ICRA has upgraded the long term rating assigned to the Rs. 19.50 crore*
cash credit facility of Rajoo Engineers Ltd (REL)† from [ICRA]BBB- (pronounced ICRA triple B minus) to [ICRA]BBB+ (pronounced ICRA triple B plus). ICRA has also upgraded short term rating assigned to the Rs. 16.50 crore short term fund based facility (sublimit of cash credit facility) of REL from [ICRA]A3 (pronounced ICRA A
three) to [ICRA]A2 (pronounced ICRA A two). The outlook on the long term rating is ‘Stable’.

The upgrade in ratings reflect the continued improvement in the performance of the company as witnessed from steady growth in scale of operations in last two fiscals supported by healthy order book, improved profitability and return indicators, moderation of capital structure and healthy coverage indicators. ICRA notes that the improvement in the financial risk profile had been largely on account of discontinuance of relatively low value additive segments (non woven fabric manufacturing machine and polymer trading). The ratings continue to favorably take into account the longstanding experience of the promoters in the plastic extrusion machinery, and the favorable demand outlook for flexible packaging products in the domestic market. The ratings are also supported by the company’s wide ranging product portfolio and its competitive advantage arising from technological tie-ups with the international entities providing access to the latest technology.

The ratings are, however, constrained by the exposure of company’s profitability to any adverse fluctuations in foreign exchange rates and volatility in raw material prices; however natural hedge provided through import of raw material mitigates the currency fluctuation risk to a certain extent. The ratings also consider the increasing competitive pressures both from organized and unorganized players in the domestic market and import threat from Germany, Italy and China as well as the regulatory risks attached with the ban on plastic packaging.

Company Profile

Incorporated in 1986, Rajoo Engineers Limited (REL), promoted by Mr. C.N. Doshi and Mr. R.N. Doshi, is engaged in manufacturing of plastic extrusion machinery at its plant located at Rajkot, Gujarat. The machinery finds application in the flexible packaging industry. The company designs and manufactures the machines and offers customized solutions as per customers’ requirement. Its current product portfolio includes a wide range of extrusion machinery consisting of mono and multilayer blown film lines, sheet extrusion lines, thermoforming machines, non-woven fabric machines, Polyvinyl
Chloride (PVC) pipeline machines, drip irrigation machines and wooden plastic composite (WPC) machines which can process a wide range of polymers.

Recent Results

For the year ended 31st March 2015, REL has reported an operating income of Rs. 116.67 crore and profit after tax (PAT) of Rs. 5.25 crore as against an operating income of Rs. 101.62 crore and PAT of Rs. 3.46 crore for the year ended 31st March 2014. Further REL has reported operating income of Rs. 19.81 crore and PAT of Rs. 0.90 crore during the period from April 15 to June 15 (unaudited provisional financials).

http://icra.in/Files/Reports/Rationale/Rajoo%20Engineers-R-05102015.pdf