Rating Rationale
February 28, 2022 | Mumbai
Teesta Agro Industries Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.48 Crore
Long Term RatingCRISIL BBB-/Stable (Reaffirmed)
Short Term RatingCRISIL A3 (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 ratings on the bank facilities of Teesta Agro Industries Limited (Teesta) to ‘CRISIL BBB-/Stable/CRISIL A3’.

 

The ratings continue to reflect Teesta’s comfortable financial risk profile and established market presence. These strengths are partially offset by large working capital requirement and exposure to adverse regulatory changes.

 

Players in the fertiliser industry were impacted by the Covid-19 pandemic, with nationwide lockdown declared by the central government leading to disruption in production and supply chain management. This had led to lower revenue by around a 10% in fiscal 2020 as Teesta generates a substantial portion of revenue in the last quarter of the fiscal. Hover, in fiscal 2021 even with 1.5 month of lockdowns, the revenue has seen only modest dip till half year fiscal 2021. They are expected to cover up this revenue loss going forward and also profitability is expected to be sustained.

Key Rating Drivers & Detailed Description

Strengths:

  • Comfortable financial risk profile: Financial risk profile should remain supported by the absence of any large, debt-funded capital expenditure (capex). Gearing was 0.02-0.16 time over the five fiscals through 2021 and stood at 0.08 time as on March 31, 2021; networth was Rs 94.26 crore. Debt protection metrics were healthy, with interest coverage and net cash accrual to total debt ratios of 6.07 times and 0.59 times, respectively, for fiscal 2021.

 

  • Strong market position: Teesta is the sole manufacturer of single super phosphate (SSP) fertilizer in West Bengal and other northeastern states. The company has 10 marketing offices across West Bengal, Assam, Delhi and Punjab; it has also set up a unit in Rajasthan. Further, despite the government subsidy being insufficient to cover cost of transporting the fertilizer over large distances, the strategic location of Teesta’s facilities enables it to comfortably reach out to farmers in the northeastern states that cultivate potatoes, oil seeds, mustard and vegetables.

 

Weaknesses:

  • Large working capital requirement: The working capital cycle may remain stretched over the medium term and hence will be closely monitored. Gross current assets increased to 315 days as on March 31, 2021, from 274 days a year ago as inventory rose to around 122 days from 211 days. Further, the working capital is constrained by delay (sometimes by over 180 days) in dues from the government for subsidy; debtors have improved a bit since the last two years and may further get better with the implementation of the Direct Benefit Transfer (for subsidy) initiative, wherein the amount can be transferred in 7 working days.

 

  • Susceptibility to government regulations: As the fertilizer industry is strategically important, it will continue to be extensively regulated by the government.

Liquidity: Adequate

Bank limit utilization is low at around 30 percent for the past 5 months ended 31st January 2022.Cash accruals are expected to be over Rs 4.5 crore which are sufficient against negligible debt obligation over the medium term. In addition, it will be act as cushion to the liquidity of the company.

 

Current ratio is healthy at 1.95 times on March 31, 2021. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Rating believes Teesta should continue to benefit from its strong market position in the fertilizer business in the northern districts of West Bengal and northeastern states of India.

Rating Sensitivity factors

Upward factors

  • Steady growth in revenue along with steady rise in profitability
  • Significant improvement in working capital cycle, thereby declining debt

 

Downward factors

  • Steep decline in revenue and profitability, resulting in cash accrual below Rs 2.5-3 crore
  • Any large, debt-funded capex

About the Company

Teesta, incorporated in September 1986 by Mr Hardev Singh, manufactures fertilisers such as SSP, mixture fertilisers in various grades, granulated single sulphur phosphate, nitrogen phosphorus potassium fertiliser and sulphuric acid.

 

The products are sold under the brand, Kanchan, which is well-reputed in eastern and northeastern states of India with a major focus in West Bengal. With addition of the new manufacturing plant in Rajasthan, Teesta further spread its operations to Rajasthan, Uttar Pradesh and Haryana.

 

Teesta has its manufacturing facility in Jalpaiguri, West Bengal. It has another unit at Gangur (Chittorgarh, Rajasthan) for manufacturing SSP in powder and granular forms, with installed capacity of 1,85,000 tonne per annum and 1,32,000 tonne per annum, respectively. The Rajasthan unit commenced operations from September 2016.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

92.76

91.75

Reported profit after tax

Rs crore

2.43

2.32

PAT margins

%

2.52

2.10

Adjusted Debt/Adjusted Net worth

Times

0.08

0.02

Interest coverage

Times

6.07

4.13

 

Status of non cooperation with previous CRA:

Teesta has not cooperated with Credit Analysis & Research Ltd which has classified it as non-cooperative vide release dated 16-Mar-2018. The reason provided by Credit Analysis & Research Ltd is 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

23

NA

CRISIL BBB-/Stable

NA

Bank Guarantee

NA

NA

NA

2

NA

CRISIL A3

NA

Letter of Credit

NA

NA

NA

23

NA

CRISIL A3

 

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 23.0 CRISIL BBB-/Stable   --   -- 25-11-20 CRISIL BBB-/Stable 30-03-19 CRISIL BBB-/Stable Suspended
      --   --   -- 30-06-20 CRISIL BB+ /Stable(Issuer Not Cooperating)*   -- --
Non-Fund Based Facilities ST 25.0 CRISIL A3   --   -- 25-11-20 CRISIL A3 30-03-19 CRISIL A3 Suspended
      --   --   -- 30-06-20 CRISIL A4+ (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
Bank Guarantee 1 Allahabad Bank CRISIL A3
Bank Guarantee 1 State Bank of India CRISIL A3
Cash Credit 10 Allahabad Bank CRISIL BBB-/Stable
Cash Credit 1.5 Allahabad Bank CRISIL BBB-/Stable
Cash Credit 4 State Bank of India CRISIL BBB-/Stable
Cash Credit 7.5 State Bank of India CRISIL BBB-/Stable
Letter of Credit 1.5 Allahabad Bank CRISIL A3
Letter of Credit 10 Allahabad Bank CRISIL A3
Letter of Credit 7.5 State Bank of India CRISIL A3
Letter of Credit 4 State Bank of India CRISIL A3

This Annexure has been updated on 17-Feb-23 in line with the lender-wise facility details as on 28-Jan-23 received from the rated entity.

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
Assessing Information Adequacy Risk
Rating Criteria for Fertiliser Industry
Mapping global scale ratings onto CRISIL scale
CRISILs Approach to Recognising Default
CRISILs Criteria for rating short term debt

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