| Sree Rayalaseema Hi-Strength Hypo Limited | ||||||
| Long-term rating upgraded to 'CRISIL A/Stable'; Short-term rating Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 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 has upgraded its rating on the long-term bank facilities of Sree Rayalaseema Hi-Strength Hypo Limited (SRHHL; part of TGV group) to 'CRISIL A/Stable’ from 'CRISIL A-/Positive’ while the rating on the short-term facilities is reaffirmed at ’CRISIL A1'.
The rating upgrade factors the significant improvement in the credit risk profile, driven by a better-than-expected business performance as indicated by healthy revenue growth and higher operating margin resulting in substantial increase in net cash accruals. Operating Income grew 39% in fiscal 2022 to Rs 1268 crore supported by strong performance of both chemicals and trading businesses. Operating performance is expected to remain healthy going forward also, despite some drop in realisations from Sulphuric acid sales, supported by steady revenue growth from other products while the operating margin is also expected to sustain in the range of 10-12% This along with prudent working capital requirement resulted in healthy net cash accrual and return on capital employed (RoCE).
The rating action also factors in TGV group’s strong and improving financial risk profile & liquidity supported by healthy accruals, modest debt funded capex plans, healthy unencumbered cash & cash equivalents and minimally utuilised bank limits. Sustenance of healthy operating margin and working capital management will remain the key monitorables.
The ratings also factor TGV group’s established track record in the inorganic chemicals industry, an established relationship with customers and a strong financial risk profile.. . These strengths are partially offset by exposure to intense competition and susceptibility of profitability margins to volatility in raw material prices and in foreign exchange (forex) rates. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered the consolidated financials of SRHHL and its subsidiaries TGV Sodium and Electrolyte Pvt Ltd (TGV Sodium) and TGV Metals and Chemicals Pvt Ltd (TGV Metals), together referred to as TGV group.
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:
Weaknesses:
|
Liquidity: Strong TGV group is expected to generate healthy net cash accrual of about Rs 135-171crore in medium term against which the repayment obligations are expected to be negligible. Bank limit utilisation was low at around 29% for the twelve months ended December 2022. The unencumbered cash & cash equivalents stood at Rs 152 crs as on 30th November 2022. Low gearing and moderate net worth support it’s financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes TGV group will continue to maintain a strong financial risk profile, backed a robust capital structure and prudent working capital management, over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Group SRHHL, incorporated in 2005, is based in Kurnool, Andhra Pradesh, and is part of the TGV group. The group, currently managed by Mr T G Bharath, has diversified business interests, including chemicals, healthcare, and power generation.
TGV Sodium was incorporated in January, 2020 as a wholly-owned subsidiary of SRHHL. However there are no major operations in the company.
TGV Metals was formed on February 10, 2022 as a 50% subsidiary of SRHHL. Operations are yet to commence in this entity.
For the 6 months ended September 2022, the group achieved revenue and profit after tax (PAT) of Rs 914.02 crore and Rs 59.63 crore as against Rs 557.98 crore and Rs 38.86 crore respectively for the corresponding period of previous fiscal. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 10 | State Bank of India | CRISIL A1 |
| Cash Credit | 10 | State Bank of India | CRISIL A/Stable |
| Foreign Exchange Forward | 0.7 | State Bank of India | CRISIL A1 |
| Letter of Credit | 40 | State Bank of India | CRISIL A1 |
| Proposed Working Capital Facility | 132.02 | Not Applicable | CRISIL A/Stable |
This Annexure has been updated on 20-Feb-23 in line with the lender-wise facility details as on 11-Feb-23 received from the rated entity.
Criteria Details
|