Detailed Rationale CRISIL Ratings ratings on the bank facilities of Rausheena Udyog Limited (RUL) continues to reflect RUL's extensive experience of promoters, diversified business segments and healthy product diversity supporting the scale and sustainability and moderate financial risk profile. These strengths are partially offset by its working capital intensive operations, risks associated with tender nature of business and implementation and funding of social welfare schemes by the government agencies.
CRISIL Ratings had assigned its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings to the bank facilities of RUL on February 28, 2023. |
Analytical Approach Unsecured loans of Rs 9.39 crore from promoters and their relatives as on March 31, 2022 have been treated as neither debt nor equity as it bears minimal interest and is subordinate to external debt. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of promoters: The promoters have been in the nutritious food manufacturing industry since almost five decades. RUL is currently being managed by Mr. Saroj Agarwal and his son, Mr. Raunak Agarwal. Over the last few years, the company has expanded its footprints to all Northeast states along with some southern and northern states. Benefits from the extensive experience of promoters and stable relationship with customers will continue to support business.
Diversified business segments and healthy product diversity supporting the scale and sustainability: RUL is an established player in the market and in operations since 1998, the scale of operations remains comfortable. RUL operates mainly in three divisions namely processed food division, engineering division and trading division. Food division contributed to around 75% of the total revenue while both engineering and supply division contributed the remaining 25% of the total revenue. Further, RUL products basket is diversified, i.e., Ready To Eat Food, Weaning food, India Mix, Baby Mix, Murmura (Sweet & salty), Paushtik Aahar and Cereal Food in food division, steel casting products, CMS crossing tracks, couplers, knuckles and yoke which are supplied to Indian Railways (engineering division) and in supply division, it supplies school bags, fans, sweaters, footwear etc. to government institutions thus, mitigating it to risk of obsolescence in case of any new technology coming into the market. Accordingly, revenue of the company was around Rs 135 crore in fiscal 2022 and revenue is estimated to be around Rs 113 crore in 9 months of fiscal 2023. The scale of operations is expected to improve as operations in the UP food unit is likely to resume by April 2024.
Moderate financial risk profile: RUL’s capital structure has been at moderate level due to limited reliance on external funds yielding gearing of and total outside liabilities to adj tangible networth (TOL/ANW) of 0.4 times and 0.8 times respectively for fiscal 2022. RUL’s debt protection measures have also been at comfortable level due to moderately healthy profitability. The interest coverage and net cash accrual to adj debt (NCAAD) ratio are at 2.5 times and 0.4 times for fiscal 2022. RUL debt protection measures are expected to strengthen on back of improvement in scale of operations over medium term.
Weaknesses: Working capital intensive operations: Gross current assets were at 133-320 days over the three fiscals ended March 31, 2022. Its intensive working capital management is reflected in its gross current assets (GCA) of 294 days as on March 31, 2022. Its's large working capital requirements arise from its high debtor on account of delay in receipt of payments from Government agencies, which is estimate to have been realized in fiscal 2023. It maintains inventory levels as per orders received. Improvement in working capital cycle over the medium term remains key monitorable.
Implementation and funding of social welfare schemes by the government agencies: The company receives the entire order book from state government and Department of Child and Women Social Welfare, which depends on budgetary allocation by the union government in every union budget. Hence, any slowdown or lower-than-expected allocation to any division will affect players such as RUL. Also, in the engineering division, revenue visibility depends on the order flow from the Indian Railway. Although the company has expanded its reach by diversifying its geographical location and has shown track record in executing large contract with government, implementation and funding of social welfare scheme by the government agencies will play major roles. |
Liquidity: Adequate 12-month average bank limit utilisation is moderate around 43% through November 2022. Net cash accruals in range of Rs 12-13 crore is expected to be sufficient against repayment obligation of Rs 6-6.5 crore per fiscal over the medium term. Promoters have infused need based funding to support working capital requirement. Current ratio is healthy at 2.1 times on March31, 2022. Moderately healthy cash and bank balance of around Rs. 20 crore as on March 31, 2022 and around Rs 14 crore as on December 31, 2022 additionally cushions liquidity. Low gearing and moderate net worth support financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believe RUL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company RUL was incorporated in March 1998. The company is present in three segments ' manufacturing of ready to eat food, engineering division which manufactures steel casting products, CMS crossing tracks, couplers, knuckles and yoke & supplied to Indian Railways and also supplies stationery items, bag, fans, footwear, etc. to government institutions. The company’s manufacturing facilities (Food division units) are located at Guwahati (Assam) and Jaunpur (Uttar Pradesh) whereas its railway engineering unit is located at Kamrup, Assam. RUL is promoted by Mr. Saroj Kumar Agarwal, Mrs Mamta Agarwal, Mr. Raunak Agarwal and Mrs. Prachi Agarwal. |
Key Financial Indicators
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Status of non cooperation with previous CRA: RUL has not cooperated with Credit Analysis & Research Ltd. (CARE Ratings) which has classified it as non-cooperative vide release dated Mar 14, 2018. The reason provided by CARE Ratings is non-furnishing of information for monitoring of ratings. RUL has not cooperated with Brickwork Ratings India Private Limited which has classified it as non-cooperative vide release dated Dec 28, 2022. The reason provided by Brickwork Ratings India Private Limited is non-furnishing of information for monitoring of ratings. |
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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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 21-Mar-2023 in line with the lender-wise facility details as on 28-Feb-2023 received from the rated entity
Criteria Details
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