| Origo Commodities India Private Limited | ||||
| 'CCR BBB-/Stable' assigned to Corporate Credit Rating; 'CRISIL BBB-/Stable' assigned to Non Convertible Debentures | ||||
| 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 assigned its ‘CCR BBB-/Stable’ rating to the corporate credit rating and ‘CRISIL BBB-/Stable’ rating to non-convertible debentures of Origo Commodities India Private Limited (OCIPL).
The ratings reflect the established market position of OCIPL backed by its strong clientele, diverse portfolio of services and improved scale of operations. The rating also factors in the company’s comfortable leverage position backed by sizeable networth. These strengths are partially offset by working capital intensive operations, average debt protection metrics and moderate cushion between net cash accrual and repayment obligations maturing over the medium term. |
Key Rating Drivers & Detailed Description Strengths:
OCIPL provides integrated post-harvest management and supply chain solutions, including procurement, professional warehousing, quality evaluation, collateral management, and exchange services. Different business segments include warehousing services, trade facilitation and financing services, across both private and government sector customers. Diversified customer base and varied business segments insulate the company from downturn in a particular segment and high dependence on a single customer, aside assuring regular order flow. Resultantly, revenue is expected to report over 140% growth in fiscal 2022 (on-year basis) to over Rs 500 crore (Rs 214 crore the previous year). Also, outstanding orders of Rs 750-800 crore (from trade facilitations segment) as of April 2022, along with estimated revenue booking of Rs 125 crore in the current month provides healthy revenue visibility for fiscal 2023. The rating also factors in the proven track record of the management in launching new offerings and stabilising it in a timely manner, hence leading to increased revenue streams for the company. The management has also launched its new tech service, ‘e-auction platform’, which will further diversify the revenue stream and improve the overall market position of the company.
Despite increased dependence on external debt over the past few years, capital structure has remained comfortable backed by steady accretion to reserve leading to sizeable networth; total outside liabilities to tangible networth (TOL/TNW) ratio is estimated at around 1.5 times as on March 31, 2022. The expected infusion of equity to aid business growth over the medium term will further ensure maintenance of TOL/TNW ratio comfortable at 1.5-2.0 times. However, timely receipt of stated equity will remain a key monitorable. Expected accretion to reserve and absence of debt-funded capital expenditure (capex) will continue to aid the leverage and overall financial risk profile of OCIPL over the medium term.
Weaknesses:
Gross current assets (GCAs) have averaged a sizeable 240 days over the past four fiscals (270-280 days estimated as on March 31, 2022) driven by stretched debtors and high inventory. Debtors are stretched due to delay in payments from government authorities in the warehousing segment alongside need-based credit of 30-45 days, offered to customers in procurement finance segment. Inventory holding remains high due to sizeable procurement in peak season under trade facilitation segment. Robust credit evaluation of customers, real time tracking and various covenants in the agreement with counter parties safeguard the company from debtor and inventory holding risks. Though inventory and debtor risk of OCIPL remains hedged, the increased reliance on working capital debt has resulted in modest return on capital employed (RoCE) of 7.0-7.5% over the three fiscals through 2021. Despite some improvement, RoCE is estimated at a modest 9% in fiscal 2022. Operations are expected to remain working capital intensive over the medium term. Any improvement in working capital cycle on a sustainable basis along with higher RoCE will remain a monitorable.
Sizeable repayments arising from maturing working capital debt shall keep the cushion between net cash accrual and repayments moderate at 1.2-1.4 times over the medium term. Expected increase in debt, to aid business growth, would further hike the repayment obligation over the medium term and hence prudent management of liquidity while ensuring sustained increase in net cash accrual to repayment obligation (NCA/RO) ratio will remain a monitorable. The rating continues to factor in sizeable cash/bank balance maintained by the company, averaging Rs 18-20 crore per month, during the two fiscals through 2022.
Increase in debt and hence the interest cost has resulted in below-average debt protection indicators with consistent decline in interest coverage ratio to around 1.7-1.8 times estimated for fiscal 2022, from around 3.9 times in fiscal 2019. CRISIL Ratings believes that, since business growth of OCIPL would be driven by trade facilitation segment, wherein profitability is comparatively low, improvement in interest coverage will remain constrained. Though management intends to support business growth through private equity infusion, thereby leading to moderate reliance on external debt, its timely receipt leading to an improved interest coverage will remain a key rating sensitivity factor. |
Liquidity: Adequate Bank lines majorly comprise of channel financing and its utilisation remains moderate at around 54% for the 12 months ended March 2022. Expected net cash accrual of Rs 25-30 crore per annum over the medium term should cover yearly working capital debt obligation of over Rs 22 crore. Since, repayment in fy23 towards maturing non-convertible debentures (NCD’s), which were raised to aid the business requirement of subsidiary (Origo Finance Private Limited), would be serviced through the cash flows of subsidiary itself, excess cash accruals (over repayment) would aid the incremental working capital requirements of OCIPL. Additionally, liquidity will remain supported by sizeable cash/bank balance, outstanding at around Rs 19.9 crore as on March 31, 2022, alongside unencumbered fixed deposits of Rs 2-3 crore. Absence of debt-funded capex and cushion in leverage position provides headroom to raise additional debt to support working capital requirement, if warranted. |
Outlook: Stable CRISIL Ratings believes OCIPL will continue to benefit from the extensive experience of its promoters, and established customer relationships. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company OCIPL, incorporated in 2011 by Mr Mayank Dhanuka and Mr Sunoor Kaul, provides post-harvest solutions. Based in Gurugram, the company provides procurement, warehousing, and collateral management services to public and private entities. |
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)
*Yet to be issued |
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* - Issuer did not cooperate; based on best-available information
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Criteria Details
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