Samunnati Financial Intermediation & Services Private Limited
Rating Action
*Transferred from Samunnati Agro Solutions Private Limited
&Transferred to Samunnati Finance Pvt Ltd (newly formed NBFC of Samunnati Group); this transfer is part of revision in organisation structure
&Transferred to Samunnati Finance Pvt Ltd (newly formed NBFC of Samunnati Group); this transfer is part of revision in organisation structure *Transferred from Samunnati Agro Solutions Private Limited 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 ‘Crisil BBB/Stable’ rating on the bank loan facilities of Samunnati Financial Intermediation and Services Private Limited (SFISPL; a part of the Samunnati group). The partially reduced rated quantum reflects the transfer of facilities from Samunnati Agro Solutions Private Limited (Samunnati Agro) to SFISPL given the reverse merger of Samunnati Agro into SFISPL.
Crisil Ratings has also assigned its ‘Crisil BBB/Stable’ rating on the non-convertible debentures (NCD) of Rs. 25 crore of SFISPL.
Additionally, Crisil Ratings has also withdrawn its ‘Crisil BBB/Stable/Crisil A2’ rating on the NCDs, short term NCDs, bank loan facilities (rated quantum partially reduced) and commercial paper (rated quantum partially reduced) of SFISPL. This is because these instruments have now been transferred to Samunnati Finance Pvt Ltd (newly formed NBFC of Samunnati Group).
Earlier through its rating rationale dated January 2, 2025, Crisil Ratings had noted the announcement made by SFISPL on December 20, 2024, with regards to a flip in its organization structure. As per the scheme of amalgamation filed with National Company Law Tribunal, the group has now revised its structure wherein the non-banking financial companies (NBFC) business which was housed under SFISPL is transferred to a new wholly owned subsidiary -- SFPL. Further, the group has surrendered NBFC license under SFISPL and have received fresh NBFC license from the Reserve Bank of India for SFPL.
It was also noted that revised structure came into effect from December 20, 2024, and hence, the loan book and major part of debt of NBFC operations was transferred to the new subsidiary SFPL from SFISPL.
As far as trading operations of the group are concerned, it continues to remain under Samunnati Agro Solutions Pvt Ltd (SASPL); however, this company has been now been merged (reverse-merged) with SFISPL and Samunnati Agro ceases to exist. Additionally, the name of the company will be changed to Samunnati Agri Value Chain Solutions Private Limited. Further, SFPL is now a wholly owned subsidiary of the trading company.
The rationale behind this revision in structure is to expand trading operations, which in the earlier structure was under the NBFC, leading to constraints in terms of expansion. With the new structure, some of the regulatory constraints will go, allowing trading operations to maximise its growth potential.
While the above changes resulted in trading operations to be at the parent company (SFISPL) with SFPL now being subsidiary, both the companies will continue to be a part of the Samunnati group. Therefore, the analytical approach adopted by Crisil Ratings remains unchanged (i.e. Crisil Ratings will continue to consolidate business and financial risk profiles of both NBFC and trading company). The ratings on Samunnati Financial Intermediation and Services Private Limited (SFISPL), also centrally factors in its strategic importance , and expectation of strong support from the Samunnati group. Apart from sharing a common brand name, SFISPL will continue to have access to the group cashflows (including that of NBFC operations) to meet its debt service obligations as well as any other liquidity requirements in a timely manner, both on an ongoing basis and in the event of any exigencies.
The rating reflects adequate capitalization of SFISPL (trading business of Samunnati Group), and the company's experienced leadership, sound risk management processes and diversified product profile, ensuring healthy revenue growth. However, these strengths are partially offset by the company's limited track record of operations and susceptibility to volatility in prices of agricultural commodities and climatic conditions and weak interest coverage ratio. |
Analytical Approach For arriving at the ratings, Crisil Ratings continues to consolidate the business and financial risk profile of Samunnati Financial & Intermediation Services Private Limited (SFISPL) with Samunnati Finance Private Limited (SFPL) collectively referred to as the Samunnati group. This is because the entities have a common promoter and have significant managerial and financial linkages.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths: Strategic importance to and expectation of strong support from the group: Strong linkage between SFISPL and its group company, SFPL, is reflected in shared brand name and established operational/cashflow linkages. The company enhances the group's presence in the agricultural commodities market. The two entities have two common directors at board level. SFISPL also enjoys the financial flexibility to raise capital whenever necessary, as its group is committed to and capable of infusing capital with a proven track record of infusion of both equity and unsecured loans in the last three fiscal years ended FY 2024.
Extensive experience of the promoter and experienced senior management team: The founder of the Samunnati group, Mr Anil Kumar S G, has over 27 years of experience in banking and agricultural financing businesses. He entered the rural agricultural financing space in 2007, as the founder trustee of the IFMR Trust. He was involved in the design and deployment of a local financial institution model called Kshetriya Gramin Financial Services for the IFMR trust. The second line of management comprises professionals with average experience of over a decade in the fields of commercial lending, audit, operations and information technology. The board has adequate representation from investors and extends strategic support to the company. The management is aware of risks associated with the segment and has put in place an elaborate credit policy for the on boarding and sanctioning processes, including insuring its current exposures.
Diversified product and customer profile leading to healthy revenue growth: SFISPL has diversified trading portfolio of over 200 products, comprising fruits and vegetables, and other agro commodities. SFISPL works with highly rated and few listed entities. Over the years, SFISPL has built strong relationships with leading agricultural trading participants such as ITC, Cargill, ADM and a host of modern trade entities, including More Super Markets, Reliance Retail, Future Consumer Ltd, Spencer Retail, among others, as a tier-I vendor on pan-India basis. This has led to steady increase in operations and the company has broad based its customer portfolio to include externally rated entities and listed companies as one of their key customers and suppliers for various agricultural commodities, given its seamless connect with the FPO (farmer producer organizations) segment.
Adequate capital structure: SFISPL capital structure is marked by improvement in net worth supported by continued equity infusion from Samunnati Finance (NBFC), at around Rs 99 crores as on March 31 2024 (Rs 91 crores a year ago). Samunnati Finance (NBFC) has further infused Rs 80 crores in May 2024 further enhancing the net worth of Samunnati Agro (now known as SFISPL) leading to improvement in capital structure for the current fiscal year 2025. As a result of continued equity infusion, gearing and total outside liability to adjusted net worth ratio stood at 3.8 times and 4.4 times as on March 31, 2024 and is expected to steadily improve in current year with the recent equity infusion despite subdued profitability). With the increase in scale of operations, the company’s reliance on external debt for working capital requirements has also increased compared to earlier years of its inspection. The company's ability to ramp up internal accretion so as to self-sustain its capital position and, thereby, improving gearing remains a key monitorable.
Weaknesses: Limited track record of operations with geographical concentration in revenue: Having commenced full-fledged operations in fiscal 2018, SFISPL (trading business) has substantially scaled up in fiscals 2024 with a revenue base of Rs 2200 crore, however same moderated in Fiscal 2023 due to company’s increasing focus on margin remunerative products. Therefore, the company's trading operations lack seasoning, and its profitability performance also needs to be monitored over a longer period of time. The business model involves market linkage between farmer-producer and community-based organizations, farmers and modern retail corporations, institutional buyers, aggregators and traders. Hence, the company's performance will depend on the credit risk profiles of these counterparties. However, as a risk mitigation measure SFISPL has insured 85% of its receivables under a structured arrangement which partially mitigates risk of bad debt. The entity has been growing its presence across large production and consumption centers in order to manage the risk of geographical concentration in revenue. Currently it has a strong presence in southern India (majorly Tamil Nadu, Andhra Pradesh, Telangana and Karnataka) and moderate presence in western and central India (majorly Madhya Pradesh, Maharashtra and Gujarat). It plans to increase its presence in north and eastern regions which will help to mitigate the geographical concentration risks.
Susceptibility to climatic conditions, volatility in prices of agricultural commodities and debtor risk: The company is exposed to debtor risk given the credit period offered to customers. However, this debtor risk is also partially offset by the insurance cover taken for each transaction. Operating margin have remained low and volatile ranging from -0.5 – 1.1 % for the past three fiscals ended March 31, 2024, Margins should further improve in fiscal 2025 due to discontinuation of market linked products. Moreover, competition from both organized and unorganized players in the agricultural commodities segment, limits the pricing power with customers. With limited value addition in trading business, operating margin are expected to remain low over the medium term.
Weak earnings and interest coverage ratio on standalone level: The debt protection metrics has improved in fiscal 2024 but remains subdued ,with estimated interest coverage at 0.53 times in fiscal 2024 (-0.20 times in fiscal 2023). The weak interest coverage ratio is because of low operating margin (given limited value addition in trading business and provisioning done for doubtful debtors) as well as high reliance on external debt (with increasing scale of operations) leading to higher interest cost. The company has turned profitable in the month of November 2024, though sustained improvement in debt protection metrics will be a key rating sensitivity factor. |
Liquidity: Adequate Bank limit utilisation is moderate around 67 percent for the past twelve months ended July 2024. The company is further enhancing its bank limits to fund the working capital requirements. Cash accruals are expected to be negative for fiscal 2025 and over Rs 0.3 lakhs fiscal 2026 against term loan repayment obligations of Rs 5.4 crores in fiscal 2025. In addition, the company also has significant NBFC term loans, NCD and CP repayments upcoming over the next 6 to 12 months.
SFISPL will continue to have access to the group cashflows (including that of NBFC operations) to meet its debt service obligations as well as any other liquidity requirements, both on an ongoing basis and in the event of any exigencies. |
Outlook: Stable Crisil Ratings believes SFISPL will remain strategically important to the Samunnati group and thus, will continue to receive strong financial and operational support from Samunnati group. |
Rating sensitivity factors Upward factors:
Downward factors:
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About SFISPL (Earlier known as Samunnati Agro) Samunnati Agro was incorporated in September 2016, used to be a wholly-owned subsidiary of Samunnati Finance (NBFC Business). With the recent change in the group structure, Samunnati Agro has been reverse merged with Samunnati Finance and is now a parent company. Additionally, the name of the company will be changed to 'Samunnati Agri Value Chain Solutions Private Limited'. SFPL (entity with new NBFC license) is a wholly owned subsidiary of SFISPL. The company trades in agricultural produce, including fruits and vegetables. It enables small farmers to receive optimal value for their produce by providing market linkages between farmer-producer organisations, farmers, local mandis and modern retailers, corporates and traders. It caters to a large base of almost 300 clients and deals in over 300 commodities. As of January 2025, Samunnati Agro has ceased to exist and is amalgamated with Samunnati Financial Intermediation & Services Private Limited.
About SFPL (Earlier Known as Samunnati Financial Intermediation & Services Private Limited) Incorporated in November 2014 and promoted by Mr Anil Kumar S G, Samunnati group provides financial services to the agricultural value chain. It started operations through retail loans in the dairy value chain. In December 2015, the company gave its first loan to an FPO, and in January 2016 it provided its first loan to an agricultural enterprise. In October 2016, the company established three verticals - retail, CBOs and agricultural enterprises It has a B2B2C (business to business to consumer) model in which it does not deal directly in retail loans. As of December 2024, the NBFC business has been transferred to newly formed entity Samunnati Fianance Private Limited. |
Key Financial Indicators SFISPL (Earlier known as Samunnati Agro)- Standalone
SFISPL - Consolidated
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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 |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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*Transferred from Samunnati Agro Solutions Private Limited
^Transferred to Samunnati Finance Limited
Criteria Details
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