| The Central Arecanut & Cocoa Marketing and Processing Co-Operative Limited | ||||||
| 'CRISIL A / Stable / CRISIL A1 ' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL A/Stable/CRISIL A1' ratings to the bank facilities of The Central Arecanut & Cocoa Marketing and Processing Co-Operative Limited (Campco).
The rating reflects Campco’s established market position in arecanut industry and strong financial risk profile. These strengths are partially offset by its susceptibility to climatic conditions and volatility in raw material prices and working capital intensive operations. |
Key Rating Drivers & Detailed Description Strength Established market position in arecanut industry: Campco has an established market position in the arecanut industry, as reflected in its turnover of around Rs.1800-2100 crore over the last four fiscals ended March 2021. Supported by steady improvement in sale realisations, the turnover is expected to improve to over Rs.2500 crore for fiscal 2022.The company derives around 85 percent of its total revenues through the sale of arecanut, 10 percent from chocolate products and the balance from rubber, cardamom etc.. The market position is further strengthened by Campco’s relationship with its large member base consisting of over 1,20,000 members from whom arecanut is procured. The company has been trading in arecanut for close to 4 decades and over this period, the management has been able to establish healthy relationship with its customers and suppliers. CRISIL Ratings believes that Campco shall benefit over the medium term from its established market position in the arecanut industry.
Strong financial risk profile: The financial risk profile is strong marked by a comfortable capital structure and robust debt protection metrics. Networth is estimated to be close to Rs.600 crore at the end of fiscal 2022. The total outside liabilities to tangible networth (TOLTNW) ratio has been comfortable in the range of 0.8-1 time over the last four fiscals and is expected to remain comfortable over the medium term supported by the absence of debt funded capital expenditure. Debt protection metrics are comfortable marked by an interest coverage and net cash accrual to total debt ratio estimated at over 6 times and 20 percent respectively for fiscal 2022. CRISIL Ratings believes Campco’s financial risk profile shall remain strong over the medium term.
Weaknesses Susceptibility to climatic conditions and volatility in raw material prices: Campco’s turnover is derived completely from agricultural commodities. The crop yield of agricultural commodities is dependent on adequate and favorable climatic condition. Thus, Campco Ltd is exposed to the risk of limited availability of its key raw material during unfavorable climatic condition and subsequent impact on its operating profitability. The operating profitability has been volatile in the range of 2.5 to 6.7 percent over the last three fiscals ended March 2021. Also production may be impacted by pests or crop infection leading to higher unpredictability in production and pricing of agricultural commodities and derived products.
Working capital intensive operations: Operations are working capital intensive as reflected in gross current assets of 140-150 days over the last three fiscals, majorly driven by high inventory levels. Arecanut is an agricultural and seasonal commodity with a peak procurement season from December to March. Hence Campco is required to stock sizeable inventory for sale during the rest of the year, resulting in higher inventory levels. Operations are expected to remain working capital intensive over the medium term. |
Liquidity : Strong Campco’s liquidity is strong marked by moderate utilisation of bank limits and adequate cash accrual to meet repayment obligations. The fund based working capital limits of Rs.249 crore have been utilised at around 50 percent for the twelve-month ended November 2021. The working capital limits have been enhanced to Rs.350 crore from December 2021, providing additional flexibility to existing liquidity. The company accepts fixed deposits from its members which was at around Rs.148 crore as on March 31, 2021. Though these fixed deposits have a maturity of 12 months, they are usually renewed and reinvested by the members. Recently enhanced limits and unencumbered cash and cash equivalents of Rs.30-40 crore to be maintained at any point in time shall provide the company the flexibility to meet maturing fixed deposits, if any. The company is also expected to generate cash accrual of around Rs.50 crore annually over the medium term against yearly repayment obligations of around Rs.5 crore. |
Outlook Stable CRISIL Ratings believes Campco shall benefit over the medium term from its established market position in the arecanut industry |
Rating Sensitivity factors Upward Factors
Downward Factors
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About the Company Campco was incorporated as a cooperative society in 1973; jointly held by the state Governments of Karnataka and Kerala. However, from 2005, the company is a completely autonomous with refund of the share capital from the two State Governments. Campco is engaged in the trading of arecanuts which contribute to around 85 percent of the total revenues and in the manufacture and sale of chocolate products |
Key Financial Indicators
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| 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 - 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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This Annexure has been updated on 08-Feb-2022 in line with the lender-wise facility details as on 08-Feb-2022 received from the rated entity.
Criteria Details
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