hedge and the use of currency forwards.
Moderate competition from unorganized segment
EPL faces competition from unorganized players due to low entry barriers in the industry. However, EPL's scale, technology, integrated manufacturing process, innovation capability and operational efficiencies are factors which further strengthen its competitiveness and ability to withstand competition.
Industry Outlook
Tube as a packaging format is being increasingly preferred for products in paste/ gel/ cream/ointment base and even viscous liquid form for reasons of ease of dispensing, convenience, resource reduction, capability for branding and decoration. They are ideal packaging solution as they are light, offer a tough barrier, and protect the product from sunlight, air, and moistures, making it a reliable product to transport goods over long distances. In Pharmaceuticals, use of high barrier, safe laminated tubes with features like tamper evidence, anti - counterfeit & innovative dispensing tubes are replacing age old aluminium tubes. Categories like shampoo, foods, nutrition & home care are also now seeing tubes as replacement to bottles & other traditional packaging. Additionally, exponentially expanding e-commerce market and rising demand for packaged foods have a direct bearing on the packaging sector. These ensure huge growth opportunities for the company.
liquidity indicator: Strong
As on March 31, 2021, the company's unencumbered cash and cash equivalents stood at around Rs.237 crore on a consolidated basis and Rs.17 crore on a standalone basis. The company's liquidity is also supported by a current ratio above unity. The company has made debt repayments of Rs.12 crore in Q1FY22 out of total scheduled borrowing repayments of Rs. 66 crore in FY22. The company's gross cash accruals are sufficient to meet debt repayment obligations. EPL's average utilisation of fundbased limits (including CP) for last 12 months ending June 30, 2021, was around 25%, whereas non-fund-based limits utilization was negligible.
Analytical approach: Consolidated
The consolidated financials of EPL have been considered for analytical purposes owing to financial and operational linkages between the company and its subsidiaries. The consolidated financials include the financials of four direct subsidiaries, fourteen step-down subsidiaries and one associate company. CARE Ratings has also considered the business and risk profile of CSPL, which became a subsidiary of EPL w.e.f. February 1, 2021. The list of companies considered in consolidation as on March 31, 2021, is provided in Annexure-6
Applicable Criteria
Criteria on assigning Outlook and Credit Watch to Credit Ratings CARE' s Policy on Default Recognition Criteria for Short Term Instruments Rating Methodology-Consolidation Rating Methodology- Manufacturing Companies Financial ratios-Non-Financial Sector liquidity Analysis of Non-Financial Sector Entities
About the Company
EPL limited (erstwhile Essel Prepack limited), founded in 1982, is a global manufacturer of laminated plastic tubes and laminates. Its products are extensively used in the packaging of products across categories such as oral care, beauty and cosmetics, pharma and health, foods, home care. EPL is one of the world's largest manufacturers holding oral care market share of around one-third in volume terms globally with business in four geographical segments, namely, Americas (with operations in the USA, Mexico, and Colombia), Europe (with operations in the UK, Germany, Russia, Poland), AMESA (Africa,
Middle East & South Asia - with operations in Egypt and India) and EAP (East Asia Pacific with operations in China and Philippines). EPL functions through nineteen facilities in nine countries, selling approximately 8 billion tubes on an annual basis.
| Total operating income | 2769 | 3100 |
|---|---|---|
| PBILDT | 566 | 620 |
| PAT | 212 | 244 |
| Overall gearing (times)* | 0.51 | 0.42 |
| Interest coverage (times) | 10.18 | 14.45 |
A: Audited
*Debt Inclusive of LC acceptances and lease liabilities as per Ind-AS 116
Status of non-cooperation with previous CRA: Nil
Any other information: Nil
Rating History for last three years: Please refer Annexure-2
Covenants of rated instrument/ facility: Detailed explanation of covenants of the rated instruments/facilities is given in Annexure-3
Complexity level of various instruments rated for this company: Annexure 4
Annexure-1: Details of Instruments/Facilities
| Fund-based - LT-Term Loan | Dec:: 2025 | 150.00 | CARE AA; Stable | |||
|---|---|---|---|---|---|---|
| Fund-based/Non-fund-based-LT/ST | 30.00 | CARE AA; Stable /CARE Al+ | ||||
| Fund-based/Non-fund-based-LT/ST | 120.00 | CARE AA; Stable /CARE Al+ | ||||
| Fund-based-Short Term | 5.00 | CARE Al+ | ||||
| Non-fund-based-LT /ST | 50.00 | CARE AA; Stable /CARE Al+ | ||||
| Debentures-NonConvertible Debentures | December21, 2017 | 7.80% pa | December21,2020 | 0.00 | Withdrawn | |
| Debentures-NonConvertible Debentures | INE255A08AW DecemberINE255A08AX9 14,2020INE255A08AY7 | 6.50% pa | June 14, 2023 | 50.00 | CARE AA; Stable |
41 CARE Ratings Limited
| 1. | Fund-based - LT-Term Loan | LT | 150.00 | CAREAA;Stable | l)CAREAA;Stable(ll-Sep-20) | l)CAREAA;Stable(30-Sep-19)2)CARE AA(CWD)(03-May-19) | l)CAREAA;Stable(24-Aug-18) | |
|---|---|---|---|---|---|---|---|---|
| 2. | Fund-based/Nonfund-based-LT /ST | LT/ST | 30.00 | CAREAA;Stable/CAREAl+ | l)CARE Al+(ll-Sep-20) | l)CARE Al+(30-Sep-19)2)CARE Al+(03-May-19) | l)CAREAl+(24-Aug-18) | |
| 3. | Fund-based/Nonfund-based-LT /ST | LT/ST | 120.00 | CAREAA;Stable/CAREAl+ | l)CAREAA;Stable(ll-Sep-20) | l)CARE AA;Stable(30-Sep-19)2)CAREAA(CWD)(03-May-19) | l)CAREAA;Stable(24-Aug-18) | |
| 4. | Non-fund-based -LT/ ST-BG/LC | LT/ST | l)Withdrawn(30-Sep-19)2)CAREAA/CARE Al+(CWD)(03-May-19) | l)CAREAA;Stable / CAREAl+(24-Aug-18) | ||||
| 5. | Non-fund-based -LT-BG/LC | LT | l)Withdrawn(ll-Sep-20) | l)CAREAA;Stable(30-Sep-19)2)CARE AA(CWD)(03-May-19) | l)CAREAA;Stable(24-Aug-18) | |||
| 6. | Debentures-NonConvertibleDebentures | LT | l)Withdrawn(24-Aug-18) | |||||
| 7. | Fu_nd-based-ShortTerm | ST | 5.00 | CAREAl+ | l)CARE Al+(ll-Sep-20) | l)CARE A'.I.+(30-Sep-19)2)CARE Al+(03-May-19) | l)CARE Al+(24-Aug-18} | |
| 8. | Non-fund-based-LT/ST | LT/ST | 50.00 | CAREAA;Stable/·cAREAl+ | l)CAREAA;Stable / CAREAl+(ll-Sep-20). | l)CAREAA;Stable / CAREAl+(30-Sep-19) | l)CAREAA;Stable / CAREAl+(24-Aug-18) | |
| s I | CARE Ratings Limited |
| 2)CAREAA/CARE Al+(CWD)(03-May-19) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 9. | Debentures-NonConvertibleDebentures | LT | l)CAREAA;Stable(11-Sep-20) | l)CAREAA;Stable(30-Sep-19)2)CAREAA(CWD)(03-May-19) | l)CAREAA;Stable(24-Aug-18) | |||
| Debentures-Non10. ConvertibleDebentures | LT | 50.00 | CAREAA;Stable | l)CAREAA;Stable(04-Dec-20) |
Annexure-3: Detailed explanation of covenants of the rated instrument / facilities
| A. | Financial covenants | |
|---|---|---|
| i) | Debt Service coverage ratio | Should not be below 1.20x |
| ii) | Total Debt/PBILDT | Should not exceed 3.0x |
| B. | Non-financial covenants/Promoter covenants | Promoter Group shall hold minimum 51% equity stake in the |
| company. Promoter Group shall exercise management | ||
| control over the Issuer at all times till tenor of the NCO. |
Annexure 4: Complexity level of various i.nstruments rated for this company
| 1. | Debentures-Non Convertible Debentures | Simple |
|---|---|---|
| 2. | Fund-based - LT-Term Loan | Simple |
| 3. | Fund-based-Short Term | Simple |
| 4. | Fund-based/Non-fund-based-LT /ST | Simple |
Annexure 5: Bank Lender Details
Click here to view Bank Lender Details
| Annexure 6: List of subsidiaries in consolidation | ||
|---|---|---|
| Direct Subsidiaries | ||
| Arista Tubes Inc. | 100% (100%) | USA |
| Lamitube Technologies (Cyprus) Ltd | 100% (100%) | Cyprus |
| Lamitube Technologies Ltd | 100% (100%) | Mauritius |
| Creative Stylopack Pvt Ltd (w.e.f. Feb 1, 2021) | 72.46% (Nil) | India |
| Step Down Subsidiaries | ||
| EPL Misr for Advanced Packaging S.A.E | 75% (75%) | Egypt |
| EPL Packaging (Guangzhou) Ltd | 100% (100%) | China |
| EPL Packaging (Jiangsu) Ltd | 100% (100%) | China |
| Essel Prepack Philippines, Inc. | 100% (100%) | Philippines |
| MTL DE Panama SA Panama | 100% (100%) | Panama |
| EPL Propack UK limited | 100% (100%) | United Kingdom |
| EPL Deutschland Gmbh& Co. KG | 100% (100%) | Germany |
| EPL Deutschland Management GMBH | 100% (100%) | Germany |
| EPL Propack de Mexico, SA de CV | 100% (100%) | Mexico |
| Tubopack de Columbia S.A | 100% (100%) | Colombia |
| Laminate Packaging Columbia S.A.S. | 100% (100%) | Colombia |
| LLC EPL Propack | 100% (100%) | Russia |
| EPL Poland Sp z.o.o | 100% (100%) | Poland |
| EPL America, LLC | 100% (100%) | USA |
| Associate | ||
| P.T. Lamipak Primula | 30%' | Indonesia |
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
Contact us
Media Contact
Name - Mr. Mradul Mishra Contact no. - +91-22-6754 3573 Email ID - [email protected]
Analyst Contact
Name - Mr. Pulkit Agarwal Contact no.- 022-67543505 Email ID- [email protected]
Relationship Contact
Name: Mr. Saikat Roy Contact no. : 022 6754 3404 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 i.n 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.
**For detailed Rationale Report and subscription information, please contact us at www.careratings.com
s I CARE Ratings Limited