November 02, 2017

Cipy Polyurethanes Private Limited

Summary of rated instruments
Instrument* Rated Amount Rating Action
(Rs. crore)
Term Loan 6.62 [ICRA]BBB-(Stable); ISSUER NOT CO-OPERATING*;
Rating moved to the ‘Issuer Not Co-operating’ category
Cash Credit 23.75 [ICRA]BBB- (Stable); ISSUER NOT CO-OPERATING*;
Rating moved to the ‘Issuer Not Co-operating’ category
Fund-based 2.00$ [ICRA]BBB- (Stable); ISSUER NOT CO-OPERATING*;
facilities Rating moved to the ‘Issuer Not Co-operating’ category
Non Fund-based 17.25 [ICRA]A3; ISSUER NOT CO-OPERATING*; Rating
facilities moved to the ‘Issuer Not Co-operating’ category
Total 47.62
* Issuer did not co-operate; based on best available information
^ Instrument details are provided in Annexure-1
$ Sublimit to cash credit facility

Rating action
ICRA has moved the ratings for the Rs 47.62 crore bank facilities of Cipy Polyurethanes Private Limited
(‘the company/CPPL) to the ‘Issuer Not Co-operating’ category. The ratings are now denoted as:
“[ICRA]BBB- (stable) and [ICRA]A3 ISSUER NOT CO-OPERATING”.

Rationale
The rating is based on limited cooperation from the company since the time it was last rated in April
2016. As part of its process and in accordance with its rating agreement with Cipy Polyurethanes Private
Limited, ICRA has been sending repeated reminders to the company for payment of surveillance fee that
became due. However, despite multiple requests by ICRA, the company’s management has remained
non-cooperative. In the absence of requisite cooperation and in line with SEBI’s Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 01, 2016, the company’s ratings have been moved to
the “Issuer Not Cooperating” category.

Key rating drivers

Credit strengths
 Established track record in the industrial coatings segment - CPPL was set up in 1976 by first
generation entrepreneur Mr. Subash Cipy to manufacture two component polyurethane (PU) coatings
for industrial use. The company started manufacturing industrial floor coatings in 1983 and derives
~70% of its business from floor coatings. The company has presence in categories like spray applied
coating for structured steel in power plants and protective coatings segment. The company
manufactures both epoxy as well polyurethane based floor coatings along with hybrid EPU (epoxy
polyurethane) coating and sells under its own brand names.
 Established and diversified customer base across various industries - The company derives
~60% its sales from automobile OEMs and auto ancillaries with floor coating being majorly used by
that segment. Other major consumer segments are pharmaceuticals, food processing, power plants and
construction industry. The company has long standing relationship with most of the major auto OEMs
and has been able to generate repeat orders from them. Close to 50% revenue was derived from top ten
 customers in FY2017 significantly lower than 58% in FY2016 given the company’s efforts to diversify
across industrial segments.
Healthy financial profile characterised by healthy profitability, low gearing and comfortable
debt coverage indicators - – The company reported an operating income of Rs.109.75 crore in
FY2017 as compared to Rs.104.03 crore in FY2016. The operating profitability of the company
continued to remain healthy as reflected by operating profit margins of 15.49% in FY2017 as against
14.13% in FY2016. As of March 31, 2017, the capital structure and debt coverage indicators of the
company remained healthy.

Credit weaknesses

 High working capital intensity on account of stretched receivables - The working capital intensity
of the company continued to remain high on account of stretched receivables and stood at 33% in
FY2017 as compared to 32% in FY2016. The contractual nature of business generally entails a gap
between the invoicing and actual application of the material (coating) resulting in extended
receivables.
 Vulnerability of profitability to fluctuations in prices of raw materials which are crude oil
derivatives - Raw material forms ~60% of the cost structure with key raw material being resins,
additives and solvents. ~75-80% of raw materials for industrial paint industry are crude oil derivatives
with majority of market being solvent based. Raw material prices vary based on crude oil prices and
are passed on with a lag effect as customer pricing is usually order based. The manufacturing is
generally order based while company maintains raw material inventory up to 40-60 days based on the
order book position. The company has been generally able to pass on raw material price rises by a lag
of 2 months but not to the fullest extent.
 High competition from well established players in the paints industry - The industrial coating
segment accounts for 30% of the domestic paints market, while decorative segment accounts for 70%
of the market. The Indian industrial coating segment is characterized by high competitive intensity
with the presence of four large players in the form of Kansai Nerolac Paints Ltd, Asian Paints Ltd,
Berger Paints India Ltd, and Akzo Nobel India Ltd and a large unorganized segment. Distribution
network and product formulation are the key differentiators for the industry players with presence of
global players like Akzo Nobel, PPG Industries, Fosroc Chemicals etc providing access to latest
technology.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated
below.

Links to applicable criteria:

Corporate Credit Rating Methodology
About the company:
Cipy Polyurethanes Private Limited (‘CPPL’, ‘The Company’) was set up in 1976 by first generation
entrepreneur Mr. Subash Cipy to manufacture two component polyurethane (PU) coatings for industrial
use. The company started manufacturing industrial floor coatings in 1983 and derives ~70% of its
business from floor coatings. CPPL is among the pioneers in the polyurethane coating industry in India.
The company manufactures both epoxy as well polyurethane based floor coatings along with hybrid EPU
(epoxy polyurethane) coating.

Key Financial Indicators (Audited)

FY2015 FY2016 FY2017
Operating Income (Rs. crore) 92.32 104.03 109.75
PAT (Rs. crore) 3.09 1.01 8.31
OPBDIT/ OI (%) 5.64% 14.13% 15.49%
RoCE (%) 12.25% 7.49% 26.75%

Total Debt/ TNW (times) 0.57 0.48 0.32

Total Debt/ OPBDIT (times) 4.20 1.23 0.88
Interest coverage (times) 2.01 5.79 7.27
NWC/ OI (%) 36% 32% 33%
OI: Operating Income; PAT: Profit after Tax; OPBDIT: Operating Profit before Depreciation, Interest,
Taxes and Amortisation; ROCE: PBIT/Avg (Total Debt + Tangible Net-Worth + Deferred Tax Liability -
Capital Work - in Progress);
NWC: Net Working Capital

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

 Rating history for last three years:

Table:

Chronology of Rating History for

Current Rating (FY2018)
the past 3 years

Instrument Type Amount Amount Date & Date & Date & Date &
S. No. Rated Outstanding Rating Rating Rating in Rating
(Rs. (Rs Crore) in FY2016 In
crore) FY2017 FY2015
May
November 2017 - April 2014
2016
[ICRA]BBB-
[ICRA] [ICRA]
Long (Stable)
1 Term Loan 6.62 - BBB- - BBB-
Term ISSUER NOT
(Stable) (Stable)
COOPERATING*
[ICRA]BBB-
[ICRA] [ICRA]
Long (Stable)
2 Cash Credit 23.75 BBB- - BBB-
Term ISSUER NOT
(Stable) (Stable)
COOPERATING*
[ICRA]BBB-
[ICRA] [ICRA]
Fund-based Long $ (Stable)
3 2.00 BBB- - BBB-
facilities Term ISSUER NOT
(Stable) (Stable)
COOPERATING*
Non Fund- [ICRA]A3
Short [ICRA]
4 based 17.25 - ISSUER NOT - [ICRA]A3
term A3
facilities COOPERATING*
$ Sublimit to cash credit facility
* Issuer did not co-operate; based on best available information

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly
Complex". The classification of instruments according to their complexity levels is available on the
website www.icra.in
Annexure-1
Instrument Details
Date of
Coupon Maturity Amount Rated Current Rating and
ISIN No Instrument Issuance /
Rate Date (Rs. crore) Outlook
Sanction
[ICRA]BBB-(Stable)
March
- Term loan - - 6.62 ISSUER NOT
2021
COOPERATING*
[ICRA]BBB-(Stable)
- Cash Credit - - - 23.75 ISSUER NOT
COOPERATING*
[ICRA]BBB-(Stable)
Fund-based
- - - - 2.00$ ISSUER NOT
facilities
COOPERATING*
Non Fund- [ICRA]A3
- based - - - 17.25 ISSUER NOT
facilities COOPERATING*
* Issuer did not co-operate; based on best available information.
$ Sublimit to cash credit facility
Source: CPPL
 Contact Details
Analyst Contacts
Subrata Ray Suprio Banerjee
+91 22 2433 1086 +91 22 61693350
subrata@icraindia.com suprio.banerjee@icraindia.com

Shashikant Raut Tushar Bharambe

+91 20 66069916 +91 22 61693350
shashikant.raut@icraindia.com tushar.bharambe@icraindia.com

Relationship Contact
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

Relationship Contact
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

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