India Ratings and Research (Ind-Ra) has assigned Flexituff International (FIL) a Long-Term Issuer Rating of 'IND A-'. The outlook is stable.

The ratings reflect FIL's leadership position in the Indian flexible intermediate bulk container (FIBC) industry with a share of 15%-20% in the country’s total FIBC exports, Ind-Ra said. It also has the largest integrated FIBC capacity in the country with total revenue of INR10.5bn in FY15. The ratings also factor in the company's likely deleveraging from FY16 (FY15: net debt/EBITDA 4.8x) due to the completion of its capex cycle.

The completion of FIL's capex programme for the expansion of its geo-textile capacity to 16,300mt (from 7,600mt) in March 2015 will lead to revenue and EBITDA growth. Margins are also likely to improve (FY15: 11.5%) since FIL was earlier generating a substantial portion of its geo-textile revenue through trading, Ind-Ra opined.

Besides, the absence of any debt-led capex plans in the near term will gradually reduce FIL's debt level which peaked in FY15 (Rs 5.9 billion). This was because of the continuous capex undertaken in the past four years to increase its capacities and product offerings.  

The ratings also benefit from FIL's integrated operations, established operating track record of close to five decades and strong clientele across the globe. The ratings also factor in FIL's diversified product portfolio with a presence in the industrial bulk packaging, retail packaging and niche geo-textile segments. The FIBC segment will continue to constitute close to 50% of FIL's total revenue (FY15: 56%) and the higher-margin geo-textile segment which constituted around 20% of total revenue in FY15 is likely to grow substantially in the next couple of years.

The ratings are, however, constrained by FIL's exposure to volatility in raw material prices as well as forex fluctuations, the rating agency said.