Fortune Cotton and Agro Industries

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 240.00 Crs. of Fortune Cotton and Agro Industries

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	20.00	Long Term	BWR BBB - /Stable Assignment
Non Fund Based	220.00	Short Term	BWR A3 Assignment
Non Fund Based	(50.00)	Short Term	BWR A3 Assignment
Grand Total	240.00	(Rupees Two Hundred Forty Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

The rating assigned to the bank loan facilities of Fortune Cotton and Agro Industries (FCAI) reflects the experience of the promoters in critical operational areas. It also highlights a satisfactory capital structure & debt protection metrics, efficient working capital management and the implementation of effective hedging strategies to mitigate price volatility and foreign exchange risks. However, these strengths are partially offset by high industry competition, volatile revenue, and thin profit margins.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR believes the firm’s business risk profile will be maintained over the medium term. The outlook may be revised to Positive if a sustained increase in the scale of operations with improvement in the profitability results, in further improvement of the financial risk profile, and better gearing and debt protection metrics. The outlook may be revised to Negative with lower-than-expected revenue/cash accruals or a deterioration in the profitability/gearing indicators and/or a significant increase in the operating cycle, a deterioration in the capital structure due to fresh debt-financed capital expenditure thus weakening the company’s financial risk profile.

KEY RATING DRIVERS

Credit Strengths:

Experienced Promotors :
FCAI is promoted by Mr. Vishwanath Matti, who brings over three decades of experience in the edible oil and cotton industry. He is actively involved in the day-to-day operations of the firm and is ably supported by his partners, who are also his family members—Mr. Maritammappa Asuti, with 35 years of industry experience, Mr. Sharath Sajjanar, with 35 years of experience and Mr. Ashok Asuti, with 5 years of industry experience. Their collective experience in the edible oil and cotton businesses contributes significantly to the firm’s industry knowledge and operational expertise.
Satisfactory capital structure and debt protection metrics :
The firm has a comfortable capital structure on the back of its satisfactory net worth base of Rs. 90.28 Crore as on March 31, 2024. This improvement is attributed to consistent year-on-year accretion of profits and infusion of capital by the partners during FY24. As a result, the firm's long-term solvency indicators have shown marked improvement. The Total Debt to Tangible Net Worth (TD/TNW) ratio improved from 2.00 times as on March 31, 2023, to 1.13 times as on March 31, 2024, while the Total Outside Liabilities to Tangible Net Worth (TOL/TNW) ratio improved from 2.11 times to 1.18 times over the same period, reflecting strengthened net worth. While the debt coverage indicator, as represented by the Interest Service Coverage Ratio (ISCR), moderated from 8.13 times in FY23 to 5.93 times in FY24, it remains at a comfortable level. The decline was primarily due to a reduction in profitability during the year. Additionally, the firm has received interest-free loans amounting to Rs. 21.83 crore under the Karnataka Government Industrial Policy 2009–14. The repayment of these loans is scheduled to commence from FY27, providing the firm with a favorable financing cushion in the medium term. Moreover, the capital structure and debt service coverage ratio have improved further in FY25.
Efficient working capital management :
The firm primarily engages in cash sales, with minimal reliance on credit sales, which has enabled it to maintain a healthy collection period of just 4–9 days over the past three years. Effective working capital management practices have also contributed to a satisfactory inventory holding period of 16 days & 9 days in FY24 and FY25, respectively. Furthermore, the firm’s reliance on LC-based imports and continued focus on cash sales have helped sustain a comfortable operating cycle of 19 days & 12 days in FY24 and FY25, respectively.
Hedging Strategies to Mitigate Price Volatility and Forex Risks :
The firm employs hedging practices to mitigate the risks associated with price volatility and foreign exchange fluctuations. The crude palm oil is mainly imported from east asian countries. To protect itself from fluctuations in both oil prices and currency exchange rates, the firm actively enters into forward contracts based on anticipated price movements and currency trends.

Credit Risks:

Volatile revenue :
The firm's revenue has remained volatile over the past three years. The firm derives ~ 90% of its revenue from the sale of edible oil. In FY23, the firm reported a revenue growth of approximately 27.87%, increasing from Rs. 1103.96 crore in FY22 to Rs. 1411.70 crore, primarily driven by higher sales of edible oil, cotton bales, raw silk, and related products, on account of an increase in sales realisation. However, in FY24, despite increased sales of cotton bales, raw silk, and related products, a decline in the sales volume of edible oil and a correction in its prices led to a 26.30% decrease in revenue, which fell to Rs. 1040.36 crore. In FY25, the firm has reported a topline of 1242.25 crores.
Thin profit margins :
The firm is mainly involved in the manufacturing of edible oil, which is a low value additive product. The EBITDA and PAT margin of the firm stood thin at 1.03% and 0.77% respectively in FY24. The firm has maintained the same level of EBITDA & PAT margin in FY25.
Exposure to Agro-climatic risks :
The firm is vulnerable to agro-climatic risks, considering the availability and prices of its raw materials depend on climatic conditions.

ANALYTICAL APPROACH - Standalone

BWR has adopted a Standalone approach while arriving at its ratings and applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive Factors:

Consistent growth in scale of operations by 20% with improvement in profitability metrics, thereby leading to overall improvement in cash accruals on a sustained basis.
Further improvement in the capital structure. The Total debt/TNW & TOL/TNW should remain below 1.50x at all time.

Negative Factors:

Moderation in scale of operation by 15% along with moderation in profitability, impacting the cash accrual and debt coverage indicators.
The deviation between provisional and audited financials for FY25 should be more than 10%.

LIQUIDITY INDICATORS - Adequate

The firm’s liquidity position remains adequate. In FY25, it reported net cash accruals of Rs. 12.96 crore, against Rs. 1.11 crore repayment of term loan, leaving a surplus of Rs. 11.85 crore to address any unforeseen expenses. Looking ahead, the firm projects net cash accruals of Rs. 15.93 crore in FY26 and Rs. 16.00 crore in FY27, against "Nil" repayment in FY26 and repayment of Rs. 4.88 in FY27, respectively, ensuring ample coverage for debt servicing. Furthermore, the firm maintains a healthy current ratio of 4.46 times as of March 31, 2025. Additionally, fund-based utilisation limits stood at 0.55% over the last 12 months, providing adequate backup for any contingent expenses.

ABOUT THE ENTITY

Macro Economic Indicator	Sector	Industry	Basic Industry
Fast Moving Consumer Goods	Fast Moving Consumer Goods	Agricultural Food & other Products	Edible Oil

Fortune Cotton and Agro Industries (FCAI) is a family-owned partnership firm established in 2009, based in Karnataka. The firm is currently led by Mr. Vishwanath Matti, the Managing Partner, along with three other partners—Mr. Sharath S. Sajjanar, Mr. Ashok S. Asuti, and Mr. Maritamappa M. Asuti—all belong to the same family. The firm derives over 90% of its revenue from the sale of edible oils, with the remaining contribution coming from cotton and related products. As of March 31, 2024, the firm has an installed capacity of 2.1 lakh MTPA in its edible oils division. In the cotton division, the installed capacities include 50 MT for the production of Cotton Ginning per day and 100 Kg for the production of Silk Reeling per day. Additionally, FCAI operates a 1 MW captive solar power plant, which meets approximately 90% of the firm’s total power requirements.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 22 - 23 (Audited - Annual)	FY 23 - 24 (Audited - Annual)	FY 24 - 25 (Provisional - Annual)
Operating Revenue	Rs.Crs.	1411.70	1040.36	1242.25
EBITDA	Rs.Crs.	15.44	10.71	12.78
PAT	Rs.Crs.	10.81	8.04	9.69
Tangible Net Worth	Rs.Crs.	67.51	90.28	106.16
Total Debt / Tangible Net Worth	Times	2.00	1.13	0.35
Current Ratio	Times	1.40	1.66	4.46

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction of the rated facilities include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	20.00	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	220.00	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
NFB SubLimit	ST	(50.00)	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		240.00	(Rupees Two Hundred Forty Crores Only)

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Deepthi Nair V. Rating Analyst deepthinair.v@brickworkratings.com	Suryanarayan N Associate Director - Ratings suryanarayan.n@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com	Customer Support \| CustSupport@brickwrokratings.com

Fortune Cotton and Agro Industries

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Karnataka Bank Ltd	Over Draft - Sanctioned	20.00	_	20.00	Simple##
2	Karnataka Bank Ltd	Letter of Credit - Sanctioned	_	215.00	215.00	Simple##
	Sub-Limit (Inland Letter of Credit) - Sanctioned		(50.00)
3	Karnataka Bank Ltd	Forward Contract - Sanctioned	_	5.00	5.00	Simple##
Total			20.00	220.00	240.00
TOTAL (Rupees Two Hundred Forty Crores Only)

## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate (%)	Maturity Date	ISIN Particulars	Complexity of the Instrument
Nil	Nil	Nil	Nil	Nil	Nil	Nil

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Nil	Nil	Nil	Nil

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