Rating Rationale
September 24, 2024 | Mumbai
Gautam Exim Limited
Rating Reaffirmed and Withdrawn
 
Rating Action
Total Bank Loan Facilities RatedRs.13.5 Crore
Short Term RatingCRISIL A4+ (Rating Reaffirmed and Withdrawn)
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Ratings has reaffirmed its rating on the short term bank facilities of Gautam Exim Limited (GEL) and subsequently withdrawn the rating at the company's request and on receipt of a no-objection certificate from the bankers. The action is in line with the policy of CRISIL Ratings for withdrawal of ratings on bank facilities.

 

Rating has been reaffirmed because the business risk profile slightly deteriorated with revenue of Rs. 167.77 crores in FY24 against Rs. 279.54 crores in FY23. The operating margins stood at 0.20% in FY24. The company has paid up all the bank dues and currently does not have any bank facility exposure, which has improved the financial risk profile of the company. The gearing and networth of the company are 0.53 times and 18.63 crores respectively at the end of 31st March 2024. The company has repaid all the bank dues and currently does not have any bank facility exposure.

 

The rating continues to reflect GEL's average financial profile and moderate working capital cycle. These strengths are partially offset by Decline in scale of operations and low operating margin business.

Analytical Approach

Unsecured loans from promoters (Rs 7.31 crore as on March 31, 2024), have been treated 75% equity and 25% debt as these are interest free and expected to be retained by the company.

Key Rating Drivers & Detailed Description

Strengths:

  • Average financial profile: GEL had an average net worth of Rs 18.63 crore as on March 31, 2024, the company is well managing its debt and thus TOL TNW is at 0.31 times as on 31st march 2024. Its debt protection measures were constrained with interest coverage of 0.41 times and net cash accruals to total debt ratio of 0.02 times for fiscal 2024. GEL’s financial profile is expected to improve driven by repayment of all the bank dues. Currently the company does not have any bank facility which will improve the financial risk profile of the company over the medium term.

 

  • Moderate working capital cycle: The company has a moderate working capital cycle reflected in gross current assets (GCA) of 52 days as on March 31, 2024. With a company not carrying any inventory, GCA primarily comprises debtors. GCA levels are estimated to have moderated to around 2 months currently with the improved pace of revenue booking in current fiscal. The GCA days are expected to increase with increase in cash balance with the company and efficient debtor collection period.

 

Weaknesses:

  • Decline in scale of operations: The scale of operations has been declining for the past 3 fiscals from Rs. 379.48 crores in FY22 to Rs. 167.77 crores in FY24. The decline in the scale of operations is due to the high competition and decline in demand for the product. There was no export of the products in fiscal 2024, all the business was carried out in domestic market only.

 

  • Low operating margin business: Given the trading nature of business, GEL enjoys modest profitability with an operating margin of 0.2-0.9% and net margin of 0.09-0.26%. GEL’s return on capital employed (RoCE) is modest around 3.04-8.17%. The highly competitive, fragmented industry with low value addition translates in modest return ratio for the company. GEL’s business profile is also marked by high customer concentration and delayed debtor realization from a few customers.

Liquidity: Adequate

Bank limit utilization is low at around 58.64 percent for the past twelve months ended March 24. Cash accruals are expected to be over Rs 0.60 crore, which is sufficient against nil debt. In addition, it will act as a cushion to the liquidity of the company.

 

Current ratios are healthy at 3.06 times on March31, 2024. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. High or moderate cash and bank balance of around Rs.1.32 crore as on March 31, 2024.

Rating sensitivity factors

Upward factors

  • Sharp improvement in the profitability and scale leading to sustainable annual accruals of Rs 3 crore
  • Improvement in the working capital cycle with robust financial risk profile.

 

Downward factors

  • Consistent deterioration in the profitability and scale of operations
  • Deterioration in the working capital cycle with more than 70 days

About the Company

GEL was incorporated in 2005 and later got listed on BSE SME platform. It is engaged in trading (high seas basis) of wastepaper and distributor of finished paper. The company is based in Vapi- Gujarat and promoted by Mr. Balasubramanian Raman.

Key Financial Indicators

As on / for the period ended March 31

 

2024

2023

Operating income

Rs crore

167.77

279.54

Reported profit after tax

Rs crore

0.15

0.37

PAT margins

%

0.09

0.13

Adjusted Debt/Adjusted Net worth

Times

0.53

1.24

Interest coverage

Times

0.41

0.04

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Bill Purchase NA NA NA 0.16 NA CRISIL A4+ (Rating Reaffirmed and Withdrawn)
NA Letter of Credit^ NA NA NA 9.37 NA CRISIL A4+ (Rating Reaffirmed and Withdrawn)
NA Proposed Non Fund based limits NA NA NA 3.97 NA CRISIL A4+ (Rating Reaffirmed and Withdrawn)

^ - Interchangeable with buyers’ credit 

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST 0.16 Withdrawn   -- 28-07-23 CRISIL A4+ 15-03-22 CRISIL A4+   -- --
      --   -- 19-04-23 CRISIL A4+ 14-03-22 CRISIL BB-/Stable   -- --
Non-Fund Based Facilities ST 13.34 Withdrawn   -- 28-07-23 CRISIL A4+ 15-03-22 CRISIL A4+   -- --
      --   -- 19-04-23 CRISIL A4+ 14-03-22 CRISIL A4+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bill Purchase 0.16 Kotak Mahindra Bank Limited CRISIL A4+ (Rating
Reaffirmed and Withdrawn)
Letter of Credit& 6.85 DBS Bank Limited CRISIL A4+ (Rating Reaffirmed and Withdrawn)
Letter of Credit& 2.52 Kotak Mahindra Bank Limited CRISIL A4+ (Rating Reaffirmed and Withdrawn)
Proposed Non Fund based limits 3.97 Not Applicable CRISIL A4+ (Rating Reaffirmed and Withdrawn)
& - Interchangeable with buyers credit
Criteria Details
Links to related criteria
Criteria for rating trading companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
CRISILs Criteria for rating short term debt

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