India Ratings & Research (Ind-Ra) has affirmed Rupa & Company long-term issuer rating at 'A'. The outlook is stable.

The affirmation reflects Rupa's continued improvement in financial profile in FY13 (year end March). Revenue increased to Rs 8,290 million along with an improvement in EBITDA margins to 15.2% (12.8%, 10.6%). This led to gross financial leverage improving to 1.73x in FY13 and interest coverage increasing to 6.54x, although debt increased due to high working capital requirement and capex.

The improvement was driven by a favourable change in the product mix and better operating EBITDA margins across all products. Ind-Ra believes that Rupa will sustain the improvement backed by its strong branding across all product segments of the industry and its strong network of around 1,000 distributors.

The ratings are, however, constrained by working capital intensive nature of the business, as reflected by a long cash conversion cycle of around 200 days due to the high inventory holdings required to be maintained by the company. However, Rupa has a comfortable liquidity position as reflected in its working capital use of around 75% during the 12 months ended November 2013.

Shares of the company declined Rs 1.8, or 0.82%, to trade at Rs 217.90. The total volume of shares traded was 12 at the BSE (11.58 a.m., Thursday).