| Sree Rayalaseema Hi-Strength Hypo Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
CRISIL Ratings has reaffirmed its ‘CRISIL A-/Positive/CRISIL A1’ ratings on the bank facilities of Sree Rayalaseema Hi-Strength Hypo Limited (SRHHL; part of Sree Rayalaseema group).
The ratings continue to reflect the established track record of the group in the inorganic chemicals industry, its strong relationship with customers and healthy financial risk profile. These strengths are partially offset by exposure to intense competition and susceptibility to volatility in raw material prices and foreign exchange (forex) rates. |
Analytical Approach CRISIL Ratings has considered the consolidated financials of SRHHL and its wholly-owned subsidiary TGV Sodium and Electrolite Pvt Ltd (TGV Sodium).
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: Established market position and healthy relationship with customers: The group is one of the major producers of calcium hypochlorite and stable bleaching powder in India and has consistently expanded its product portfolio. The two decades of experience of the promoters along with an established relationship with customers helped scale up revenue to over Rs 900 crore in fiscal 2021.
Healthy financial risk profile: Networth and gearing are estimated at a healthy Rs 440 crore and 0.09 time, respectively, as on March 31, 2022. Above-average operating margin and moderate capital structure result in robust debt protection metrics - interest coverage and net cash accrual to total debt ratios are estimated at 23 times and 2.1 times, respectively, for fiscal 2022.
Weakness: Susceptibility to volatility in raw material prices and forex rates: Raw material price fluctuations across products impacts profitability. Also, exports account for about 26% of the revenue and are mainly in US dollars. Against this, imports account for about 47% of raw material requirement, thus exposing the company to forex rate fluctuation risk.
Exposure to intense competition: Pricing flexibility is constrained by competition from global players in the inorganic chemicals industry. |
Liquidity: Strong With negligible term debt obligation, net cash accrual, expected at Rs 80-90 crore each in fiscals 2022 and 2023 supports liquidity. Utilisation of working capital limits was also low at 3% over the 12 months ended October 2021. Also cash and bank balance of about Rs 130 crore is used for import of coal against 100% margin as and when required. Current ratio was healthy at 2.42 times as on March 31, 2021. |
Outlook: Positive CRISIL Ratings believes the business and financial risk profiles of SRHHL will further improve on account of healthy demand for its products. |
Rating Sensitivity Factors Upward Factors *Sustenance of working capital cycle and healthy return on capital employed
Downward Factors *Decline in scale and profitability along with a stretch in working capital cycle. *Large debt-funded capital expenditure weakening the capital structure with gearing rising above 0.75 time *Any large cash outflow in the form of dividends/share buy-back or any large acquisition |
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.
For the six months ended September, 2021 the group reported consolidated revenue and profit after tax of Rs 557.98 crore and Rs 38.86 crore, respectively, as against Rs 398 crore and Rs 29.76 crore, respectively, in the corresponding period of the previous fiscal. |
Key Financial Indicators - Consolidated
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||
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Criteria Details
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