Rating Rationale
April 22, 2022 | Mumbai
Sri Sai Nath Agri Industries Private Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.30 Crore
Long Term RatingCRISIL BBB-/Stable (Reaffirmed)
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 bank facilities of Sri Sai Nath Agri Industries Private Limited (SSNAIPL).

 

The rating reflects the extensive experience of the promoters in the rice industry, geographically diversified revenue, controlled working capital cycle and above-average financial risk profile. These strengths are partially offset by the moderate scale of operations amid intense competition, and susceptibility to fluctuations in raw material prices and changes in government policies.

Analytical Approach

Unsecured loan estimated at Rs 9.45 crore as on March 31, 2022, is treated as neither debt nor equity as the loan is expected to remain in the business over the medium term.

Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of promoters: Promoter’s experience of over three decades in rice industry, and their strong understanding of market dynamics  helps anticipate price trends and calibrate purchasing decisions. This has helped in revenues to grow to estimated Rs 300 crore in fiscal 2022 from Rs 132 crore in fiscal 2020.

 

Geographically diversified revenues: Promoter’s extensive experience has helped the company to diversify its customers base in export market in middle eastern region along with Russia which has helped them to reduce their geographical concentration risk.

 

Controlled working capital cycle: The prudent working capital management is indicated by gross current assets of 70-80 days for past three fiscals. Receivables are under control as the company offers credit of 45-60 days to customers and inventory is low at 25-30 days. With no major changes expected in operating policies, the working capital cycle is expected to remain controlled over the medium term.

 

Above-average financial risk profile: Networth is moderate at Rs 27-28 crore and capital structure comfortable with Gearing at 1.1-1.2 time and total outside liabilities to adjusted networth ratio at 1.5-1.6 times, estimated as on March 31, 2022. Debt protection metrics remain adequate, with interest coverage ratios of 4.9-5.0 times and net cash accrual to adjusted debt ratio at 0.35-0.45 times estimated in fiscal 2022, due to healthy operating margin. The financial risk profile should improve over the medium term with repayment of term loan.

 

Weaknesses:

Moderate scale of operations amid intense competition: Despite being in operations for more than 30 years, the company’s scale remains moderate as reflected in revenue of Rs 300 crore for fiscal 2022. Intense competition from organised as well as unorganised regional entities limits bargaining power with customers and suppliers and restricts profitability. Sustained revenue growth will remain critical over the medium term.

 

Susceptibility to fluctuations in raw material prices and changes in government policies: The vulnerability of the basmati crop to the vagaries of the monsoon can lead to fluctuations in the availability of paddy, and thus could impact the business risk profile of rice processors such as SSNAIPL. Also, export of rice, which is a staple diet in India, is highly regulated and the company remains susceptible to any changes in government policies. Performance will also be susceptible to geopolitical risks, considering it generated more than 50% sales from Russia in fiscal 2022, given the Russia-Ukraine war and sanctions imposed due to the same.

Liquidity: Adequate

SSNAIPL has adequate liquidity driven by expected cash accrual of Rs 14-15 crore annually in fiscals 2023 and fiscal 2024 against long-term debt obligation of Rs 3.25 crore and Rs 1.65 crore, respectively. Fund-based limits were utilised 79% on average over the 12 months through March 2022. Internal accrual, cash and equivalent, and unutilised bank lines will be sufficient to meet debt obligation and incremental working capital requirement.

Outlook: Stable

CRISIL Ratings believes SSNAIPL’s business risk profile will remain under monitor over the medium term due to large exposure to Russia

Rating Sensitivity Factors

Upward factors:

  • Sustained growth in revenue and stable operating profitability, leading to cash accrual above Rs.14 crores
  • Improved working capital cycle reducing dependence on bank limit

 

Downward factors:

  • Significant decline in revenue or profitability, leading to net cash accrual below Rs.5 crore
  • Stretch in the working capital cycle, leading to weakening of the financial risk profile

About the Company

SSNAIPL was set up in 2009 by Mr Rajeshkumar Agrawal, Mr Rohitkumar Agrawal and Mr Saurabh Agrawal. The company processes non-basmati rice and bran at Bhandara, Maharashtra, with capacity of 600 tonne per day.

Key Financial Indicators

As on/for the period ended March 31

Unit

2021

2020

Operating income

Rs.Crore

197.73

132.95

Reported profit after tax (PAT)

Rs.Crore

3.41

2.21

PAT margin

%

1.72

1.66

Adjusted debt/adjusted networth

Times

1.88

2.29

Interest coverage

Times

3.33

2.98

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)

ISIN

Name of instrument

Date of allotment

Coupon
rate (%)

Maturity date

Issue size (Rs.Crore)

Complexity level

Rating assigned with outlook

NA

Term Loan

NA

NA

Mar-2023

4.5

NA

CRISIL BBB-/Stable

NA

Cash Credit

NA

NA

NA

15

NA

CRISIL BBB-/Stable

NA

Export Packing Credit

NA

NA

NA

10.5

NA

CRISIL BBB-/Stable

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 30.0 CRISIL BBB-/Stable   -- 16-02-21 CRISIL BBB-/Stable 04-02-20 CRISIL BBB-/Stable   -- --
      --   --   -- 27-01-20 CRISIL BBB-/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 15 CRISIL BBB-/Stable
Export Packing Credit 10.5 CRISIL BBB-/Stable
Term Loan 4.5 CRISIL BBB-/Stable
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

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