| Lubi Gel Limited | ||||||
| 'CRISIL BBB- / Stable / CRISIL A3 ' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale CRISIL Ratings has assigned its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings to the bank facilities of Lubi Gel Ltd (LGL).
The ratings reflect the extensive experience of the promoters in the guar gum industry, the geographical diversification in revenue and the healthy financial risk profile of the company. These strengths are partially offset by susceptibility to climatic conditions and volatility in raw material prices and working capital-intensive operations. |
Key rating drivers and detailed description Strengths: Extensive industry experience of the promoters: Experience of over 25 years in the guar gum business has given the promoters an understanding of the market dynamics and helped establish relationships with suppliers and customers.
Geographical diversification in revenue: LGL has a diverse clientele, both in India and overseas. The top 10 customers accounted for about 90% of revenue in fiscal 2021, while 90 of revenue is from exports. Diversity in geographic reach and clientele should continue to support the business risk profile.
Healthy financial risk profile: Capital structure has been healthy with low reliance on external funds yielding gearing of 0.44 time and low total outside liabilities to adjusted networth ratio of 0.52 time as on March 31, 2021. Debt protection metrics have also been healthy due to low leverage and healthy profitability. Interest coverage and net cash accrual to total debt ratio were at 17.2 times and 1.29 times, respectively, for fiscal 2021, and are expected at similar levels over the medium term.
Weaknesses: Susceptibility to climatic conditions and volatility in raw material prices: The crop yield of agricultural commodities depends on climatic conditions. LGL faces the risk of limited availability of its key raw material during unfavorable climatic conditions. The risks of pest infestation and crop infection lead to higher unpredictability in production and pricing of agricultural commodities and derived products.
Working capital-intensive operations: Gross current assets were at 205-317 days over the three years through fiscal 2021 and at 205 days as on March 31, 2021, against over 170 days for some peers. The large working capital requirement arises from sizeable receivables and inventory. The company has to extend long credit period to customers and hold large work-in-process and finished goods inventory. |
Bank limit utilisation was high at 92% on average for the 12 months through September 2021. Cash accrual is expected over Rs 15 crore against term debt obligation of Rs 5-6 crore over the medium term. Current ratio was healthy at 1.75 times on March 31, 2021. |
Outlook: Stable CRISIL Ratings believe LGL will continue to benefit from the extensive experience of its promoters and established relationships with clients. |
Rating sensitivity factors Upward factor
Downward factors
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About the company LGL was established in 2015 as a limited liability partnership and was reconstituted as a limited company in March 2021. It processes and exports cassia seeds and sells cassia gum powder. LGL manufactures and exports native, modified and chemically derived cassia products for the food, textile printing, personal care and paper industries.
LGL has a FSSC 22000 certified production plant in Gujarat. It recently expanded manufacturing facility to 7 tonne per day from 3 tonne, and is increasing capacity to 15 tonne per day.
LGL is promoted by Rajasthan-based Dinesh Dhoot and his family, Om Prakash Soni, and Purshotam Kumar Hissaria and his family. |
Key financial indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
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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This Annexure has been updated on 03-Dec-2021 in line with the lender-wise facility details as on 02-Dec-2021 received from the rated entity.
Criteria Details
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