Anjalitai Canes Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 155.60 Crs. of Anjalitai Canes Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	155.60	Long Term	BWR B /Stable Assignment
Grand Total	155.60	(Rupees One Hundred Fifty Five Crores and Sixty lakhs 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 assignment of bank loan facilities of Anjalitai Canes Private Limited (“ACPL” or “the company”) factors the management experience in setting up of ethanol plants and healthy demand scenario for ethanol with favourable demand prospects in end user industries. The project also enjoys locational advantage due to its proximity to sugar cane belt. The company is entitled to receive various fiscal benefits under the National Biofuel Policy 2018, which are likely to support its profitability post commencement of operations. However, the rating is constrained by the nascent stage of the and yet to be achieved financial closure. The ratings also factor the significant project-related risks including obtention of balance statutory approvals, commissioning of the project without time and cost overuns, stabilising the operations with achieving the desired process parameters and cost efficiencies. BWR notes that the company would have significant debt servicing obligations compared to its projected cash accruals in the near to medium term. ACPL's operations remain exposed to regulatory risks and agro climatic conditions associated with sugar cane crushing and ethanol business.

BWR believes the business risk profile be maintained over the medium term. The outlook may be revised to Positive on achievement of financial closure, within the expected timeline and timely commencement of operations without significant cost overruns. The outlook may be revised to Negative in case of delay in execution of the project with significant time and cost overruns and more than the envisaged delay in stabilisation of operations

KEY RATING DRIVERS

Credit Strengths:

Promoters business experience :
Dr Anjali Nimbalkar, the main promoter, is an elected representative (MLA) from Khanapur taluka of Belgavi district, Karnataka and a member of All India Congress Committee. She is ably supported by other directors Mr Suresh Jadhav and Mr Deepak Desai who have adequate experience in setting up of sugar production and consultancy business for distillery projects focusing on fuel ethanol through various feedstocks. The top management shall be supported by a qualified operations team for day to day operations
Locational advantage :
The manufacturing unit is located at Halaga Village, Khanapur Taluk, Belagavi District, Karnataka State which is well connected to railway station and airport. The region surrounding the unit is a major sugarcane producing belt of Karnataka ensuring availability of sugarcane for sugar mills to produce molasses. The region also has many other sugar mills which provide the company option to procure C molasses from the open market if and when needed. The proposed site is also near to the Malaprabha river which is located 14 Km from the site, is the major source of water, which will ensure ample quantity of water over the year.
Positive industry outlook :
National Biofuel Policy 2018 envisages an indicative target of 20% blending of ethanol in petrol by 2030. The target for 2022 is 10% blending of ethanol in petrol. For the targeted 20% blending of ethanol in petrol by 2030, the country will need a 1,000 crore litres capacity. Central government is trying to advance the blending target to 20% by 2025 with an installed capacity of 900 crore litres.Currently, India has an annual ethanol production capacity of 684 crore litres. To increase the capacity and incentivize the production, the government has launched many policy initiatives.

Credit Risks:

Regulatory Risk :

The ethanol industry is highly regulated. The price and trade of sugarcane and sugar are regulated by the government. This may impact the availability and price of molasses, the primary raw material. The ethanol industry is highly dependent on the policy support of the government as the demand from petroleum industry has emerged only due to policy preference of the government in order to reduce the import of petroleum products. The ethanol has to be sold at the government determined price. Government interventions will remain a driver for the profitability of ethanol plants and continue as a key rating sensitivity factor.
Project implementation risk :
The company plans to set up a standalone molasses based ethanol distillery of 90 KLPD capacity. It will also install an incineration boiler and Turbine Generator (TG) for generating steam and power for the process and distillery. The incineration boiler will have a capacity of 30 tonnes per hour (TPH) with matching TG of 3.0 MW. The operations are expected to start by April 2023 subject to financial closure by November 2021. The company's project is yet to receive financial closure. BWR notes that in principle approval has been accorded by the lender and few regulatory approvals are yet to be obtained. The physical execution is expected post final sanction from the lender. The company expects to achieve the COD by April 2023 subject to financial closure by November 2021. There is a possibility of time and cost overrun in case of delay in approvals and any other disruptions typically associated with any greenfield project. Achievement of COD and stabilization and scaling up of operations as per the project plan are key monitorable.
Sugar mills remain vulnerable to industry cyclicality and agro-climatic risks :
The availability of sugar cane and C molasses is dependent on weather conditions and is vulnerable to pests and diseases that may impact not only the yield per hectare but also the recovery rate. These factors can have a significant impact on the company’s profitability. In addition, the cyclicality in sugar production results in significant volatility in sugar prices. The storage and transportation of molasses is regulated by the government, limiting the operational flexibility in inventory management. Although the promoters have experience in distillery operations, the erection of new plant and commencement of operations has its own technological challenges.

ANALYTICAL APPROACH - Standalone

The company does not have any subsidiary. BWR has taken the standalone approach towards the rating of the bank loan facilities of the company

RATING SENSITIVITIES

Going forward, the ability of the promoters to ensure project implementation within the envisaged time and costs, ensure timely financial closure and disbursement by the lenders, obtain the necessary regulatory approvals, stabilize and scale up operations as per the expected operating parameters would be the key rating sensitivities.

Positive:

Achievement of financial closure, within the expected timeline
Timely commencement of operations without significant cost overruns.
After commencement of commercial operations, sustained improvement in scale and profitability leading to healthy cash accruals.

Negative:

Delay in funding tie up and other pending approvals with various regulatory authorities.
Delay in project execution with significant time and cost overruns.
More than the envisaged delay in stabilisation of operations

LIQUIDITY INDICATORS - Stretched

This is a greenfield project under implementation. The company is yet to receive the final approval from its bank for the bank loan facilities of Rs.155.60 Crs. While the interest costs on the term loan would be capitalized during the construction period, the working capital facility would be availed upon commencement of operations. Hence, currently the company has nil debt servicing obligation. Apart from some small preliminary expenses being funded through unsecured loans from promoters, no project cost has been incurred till date. The ability of the promoters to support the project and attain early financial closure will be crucial for ensuring liquidity and implementation of the project. Timely implementation and stabilization of the project leading to estimated projections of revenue, profitability and cash accruals would support liquidity, going forward.

ABOUT THE ENTITY

Anjalitai Canes Private Limited (ACPL) is Private Limited company in incorporated on July 11,2014. The Registered office of ACPL is located at Vinayak Colony, Belagavi, Karnataka.ACPL proposes to set up a 90 KLPD C molasses based standalone ethanol distillery plant along with incineration boiler based co-gen plant of 3 MW capacity with zero liquid discharge (ZLD). The unit is to be established at Village Halaga, Taluka – Khanapura, District Belagavi, Karnataka. Estimated project cost is Rs. 198.75 Crs. to be funded by promoter's equity of Rs. 68.15 Crs. (34.29%) and bank/FI loan of 130.30 Crs. (65.71%).

The project is expected to be commissioned by April 2023 subject to financial closure by November 2021. The company is yet to incur any capital expenditure as on 30 Sep 2021.

Smt. Anjali Nimbalkar, Shri Suresh Jadhav and Shri Deepak Desai are the directors to this company.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21	FY 19-20
Operating Revenue	Rs.Crs.	Not Available	Not Available
EBITDA	Rs.Crs.	Not Available	Not Available
PAT	Rs.Crs.	Not Available	Not Available
Tangible Net Worth	Rs.Crs.	-0.06	-0.09
Total Debt/Tangible Net Worth	Times	-24.55	-14.93
Current Ratio	Times	96.76	115.08

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

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	155.60	BWR B/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		155.60	(Rupees One Hundred Fifty Five Crores and Sixty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Kaushik Srikanth V Rating Analyst kaushik.s@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Anjalitai Canes Pvt. Ltd.

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.)
1	Union Bank of India	Term Loan - Proposed	130.60	_	130.60
2	Union Bank of India	Cash Credit - Proposed	25.00	_	25.00
Total			155.60	0.00	155.60
TOTAL (Rupees One Hundred Fifty Five Crores and Sixty lakhs Only)

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