| Diana Tea Co Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL BBB-/Stable/CRISIL A3' ratings on the bank facilities of Diana Tea Co Limited (DTCL).
The ratings continue to reflect the extensive experience of the promoters in the tea industry and the established market position and healthy capital structure of the company. These strengths are partially offset by exposure to risks arising from fluctuations in tea prices, seasonality in production and changing weather conditions. |
Key Rating Drivers & Detailed Description Strengths: Healthy capital structure: Networth improved to Rs 51.10 crore as on March 31, 2021, from Rs 44.85 crore as on March 31, 2020. Gearing and total outside liabilities to tangible networth ratio were also low at 0.44 time and 0.66 time, respectively, as on March 31, 2021, as against 0.52 time and 0.77 time, respectively, as on March 31, 2020. The outstanding debt stood at Rs 22.67 crore, (vis-à-vis Rs 23.11 crore), over the same period, while bank limit utilisation was also negligible, averaging 15% over the 12 months through December 31, 2021.
Established market position and extensive experience of the promoters: Plantations owned by DTCL have been under cultivation since the early 1900’s. Tea produced at its estates is well known and commands a premium. The company is present in the bulk as well as branded segments, and its brand, Diana Tea, has an established market position in Madhya Pradesh, Uttar Pradesh, Punjab, Haryana, Rajasthan, and Maharashtra. The tea is bought through auctions by reputed tea marketing companies. Healthy reputation of tea estates and high quality of tea enable the company to realise better prices at auctions. The promoters, members of the Singhania family, also have extensive experience in the tea business.
Weaknesses: Susceptibility of profitability to fluctuations in tea prices: A significant portion of sales is through auctions at Kolkata and Siliguri, both in West Bengal. Auction prices are determined at the centres, based on demand-supply dynamics. The domestic scenario directly impacts prices, while the global situation could affect market sentiment. Though DTCL has some pricing discretion for tea sold through the private channel, these rates are also influenced by auction prices. Moreover, fragmentation in the tea industry limits pricing variation.
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Liquidity: Adequate Bank limit utilisation was low averaging around 15% for the 12 months ended December 31, 2021. Expected cash accrual of over Rs 4 crore should suffice to cover the term debt obligation of Rs 2 crore over the medium term. Current ratio was also moderate at 1.32 times on March 31, 2021. The promoters are likely to extend support via equity and unsecured loans to cover the working capital expenses and debt obligation of required. Moderate cash and bank balance of around Rs 4 crore was maintained as on March 31, 2021. Low gearing and moderate networth enhance financial flexibility to raise additional debt in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes DTCL will continue to benefit from the extensive experience of its promoters in the tea industry. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in 1911 and listed on the Bombay Stock Exchange, DTCL is an integrated tea player. The company was set up by Mr Nawab Ghulam Jabbar of Jalpaiguri. West Bengal, and was acquired by Mr Radheshyam Singhania in 1976. It is now managed by the Singhania family. It has tea plantations and manufactures crush-tear-curl (CTC) tea. |
Key Financial Indicators
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Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 1.71 | Punjab National Bank | CRISIL A3 |
| Tea Hypothecation | 29.3 | Punjab National Bank | CRISIL BBB-/Stable |
| Term Loan | 11.4 | Punjab National Bank | CRISIL BBB-/Stable |
| Working Capital Term Loan | 3.84 | Punjab National Bank | CRISIL BBB-/Stable |
This Annexure has been updated on 08-Mar-2023 in line with the lender-wise facility details as on 01-Mar-2023 received from the rated entity.
Criteria Details
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