| Kribhco Agri Business Limited | ||||||
| Rated amount enhanced for Bank Debt | ||||||
| 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 AA-/Stable/CRISIL A1+’ ratings on the bank facilities of Kribhco Agri Business Limited (KABL; Formerly known as Kribhco Agri Business Private Limited).
The rating derives comfort from the strong operational, managerial and financial support extended by its parent Krishak Bharati Cooperative Limited (KRIBHCO) along with the parent’s strong procurement capabilities. These strengths are partially offset by modest business risk profile of KABL and its working capital intensive nature of operations.
KABL is engaged in the business of export of agricultural commodities. It commenced operations in May 2022 and plans to export around ten agricultural commodities, majority being rice and maize. Given the trading nature of the business, the operating margin are likely to be thin.
The standalone financial risk profile is weak, however, comfort is derived from parent’s support including, but not limited to, corporate guarantee on the bank facilities. CRISIL Rating’s also expect equity infusion and need-based support from the parent. |
Analytical Approach For analysis, CRISIL Ratings has notched up the standalone business and financial risk profile of KABL for the parental support extended by KRIBHCO. |
Key Rating Drivers & Detailed Description Strengths:
KABL plans to leverage KRIBHCO’s strong procurement capabilities, wide distribution network and deep connect with farmers to source agricultural commodities at competitive rates for exports at a remunerative price. It also plans to share and benefit from KRIBHCO’s warehousing facilities at key ports across the eastern as well as western coast along with the logistics arrangements with transportation companies for cost efficient storage and movement of commodities to the point of export.
Further, subsidiary also receives support in managing day-to-day operations as well as treasury and banking relations. It also shares common functions such as office space, administration, legal and accounting etc from that of parent. KRIBHCO’s chairman and managing director are also directors on board of KABL which signifies the parent’s control. Further, the current managing director of KABL was earlier associated with KRIBHCO as its marketing head. CRISIL Ratings believes the strong linkages between KABL and its parent will continue and the company will continue to receive need-based support.
Weakness:
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Liquidity: Strong KABL had cash and equivalent of Rs 28 lacs as on March 31, 2023, and the working capital limits utilization was at ~22%. KABL has no long-term debt obligation and does not plan any significant capital expenditure, being in the trading business. The enhanced bank lines should sufficiently cover the incremental working capital requirement. Liquidity is strengthened by the financial flexibility available as a subsidiary of KRIBHCO and articulation of need-based support from the parent. |
Outlook: Stable KABL would benefit from the strong linkages it holds with the parent KRIBHCO and the outlook reflects CRISIL Ratings’ view on the parent KRIBHCO. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company KABL was incorporated on February 2, 2022, as a 100% subsidiary of KRIBHCO to export agricultural commodities such as wheat, rice, maize, millets, barley, fruits to leverage the marketing and business expertise of the parent. |
About the Parent KRIBHCO was incorporated in 1980 by the Government of India. It manufactures fertilisers (including biofertilisers) and processes seeds. KRIBHCO completed the debottlenecking of its plant in Hazira, Gujarat, in 2012, and its urea manufacturing capacity increased 26% to 2.19 MTPA from 1.73 MTPA. Its first biofertiliser plant was commissioned in the late 1990s; it now has capacity to manufacture 550 TPA of biofertilisers. |
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 | ||||||||||||||||||||||||||||
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Criteria Details
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