Rationale

The ratings reaffirmation factors in the established market position of Commercial Syn Bags Limited (CSBL) in the flexible intermediate bulk container (FIBC) bags segment as well as its diverse end-user industries, which provide cushion from industry-specific downturns to some extent. ICRA notes the improvement in the financial performance of CSBL in FY2025 and H1 FY2026 with its revenues growing at 20.6% YoY and 15.5% YoY, respectively, owing to a robust demand in the export markets coupled with an improvement in realisations led by increased focus on value-added products. The capacity utilisation of the geo-textiles plant has also improved to 74% in H1 FY2026 from 58% in FY2025 and 31% in FY2024. Consequently, the operating profit margin (OPM) improved to 12.7% in H1 FY2026 from 10.2% in FY2025 and 8.8% in FY2024. The ratings, however, remain constrained by its modest scale of operations with revenues of Rs. 347.8 crore in FY2025. Further, the company has large debt-funded capacity expansion plans over FY2026-28, which are expected to keep the leverage and coverage metrics under check over the near to medium term. The ratings also factor in CSBL’s working capital-intensive operations with high inventory holding requirements and vulnerability of its profitability to the fluctuations in polypropylene (PP) granule prices. Further, stiff competition in the fragmented packaging industry limits its pricing flexibility. The Stable outlook on the [ICRA]BBB rating reflects ICRA’s opinion that the company will continue to benefit from the healthy export demand as well as increasing focus on value-added products. The debt coverage metrics will remain moderate (commensurate with the rating category), given the planned debt-funded capacity expansion.