Rationale

 The rating upgrade of Dream Pet Private Limited (DPPL) reflects the company’s sustained improvement in revenue and earnings. This momentum is expected to sustain in the near-to-medium term as well, supported by majority offtake by a promoter-owned entity Davat Beverages Private Limited (DBPL; [ICRA] BBB+ (Stable)/A2+). The company has reported a strong revenue growth of about 46.2% in FY2025 with the commencement of revenue from bottle caps, coupled with increasing sales volumes for existing products such as preforms and shrink film rolls. ICRA also notes that DBPL continues to account for the bulk of DPPL’s primary packaging requirements. The rating upgrade also factors in the extensive industry experience of the promoters and the strategic location advantage of its manufacturing facility, which is situated in close proximity to DBPL Beverages’ plant, resulting in lower logistics costs. The rating, however, remains constrained by DPPL’s modest albeit improving scale of operations and high customer concentration risk, with around 99% of revenues derived from a single customer, where supply contracts are renegotiated annually. Nevertheless, the customer being a related entity of DBPL provides comfort in terms of business continuity and revenue visibility. The rating also factors in intense competition from established players in the packaging films segment, which limits pricing flexibility as supplies are largely made at prevailing market rates. Further, the proposed debt-funded capital expenditure (capex) in the near term is expected to weigh on the company’s capital structure and debt protection metrics, and the ability of the company to efficiently ramp up and monetise the additional capacity will remain a key monitorable. The Stable outlook reflects ICRA’s expectation that DPPL will continue to witness a steady scale up in operations, driven by healthy demand from the bottled beverage industry and sustained procurement from its key customer. Further, the outlook underlines ICRA’s anticipation that the company's incremental capex, if any, will be funded in a manner that enables it to durably maintain its debt protection metrics