Rating Rationale
May 17, 2024 | Mumbai
Sheetal Cool Products Limited
Rating reaffirmed at 'CRISIL BBB/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.95 Crore
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
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 BBB/Stable’ rating on the long-term bank facilities of Sheetal Cool Products Ltd (SCPL).

 

The rating reflects the stable business performance of the company, as reflected in revenue and operating margin of Rs 352.7 crore (Rs 340.26 crore in fiscal 2023) and 12.7%, respectively, in fiscal 2024. Further, operations remain working capital intensive with bank limit utilisation constraining the credit risk profile. The financial risk profile remains comfortable with networth and total outside liabilities to adjusted networth ratio (TOLANW) at Rs 114.5 crore and 1.10 times, respectively, as on March 31, 2024, and will improve over the medium term supported by steady accretion to reserve and scheduled debt repayment. Liquidity will remain adequate, but higher utilisation of bank limit will remain a key rating sensitivity factor.

 

The rating continues to reflect the established market position of the company supported by its distribution network and healthy financial risk profile. These strengths are partially offset by large working capital requirement, high bank limit utilisation, and susceptibility to volatility in milk prices and regulatory changes.             

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position supported by distribution network: SCPL has established presence in Gujarat, which provides operating flexibility in an intensely competitive industry. Further, the promoters’ extensive experience, strong understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business. The company derives over 73% of revenue from Gujarat, followed by Maharashtra contributing over 20%, and Rajasthan and Madhya Pradesh contributing the remaining. Furthermore, the company benefits from its diversified product mix. Business performance remained stable, with revenue estimated at Rs 352.7 crore in fiscal 2024 (Rs 340.26 crore in fiscal 2023). The company has an extensive network of over 500 distributors.

 

  • Healthy financial risk profile: The financial risk profile was comfortable, as reflected in networth, gearing and TOLANW ratio of Rs 114.5 crore, 0.69 time and 1.10 times, respectively, as on March 31, 2024. Debt protection metrics were comfortable, as indicated by interest coverage and net cash accrual to adjusted debt ratios over 5 times and 37%, respectively, in fiscal 2024. In the absence of large, debt-funded capital expenditure (capex) and efficient working capital management, the financial risk profile will improve over the medium term.

 

Weaknesses:

  • Large working capital requirement: Operations will remain working capital intensive, as reflected in expected gross current assets (GCAs) of 190-200 days over the medium term (186 days as on March 31, 2023). This is because of large inventory owing to seasonality in procuring input material from October to March. The company generally gives credit of 10-25 days; however, to combat competition, it has extended credit of 45-60 days as on March 31, 2024. With growth in operations over the medium term, the company has to penetrate multiple geographies and hence increase its inventory, which will require additional working capital requirement. Quick conversion cycle and steady operating profitability, along with growth in return on capital employed (RoCE), will be closely monitored. Ability to efficiently manage the working capital cycle and reduce bank limit utilisation will remain a key monitorable.

 

  • Susceptibility to volatility in milk prices and regulatory changes: The price of milk is sensitive to the adverse impact of changes in government policies and environment conditions. The industry is exposed to steady increase in animal feed prices and rural wages, and thus, has an adverse impact on industry players. Furthermore, regulations such as the intermittent bans imposed by the government on export of skimmed milk powder (SMP) affect procurement of milk and SMP exports. The company is also susceptible to failure in milk production because of external factors such as cattle diseases.

Liquidity: Adequate

Bank limit utilisation was high at 93.78% for the 12 months through March 2024. Cash accrual, expected over Rs 28 crore, will sufficiently cover yearly term debt obligation of Rs 7-8 crore over the medium term; surplus will be deployed towards meeting working capital requirement. Current ratio estimated to be healthy at 1.68 times as on March 31, 2024. Ability to improve working capital cycle and subsequently lower reliance on external working capital borrowing remain key monitorables.

Outlook: Stable

CRISIL Ratings believes SCPL will continue to benefit from the extensive experience of the promoters and its improving financial risk profile.

Rating Sensitivity Factors

Upward factors

  • Revenue growth of more than 20% with sustenance of operating margin over 11% leading to higher cash accrual
  • Improvement in the working capital cycle with strengthening of liquidity with healthy cushion in bank limit

 

Downward factors

  • Decline in revenue or earnings before interest, tax, depreciation and amortisation margin of less than 10%
  • Further stretch in the working capital cycle or large capex constraining the liquidity and financial risk profile
  • Further stretch in its liquidity with narrowing cushion in bank limits.

About the Company

SCPL was set up in 2000 as a sole proprietorship under the name M/s Shree Shital Industries by Late Shri Jagdishbhai D Bhuva. The proprietorship was reconstituted later as a partnership named as M/s Shree Shital Industries. The partnership was renamed Shital Cool Products as on September 11, 2013, and reconstituted as a private limited company (Sheetal Cool Products Pvt Ltd) on October 14, 2013. In 2017, the company became a public limited company with the current name (SCPL). It manufactures ice cream; milk and milk products; and food products, such as namkeens, wafers, fryums, frozen foods, bakery and sweets. It is listed on the Bombay Stock Exchange and the National Stock Exchange.

Key Financial Indicators

As on/for the period ended March 31

Unit 

2024

2023

Operating income

Rs.Crore

355.50

341.87

Reported profit after tax

Rs.Crore

20.84

20.45

PAT margins

%

5.86

5.98

Adjusted Debt/Adjusted Networth

Times

0.73

0.92

Interest coverage

Times

5.20

6.19

Status of non-cooperation with previous CRA

SCPL had not cooperated with INFOMERICS Valuation and Rating Pvt Ltd (INFOMERICS), which had classified the company as non-cooperative through release dated May 31, 2022. The reason provided by INFOMERICS was non-furnishing of information for monitoring of ratings.

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of instrument Date of allotment Coupon rate Maturity date Issue size (Rs.Crore) Complexity levels Rating assigned with outlook
NA Cash Credit NA NA NA 72 NA CRISIL BBB/Stable
NA Term Loan NA NA Nov-2027 23 NA CRISIL BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 95.0 CRISIL BBB/Stable   -- 20-03-23 CRISIL BBB/Stable   --   -- Withdrawn (Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 72 Axis Bank Limited CRISIL BBB/Stable
Term Loan 23 Axis Bank Limited CRISIL BBB/Stable
Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Understanding CRISILs Ratings and Rating Scales

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Nitin Kansal
Director
CRISIL Ratings Limited
D:+91 124 672 2154
nitin.kansal@crisil.com

Nilesh Agarwal
Associate Director
CRISIL Ratings Limited
D:+91 79 4024 4531
nilesh.agarwal1@crisil.com

Jinagna Dixit Shah
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 79 4024 4500
Jinagna.Shah@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html