Montage Enterprises Private Limited

June 30, 2023

Ratings
Instrument Amount Previous Current Rating Complexity
/ Facility (Rs. crore) Ratings Ratings Action Indicator
Long Term 163.18 IVR BB+/ IVR BB-/ Downgraded Simple
Bank (reduced Stable Stable
Facility from (IVR Double B (IVR Double
Rs.217.88 Plus with B Minus with
crore) Stable Stable
Outlook) Outlook)
Short 100.00 IVR A4+ IVR A4 Downgraded Simple
Term Bank (IVR Four (IVR A Four)
Facility Plus)

Total 263.18 Rupees Two Hundred Sixty Three Crore and Eighteen
Lakhs Only

Details of Facilities are in Annexure 1

Detailed Rationale
Informerics Valuations and Ratings Private Limited (IVR) has downgraded long-term rating to
IVR BB- with a Stable Outlook and short term rating to IVR A4 for the bank loan facilities of
Montage Enterprises Private Limited (MEPL).

The rating has been downgraded due to losses, stretched liquidity and debt protection metrics
(interest coverage ratio and debt service coverage ratio) are below unity in FY22 (audited).
There is uncertainty due to deterioration in the financial risk prolife of the company.

The rating revised to the above-mentioned bank facilities of Montage Enterprises Private
Limited (MEPL) continues to draw comfort from experienced promoters and management.
The rating also factors established clientele and relationship and satisfactory capital structure.
However, these strengths are, partially offset by weak profitability, stressed debt protection
metrics, vulnerability of profitability to adverse fluctuation in raw material prices and working
capital intensive nature of operations with elongation in operating cycle.

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IVR has principally relied on the standalone audited financial results of MEPL upto 31 March
2022 and projected financials for FY23, FY24 and FY25 and publicly available information/
clarifications provided by the company’s management.

Key Rating Sensitivities:

Upward Factors
• Improvement on profitability leading to improvement in cash accruals on a sustained
basis.
• Sustenance of the capital structure and improvement in debt protection metrics.
• Improvement in the collection period leading to improvement in liquidity.

Downward Factors
• Elongation in the operating cycle impacting the liquidity.
• Moderation in the capital structure and deterioration in profitability indicators.

List of Key Rating Drivers with Detailed Description

Key Rating Strengths

Experienced promoter and management

The company is promoted by one Mr. Arvind Gupta, having a wide exposure in flexible
packaging industry, and is associated with this industry for last three decades. The promoters
are supported by a team of well qualified professionals who help in day-to-day management
and smooth function of business operations.

Established clientele and relationship

The company over the years, has been able to establish its presence in the traditional segment
of the flexible packaging industry and caters to various small and medium base customers
across the country mainly in the domestic market in the sectors of Processed Foods, Tea &

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Coffee, Pharmaceuticals, Mouth Freshener, Agro Products, and Personal & Homecare
Industry etc.

Satisfactory capital structure

The company has satisfactory capital structure as evidenced by Tangible net worth of
Rs.769.79 crore and ATNW of Rs. 522.04 crore. The overall gearing ratio remain moderate at
0.62x and long-term debt to equity ratio of 0.52x as on March 31, 2022 as against 0.56x and
0.47x as on March 31, 2021 respectively.

Key Rating Weaknesses

Weak Profitability
The total operating income (TOI) of the company has shown growth of ~15% i.e Rs.2367.28
crore. However, the profitability was impact as evidenced by decline in EBITDA to Rs. 10.11
crore in FY22 from Rs. 143.66 crore in FY21 and reported loss during FY22 of Rs. (78.54)
crore. Due to adverse impact on mouth freshener business which comprises major portion of
company’s business, impact on logistic arrangements and increase in freight cost. The
company tried to mitigate the loss by entering into FMCG segment with their flexible packaging
products, however, the margins remain comparatively low.

Stressed debt protection metrics

The company’s coverage metrics have deteriorated due to adverse impact on profitability of
the company and stood below unity with Interest Service Coverage Ratio at 0.23x as on March
31, 2022. As discussed with management, the promoters will bring in additional fund in the
form of unsecured loans if required to make the repayments in the stressed period. The
company don’t have any irregularities in terms of repayments as on date.

Vulnerability of profitability to adverse fluctuation in raw material prices

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As portion of the raw materials for the module manufacturing are imported, the profitability of
the company remains exposed to fluctuations in raw material prices. However, the risk is
mitigated to some extent given the relatively short cycle from order to delivery. Although, the
profitability indicators remain exposed to volatility and linkage between price movement of raw
material used in production of flexible material.

Working capital intensive nature of operations with elongation in operating cycle

MEPL’s operations are working-capital intensive driven by a change in the credit terms with
traders through which the company supplies to the mouth freshener industry. Earlier, as per
the industry practice, traders made payments in cash. However, post demonetization and after
covid pandemic, traders has stretched payment, thereby increasing the receivables of the
Montage group. The average collection days remains high at 145 days and the collection days
are partially offset by high creditor period of 100 days in FY22. The operating cycle of the
company remained moderate at around 76 days in FY22. The average working capital
utilisation remained high at ~92% in the trailing 12 months ended Feb 2023. Going forward,
effective management of working capital and early realisation of receivables is a key rating
monitorable.

Analytical Approach: For arriving at the ratings, IVR has analysed MEPL’s credit profile by
considering the standalone financial statements of the company.

Applicable Criteria:

Rating Methodology for Manufacturing Companies

Financial Ratios & Interpretation (Non- Financial Sector)
Criteria for assigning rating outlook

Liquidity – Stretched
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The company’s liquidity stood stretched with negative gross cash accruals in FY22. However,
the company’s cashflows are supported by promoters fund. The average working capital
utilisation remained high at ~92% in the trailing 12 months ended Feb 2023. The company
has a current ratio of 1.36x as of March 31, 2022. The company had unencumbered cash and
bank balance of Rs.18.46 crore as on March 31, 2022.

About the Company

Montage Enterprises Private Limited (MEPL), incorporated in 2002 is involved in
manufacturing of flexible packaging materials such as polyester laminated rolls, laminated
pouches, and laminated paper rolls and Pet Chips catering mainly to the pan masala and
processed foods industry. It is headquartered in New Delhi and has its manufacturing units in
Noida (Uttar Pradesh), Malanpur (Madhya Pradesh), Haridwar (Uttarakhand), and Jammu.
MEPL is promoted by Mr. Arvind Gupta.

Financials (Standalone):
(Rs. Crore)
For the year ended* 31-03-2021 31-03-2022
Audited Audited
Total Operating Income 2059.99 2367.28
EBITDA 143.66 10.11
PAT 15.42 -78.54
Total Debt 447.48 478.92
Tangible Net worth 794.59 769.79
EBITDA Margin (%) 6.97 0.43
PAT Margin (%) 0.74 -3.30
Overall Gearing Ratio (x) 0.96 0.92
* Classification as per Infomerics’ standards

Status of non-cooperation with previous CRA: CRISIL has continued the rating of Montage
Enterprises Private Limited under “Issuer Not Cooperating” category on February 24, 2023,
due to non-availability of adequate information to carry review process.
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 Any other information: None

Rating History for last three years:

Sr. Name of Current Ratings (Year 2023- Rating History for the past 3 years
No. Instrument/ 24)
Facilities Type Amount Rating Date(s) & Date(s) & Date(s) &
outstanding Rating(s) Rating(s) Rating(s)
(Rs. Crore) assigned in assigned in assigned
2022-23 2021-22 in 2020-21
(April 01, (Feb 15, (Nov 17,
2022) 2022) 2020)
1. Cash Credit Long 80.00 IVR BB- IVR BB+/ IVR BB+/ IVR BBB-/
Term /Stable Stable INC* Stable
2. Term Loan/ Long 83.18 IVR BB- IVR BB+/ IVR BB+/ IVR BBB-/
GECL Term (reduced from /Stable Stable INC* Stable
137.88)
3. Letter of Credit Short 8.00 IVR A4 IVR A4+ IVR A4+/ IVR A3
Term INC*
4. Bank Short 92.00 IVR A4 IVR A4+ IVR A4+/ IVR A3
Guarantee Term INC*
*Issuer Not cooperating

Name and Contact Details of the Rating Analyst:

Name: Ms. Shilpa Yadav Name: Mr. Om Prakash Jain

Tel: (011) 45579024 Tel: (011) 45579024
Email: [email protected] Email: [email protected]

About Infomerics:
Infomerics was founded in the year 1986 by a team of highly experienced and knowledgeable
finance professionals. Subsequently, after obtaining Securities Exchange Board of India

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registration and RBI accreditation and the activities of the company are extended to External
Credit Assessment Institution (ECAI).
Adhering to best International Practices and maintaining high degree of ethics, the team of
knowledgeable analytical professionals deliver credible evaluation of rating.
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Infomerics has a pan India presence with Head Office in Delhi, branches in major cities and
representatives in several locations.

For more information visit www.infomerics.com.

Disclaimer: Infomerics ratings are based on information provided by the issuer on an ‘as is where is’ basis.
Infomerics credit ratings are an opinion on the credit risk of the issue / issuer and not a recommendation to buy,
hold or sell securities. Infomerics reserves the right to change or withdraw the credit ratings at any point in time.
Infomerics ratings are opinions on financial statements based on information provided by the management and
information obtained from sources believed by it to be accurate and reliable. The credit quality ratings are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any
security. We, however, do not guarantee the accuracy, adequacy or completeness of any information, which we
accepted and presumed to be free from misstatement, whether due to error or fraud. We are 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 us have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. In case of partnership/proprietary concerns/Association of Persons (AOPs), the rating
assigned by Infomerics is based on the capital deployed by the partners/proprietor/ AOPs and the financial strength
of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans
brought in by the partners/proprietor/ AOPs in addition to the financial performance and other relevant factors.

Annexure 1: Details of Facilities

Name of Facility Date of Coupon Maturity Size of Rating
Issuance Rate/ IRR Date Facility Assigned/
(Rs. Crore) Outlook
Long Term Fund Based - - - 80.00 IVR BB-/
Facilities – Cash Credit Stable
Long Term Fund Based - - - 83.18 IVR BB-/
Facilities – Term Loan/ Stable
GECL
Short Term Fund Based - - - 8.00 IVR A4
Facilities – Letter of Credit

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 Short Term Fund Based - - - 92.00 IVR A4
Facilities – Bank
Guarantee

Annexure 2: List of companies considered for consolidated analysis: None

Annexure 3: Facility wise lender details

https://www.infomerics.com/admin/prfiles/Len-Montage-Enterprises-jun23.pdf

Annexure 4: Detailed explanation of covenants of the rated instrument/facilities: Not

Applicable

Note on complexity levels of the rated instrument: Infomerics has classified instruments
rated by it on the basis of complexity and a note thereon is available at Complexity Level of
Rated Instruments/Facilities.