| KN Agri Resources Limited | ||||
| Rating outlook revised to 'Positive'; Rating 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 revised its outlook on long term brank facilities of KN Agri Resources Limited (KNARL; erstwhile Itarsi Oils and Flours Private Limited) to ‘Positive’ from ‘Stable’ while reaffirming the rating at 'CRISIL BBB+'.
Revision in outlook reflects expected improvement in business risk profile coupled with improved liquidity. Improvement in business risk profile is expected to be driven by healthy revenue growth, better operating margins, and prudent working capital management. Company has reported revenue of around Rs 1290 crore for 9 month of Fiscal 2022 with an improved operating margin upwards of 4%. Consequently accruals are expected to see healthy jump in fiscal 2022. Sustenance of improved operating performance to remain rating sensitivity factor. Company’s operating margin has remained steady in range of 3-3.3% for past 3 years which emanates from prudent inventory policies. Improvement in credit profile is also be supported by the adequate liquidity, with low bank limit utilization on back of efficient inventory management and healthy accruals against minimal repayment obligations and comfortable gearing levels. Further, company has raised equity from initial public offering which is expected to improved liquidity.
The rating continues to reflect the promoters' extensive industry experience in the agro products industry, above-average financial risk profile and prudent working capital management. These strengths are partially offset by the susceptibility of operations to adverse movement in raw material prices. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of promoters: Promoters have experience of over 3 decades in the edible oil industry and have developed understanding of the industry dynamics. It has helped KNARL establish itself in the domestic market while developing healthy relation with clientele and the suppliers as seen from healthy increase in revenue over past 3 year period.
Above-average financial profile: Networth and total outside liabilities to adjusted networth (TOLANW) ratio were above average at Rs 158 crore and 0.22 times as on March 31, 2021. TOLANW is estimated to remain sub 0.1 time as on March 31, 2022 with infusion of equity and limited reliance on debt. Debt protection metrics was comfortable as indicated by interest coverage ratio and net cash accrual to adjusted debt of 9.34 times and 1.33 times for fiscal 2021. Interest coverage ratio is expected to improve further in fiscal 2022.
Prudent working capital management: Company has prudently managed its working capital indicated by gross current assets (GCA) of around 44 days as on March 31, 2021. Inventory management has been supported by defined guidelines for hedging of commodities and stocking policies. Peak GCA over last 3 years has been 53 days. This has resulted in moderate bank limit utilization. GCA is expected to remain at similar levels over the medium term.
Weakness: Susceptibility of operations to adverse movements in raw material prices: The operating income and profitability is vulnerable to adverse movements in the prices of raw material, soya seeds. Company's revenue has varied between Rs 850-1290 crore over last 3 years ended fiscal 2021. Soya seed prices remained volatile in the past, and are expected to remain so over the medium term. However, company has continued to perform well in spite of challenging industry environment. Sustenance of operating performance amidst exposure to adverse movements to remain key rating sensitivity factor.
Exposure to adverse change in government regulations: There is significant government intervention. The industry is vulnerable to government policies in the form of duties imposed on import of refined and crude edible oil, volatility in edible oil prices. Further, Regulatory risks like the ban on soya seed imports, might also adversely affect the operating profitability of soya players, in case of high soya seed prices in the domestic market vis-a-vis international market. |
Liquidity: Adequate KNARL has adequate liquidity driven by expected cash accruals of over Rs. 40 crore per annum in fiscal 2022 and 2023 and cash and cash equivalents of Rs. 9.89 crore as on March 31, 2021. The company's fund based limits have remained utilized to the tune of 19.9% on an average over the 6 months ended February 2022. The company has minimal long term repayment obligation and capex is expected to be around Rs. 5 crore each over fiscal 2023 and 2024 to be funded from the internal accruals. Current ratio was healthy at 4.83 times as on March 31, 2022. CRISIL Ratings believes the company has sufficient accruals and cash and cash equivalents to meet its incremental working capital needs and capex. |
Outlook: Positive CRISIL Ratings believes KNARL’s operating performance will continue to improve on back of the extensive experience of its promoters and established market position along with prudent inventory policies. |
Rating Sensitivity factors Upward factor:
Downward factor:
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About the Company KNARL was incorporated in 1987 by three brothers Mr. Vijay Shrishrimal, Dhirendra Shrishrimal and Sanjay Shrishrimal. Company is engaged in the solvent extraction and refining of edible oil from soybean and production of soya de-oiled cake (DOC). Company is also engaged in flour milling and trading of commodities like gram, wheat, soya oil and soybeans. Company got listed on March 28, 2022 on SME platform of National Stock Exchange. |
Key Financial Indicators
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Any other information: Not applicable |
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 |
| Cash Credit | 30 | Corporation Bank | CRISIL BBB+/Positive |
| Cash Credit | 20 | HDFC Bank Limited | CRISIL BBB+/Positive |
| Cash Credit | 15 | IDBI Bank Limited | CRISIL BBB+/Positive |
| Cash Credit | 30 | State Bank of India | CRISIL BBB+/Positive |
| Cash Credit | 30 | YES Bank Limited | CRISIL BBB+/Positive |
| Pledge Loan | 26 | State Bank of India | CRISIL BBB+/Positive |
This Annexure has been updated on 13-Mar-23 in line with the lender-wise facility details as on 21-Feb-23 received from the rated entity.
Criteria Details
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