December 03, 2020

Mahesh Value Products Private Limited: Ratings reaffirmed

Summary of rating action

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long-term – Fund-based CC 7.00 7.00 [ICRA]BBB- (Stable); reaffirmed
Long-term – Unallocated 0.20 0.20 [ICRA]BBB- (Stable); reaffirmed
Short-term – Fund-based 4.00 4.00 [ICRA]A3; reaffirmed
Total 11.20 11.20
*Instrument details are provided in Annexure-1

Rationale
The ratings reaffirmation continues to factor in the extensive experience of Mahesh Value Products Private Limited’s
(MVPPL) promoters in the sports goods and food products industries, and its established brands, Stumper and TT in
sports and food products segments, respectively. The ratings continue to factor in MVPPL’s comfortable credit metrics,
characterised by a moderate profitability and low reliance on external borrowings. The ratings, however, continue to be
constrained by MVPPL’s modest scale of operations with a muted growth in the last four years, restricting its operating
flexibility. MVPPL’s sales in the sports segment have been impacted owing to the pandemic and are expected to recover
gradually. The ratings remain constrained by the intense competition, limited bargaining power with suppliers owing to
the fragmented nature of the industry and the susceptibility of profit margins to fluctuations in raw material prices.

ICRA expects a prolonged impact on demand in the sports equipment industry, with recovery likely to be gradual and
spread over several months. The Stable outlook on the [ICRA]BBB- rating reflects ICRA’s opinion that MVPPL will
continue to benefit from its established brand and its diversified revenue mix.

Key rating drivers and their description

Credit strengths
Established brands and long track record – MVPPL is among the few established brands in the cricket ball segment,
which enables it to command a premium pricing. Its brands, Stumper, in the rubber ball segment and TT in asafoetida
products have presence in domestic market for two decades.

Comfortable credit metrics – The company’s profitability remains healthy, as characterised by operating margin and
RoCE of 8.91% and 16.43%, respectively in FY2020 despite some moderation compared to FY2019 owing to lower sales in
Q4 FY2020. This along with MVPPL’s low reliance on external borrowings resulted in continued comfortable debt
protection metrics. While the gearing improved to 0.14 times as on March 31, 2020 from 0.27 times as on March 31,
2019, TD/ OPBITDA stood comfortable at 0.56 times, interest coverage at 5.19 times and DSCR at 2.03 times as on March
31, 2020.

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Credit challenges
Modest scale of operations – MVPPL’s scale of operations remained modest. Its revenues remained stagnant in FY2020
owing to a significant decline in sales volumes in the sports segment in March 2020 amid the nationwide lockdown.
However, MVPPL achieved revenues of Rs. 32.81 crore in H1 FY2021, led by the food segment. The demand for rubber
balls is expected to revive in H2 FY2021.

Intensely competitive and fragmented industries with low entry barriers – MVPPL operates in intensely competitive
industries with numerous organised and unorganised players and low entry barriers for new entities. However, it
continues to benefit to an extent because of its established brand name in India in the rubber ball segment and in South
India for the asafoetida segment, where it has been able to secure moderate margins.

Susceptibility of margins to raw material price variations – The raw material prices in both the segments are volatile
and witness seasonal variation as well. However, the company’s selling prices are relatively fixed on account of intense
competition, resulting in susceptibility of margins to raw material price fluctuation risk.
Liquidity position: Adequate
MVPPL’s liquidity is adequate, supported by healthy cash flow and sufficient untilised bank limits. The company’s cash
credit limit utilisation of fund-based limits stood low at an average of 10% during January 2020 to September 2020. This
apart, the company has minimal debt repayment obligation of Rs. 0.02 crore towards vehicle loan and Rs. 0.77 crore
towards unsecured loan from directors.

Rating sensitivities
Positive triggers – ICRA could upgrade MVPPL’s ratings if the company demonstrates a healthy improvement in its scale
of operations by diversifying its product profile while sustaining its profitability metrics and capital structure.

Negative triggers –Pressure on MVPPL’s rating could arise if there is a decline in its scale of operations or any significant
stretch in the company’s capital structure owing to any sizeable debt-funded capital expenditure or an elongation in the
working capital cycle. Specific credit metrics that could exert pressure on the rating include a decline in RoCE below 12%
or if TD/OPDITA increases to more than 3.0 times on a sustained basis.

Analytical approach
Analytical Approach
Applicable Rating Methodologies
Parent/Group Support
Consolidation/Standalone
Comments
Corporate Credit Rating Methodology
Not applicable
The rating is based on MVPPL’s standalone financial statements

About the company

MVPPL was established as a private limited company in 2008. The company is promoted by Mr. Nagarajan and Mr. N
Parameshwari. The promoters started the business in 1985 in the name of Maheshwari Traders as a manufacturer of
tablets of camphor. Later, they started Mahesh Rubbers in 1997 to cater to India’s sporting community, under the brand,
Stumper. Mahesh Rubbers was then converted into a private limited company and was renamed as Mahesh Elastomers
Private Limited in 2000. Mahesh Elastomers acquired TT Asafoetida, a 125-years old brand. Subsequently, in 2008, all the

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independent units were merged to form a corporate entity. At present, there are three divisions in MVPL, namely sports,
spices and trade.
In FY2020, the company reported a net profit of Rs. 1.97 crore on an operating income (OI) of Rs. 56.90 crore compared
to a net profit of Rs. 3.04 crore on an OI of Rs. 57.09 crore in FY2019. As per provisional figures, in H1 FY2021, the
company achieved sales of Rs. 32.81 crore.

Key financial indicators

FY2019 FY2020
Operating Income (Rs. crore) 57.09 56.90
PAT (Rs. crore) 3.04 1.97
OPBDIT/OI (%) 12.82% 8.91%
PAT/OI (%) 5.32% 3.46%

Total Outside Liabilities/Tangible Net Worth (times) 0.75 0.62

Total Debt/OPBDIT (times) 0.64 0.56
Interest Coverage (times) 7.00 5.19
Source: MVPPL

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Instrument Current Rating (FY2021) Rating History for the Past 3 Years
Type Amount Amount Rating FY2020 FY2019 FY2018
Rated Outstanding 3-Dec-2020 17-Oct-2019 - -
1 Cash Credit Long 7.00 - [ICRA]BBB- (Stable); [ICRA]BBB- (Stable); -
Term reaffirmed assigned
2 Unallocated Long 0.20 - [ICRA]BBB- (Stable); [ICRA]BBB- (Stable);
Term reaffirmed assigned
3 Letter of Credit Short 4.00 - [ICRA]A3; reaffirmed [ICRA]A3; assigned
Term

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

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Annexure-1: Instrument details
ISIN No Instrument Name Date of Coupon Maturity Amount Current Rating and
Issuance / Rate Date Rated Outlook
Sanction (Rs. crore)
NA Cash Credit - - - 7.00 [ICRA]BBB- (Stable)
NA Unallocated - - - 0.20 [ICRA]BBB- (Stable)
NA Letter of Credit - - - 4.00 [ICRA]A3
Source: MVPPL

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Analyst Contacts
K Ravichandran R Srinivasan
+91 44 4596 4301 +91 44 4596 4315
ravichandran@icraindia.com r.srinivasan@icraindia.com

Sheetal Sharad Ayush Kumar Mohta

+91 12 4454 5374 +91 80 4922 5517
sheetal.sharad@icraindia.com ayush.mohta@icraindia.com

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

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries:

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

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Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
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For more information, visit www.icra.in

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