Rationale

 The rating assigned to Greenply Samet Private Limited (GSPL) factors in the benefits derived from the strong promoter profile with extensive experience in the wood panel industry and furniture accessories market. GSPL is a 50:50 joint venture (JV) between Greenply Industries Limited (GIL) and Samet A.S and its products will be marketed under the brand Greenply Samet. GIL has a dominant position in the plywood industry, along with a wide distribution network of more than 2,300 dealers across India and enjoys strong brand strength for its products. Samet A.S is one of the leading brands of Turkey in the furniture accessories market. GSPL is of high strategic importance to GIL. ICRA expects GIL to extend financial support, if need arises, given the common brand name and its reputation sensitivity to default. GSPL is undertaking a greenfield capex in Vadodara, Gujarat for manufacturing different variants of hinges, drawer slides, full extension slides, single extensions slides, drawer box system and lift-up systems for a total cost of Rs. 225 crore to be completed in three phases, to be funded in debt to equity ratio of 73:27. The debt is tied up with complete infusion of equity for Phase 1 resulting in low funding risk. The phase 1 commenced part operations in March 2024 and is expected to start full-fledged production in Q2 FY2025. As on May 2024, ~87% of the cost has been incurred. The rating is, however, constrained by GSPL’s exposure to post-implementation risk related to ramp-up and stabilisation of Phase 1 capex (likely to contribute to 70-80% of the overall revenue in the near term) and moderate project implementation risks for Phases 2 and 3. While the company has funding tie-up for Phase 1 and is expected to start full-fledged production for the entire Phase 1 capacity in Q2 FY2025, it is exposed to moderate execution and funding risks, for the remaining phases. The total capex cost is around Rs. 75 crore for Phases 2 and 3, which is to be funded in debt to equity ratio of 1.1 times. With steel being a major raw material, GSPL’s operating margins are vulnerable to raw material prices fluctuations. GSPL’s ability to pass on the increase in prices to end customers remains a key monitorable. The rating is also constrained by the intense competition in the furniture accessories industry due to presence of organised and reputed brands such as Hettich, Hafele and Godrej as well as unorganised players resulting in pricing pressures. The Stable outlook on GSPL’s rating reflects ICRA’s opinion that the company will benefit from the brand strength of GIL and adequately ramp-up the operations post commercialisation of capex resulting in adequate earnings and debt protection metrics.