Rating Rationale
June 26, 2024 | Mumbai
Simbhaoli Sugars Limited
Rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.1041 Crore
Long Term RatingCRISIL D (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 rating on the long-term bank facilities of Simbhaoli Sugars Ltd (SSL) at ‘CRISIL D’.

 

The rating continues to reflect instances of delay in meeting debt obligation due to stretched liquidity.

 

Financial risk profile is also weak because of a highly leveraged capital structure and muted debt protection metrics. Moreover, the company is exposed to regulatory risks and cyclicality in the sugar industry. However, SSL benefits from its established market position in the sugar industry, and is likely to benefit from the high sugar prices prevailing currently due to favourable demand-supply dynamics.

Key Rating Drivers & Detailed Description

Weaknesses:

  • Weak financial risk profile: Volatility in sugar prices and high interest costs substantially deteriorated financial risk profile in the past, resulting in cash losses and hence, negative networth as on March 31, 2024. Debt protection metrics were also muted, with net cash accrual to total debt ratio of 0.02 time for fiscal 2024.

 

  • Exposure to regulatory risk and cyclical demand in the sugar industry: The sugar industry is susceptible to movements in sugar prices, which results in volatile profitability. Regulatory mechanisms and dependence on monsoon have also rendered the industry cyclical. The government is regulating demand-supply dynamics through restrictions on exports to ensure optimum inventory levels in the domestic market. While input prices are driven by the government, sugar prices are based on open market prices that depend on production levels. High regulatory risks and cyclical demand will continue to constrain the company’s business risk profile over the medium term.

 

Strength:

  • Established market position: The company’s plants are integrated sugar complexes comprising cogeneration and distillery, along with sugar mills to ensure value addition through by-products. SSL has a crushing capacity of 19,500 tonne per day (TPD) along with a cogeneration capacity of 108 megawatt (in a 51:40 joint venture with Sindicatum Captive Energy Singapore), and distillery capacity of 180 kilolitre per day. It has three sugar plants, one each in Simbhaoli and Brijnathpur in western Uttar Pradesh, and in Chilwariya in eastern Uttar Pradesh. In fiscal 2024, revenue was Rs 1,192 crore (Rs 1,212 crore previous fiscal).

Liquidity: Poor

Stretched liquidity is reflected in delays in servicing instalments on term loan due to insufficient cash accrual.

Rating Sensitivity factors

Upward factors

  • Timely servicing of debt
  • Increase in revenue and Ebitda (earnings before interest, taxes, depreciation and amortisation) margin improving to 3-4% on a sustained basis.

About the Company

Established as a partnership firm in 1933 in Simbhaoli, SSL (formerly, The Simbhaoli Sugar Mills Ltd) was reconstituted as a private limited company in 1936 and then as a public limited company with the current name in 1989. In 1992, SSL acquired a distillery and transformed its Simbhaoli sugar plant into a sugar complex. The company now has an integrated sugar unit and operates under the sugar-alcohol-power business model. It is among the top 10 integrated sugar companies in India.

 

SSL has three sugar plants, one each in Simbhaoli, Brijnathpur and Chilwariya; with combined crushing capacity of 19,500 TPD. It produces sugar products such as white crystal refined sugar, pharmaceutical-grade sugar, superfine sugar, sugar cubes, icing sugar, table sugar, candy sugar, and sugar sachets. The company hived off its power and alcohol divisions into two wholly owned subsidiaries, Simbhaoli Power Ltd and Simbhaoli Spirits Ltd, respectively, in 2012. In November 2015, SSL was merged with Simbhaoli Spirits Ltd (w.e.f. April 01, 2015) and the newly formed entity was named SSL.

 

The company earned marginal net profit of Rs 1.93 crore on operating income of Rs 322 crore in the third quarter of fiscal 2023, against net loss of Rs 0.36 on operating income of Rs 259 crore in the corresponding period previous fiscal.

Key Financial Indicators

Particulars

Unit

2024

2023

Revenue

Rs crore

1192

1212

Profit after tax (PAT) 

Rs crore

-12

-31

PAT margin

%

-1.0

-2.6

Adjusted debt/adjusted networth

Times

-14.26

-17.33

Adj. Interest coverage

Times

1.50

1.04

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 310.72 NA CRISIL D
NA Term Loan NA NA Mar-2016 11.54 NA CRISIL D
NA Term Loan NA NA Mar-2016 223.47 NA CRISIL D
NA Term Loan NA NA Mar-2016 8.51 NA CRISIL D
NA Term Loan NA NA Mar-2016 103.01 NA CRISIL D
NA Term Loan NA NA Mar-2016 117.04 NA CRISIL D
NA Term Loan NA NA Mar-2016 36.89 NA CRISIL D
NA Term Loan# NA NA Mar-2016 30.55 NA CRISIL D
NA Term Loan NA NA Mar-2016 49.14 NA CRISIL D
NA Term Loan NA NA Mar-2016 12.4 NA CRISIL D
NA Term Loan NA NA Mar-2016 137.73 NA CRISIL D

# Includes Sugar Technology Mission dues of Rs 1 cr.

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 1041.0 CRISIL D   -- 26-04-23 CRISIL D 28-02-22 CRISIL D   -- CRISIL D
      --   --   --   --   -- CRISIL D
Non-Fund Based Facilities ST   --   --   --   --   -- CRISIL D
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 7.13 CRISIL D
Cash Credit 18.06 CRISIL D
Cash Credit 6.27 CRISIL D
Cash Credit 107.28 CRISIL D
Cash Credit 33.13 CRISIL D
Cash Credit 48.73 CRISIL D
Cash Credit 90.12 CRISIL D
Term Loan 8.51 CRISIL D
Term Loan 103.01 CRISIL D
Term Loan 117.04 CRISIL D
Term Loan 137.73 CRISIL D
Term Loan 36.89 CRISIL D
Term Loan# 30.55 CRISIL D
Term Loan 49.14 CRISIL D
Term Loan 11.54 CRISIL D
Term Loan 223.47 CRISIL D
Term Loan 12.4 CRISIL D

 # Includes Sugar Technology Mission dues of Rs 1 cr.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Sugar Industry
CRISILs Approach to Recognising Default

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