Murlidhar Ratanlal Exports Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 148.74 Crs. of Murlidhar Ratanlal Exports Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	140.46	Long Term	BWR BBB - /Stable Assignment
Non Fund Based	8.28	Short Term	BWR A3 Assignment
Grand Total	148.74	(Rupees One Hundred Forty Eight Crores and Seventy Four 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

Brickwork Ratings has assigned long term ratings of BWR BBB- with a Stable outlook to bank loans of Rs.140.46Crs and short term ratings of BWR A3 to the bank loans of Rs.8.28Crs, (aggregate rated amount Rs.148.74 Crs) of Murlidhar Ratanlal Exports Ltd.(MREL). BWR has considered the standalone financials of the Company and essentially relied upon the audited financial statements upto FY21, management certified provisional financials of 9MFY22, projected financials upto FY24 and publicly available information and clarifications provided by the entity’s management.

The ratings assigned factors in the recovery in the financials of MREL post restructuring on back of the steady cash flow in the form of conducting charges from Shaktigarh Textiles and Industries Ltd. (STIL) from April 2019 from Hastings Mill, and from November 2020 from Gondalpara Mill as per the restructuring terms, which are sufficient to meet scheduled debt repayment obligations of MREL.The comfortable financial and credit profile of STIL indicates smooth flow of rentals. The cash flows from one mill which is still operated by MREL provides cushion for interest and principal repayments while presence of an escrow account with waterfall mechanism at the Lead Bank, along with DSRA equivalent to 2 months interest and principal payments provides additional support to liquidity. Further, KM Industrial Investments Ltd.- the new promoters inducted under Change in Ownership framework,have undertaken to bring in more funds from its own sources, if required. The ratings also take into cognisance MREL's experienced management and the established position of the Company in the domestic and the international markets and the favourable prospects of the Jute industry which is supported by the government which provides various incentives for Jute mills.

The ratings are however constrained by the exposure of the industry to the volatility in prices of raw materials, the labour intensive Jute industry and intense competition from other players in the industry.

BWR believes the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of a rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Healthy and Stable Cash Flows :
MREL entered into a take or pay conducting charge agreement with STIL for two of its mills for a period of 15 years. As per the agreement MREL will receive a production linked charge on a per ton basis or fixed conducting charges subject to a minimum amount of Rs 1.77 Crs per month irrespective of production, which ensures steady cash flow for meeting debt obligations. Given STIL’s comfortable financial and credit profile, any disruption in the flow of conducting charges is not anticipated in the near to medium term. Additionally, cash accruals from Jute sales from India Jute Mill (owned and operated by MREL) which started flowing in after the new promoters infused funds in the business as per the RP,, provide further cushion as the Company does not have any loan obligations on these cash flows. During 9MFY22, the Company has started operations at the India Jute Mills and has already booked revenues of Rs.155 Crs with EBIDTA of Rs.24Crs.
Geographic Diversification: :
MREL has been in the Jute industry since the last four decades and has sales to domestic as well as export markets. It exports mainly to African countries accounting for around 20-25% of its total revenue during 9MFY22. In the domestic market MREL mainly sells to various state governments thereby diversifying its customer profile. The Company hedges its exposure in foreign currency through forward contracts for its export sales, hence there is no negative impact from currency fluctuations as the Company is not exposing itself to exchange volatility.
Experienced promoters and an established brand :
The promoters are highly experienced, having close to four decade long experience in the Jute industry and have been able to establish an established brand.
Goverment Support to Jute Industry :
The prospects of the Jute industry is boosted by the various aids announced by the government. The government has mandated a minimum of 90% of all food grains and 20% of sugar is to be compulsorily packed in jute packaging materials under the Jute Packaging Material Act, 1987. Besides,the National Jute Board, Ministry of Textiles, Govt.of India provides Grants under the JTM scheme as capital investment subsidy for plant & machinery. Jute mills are also entitled for interest subsidy against the term loan taken from the bank under WBIS 2000 scheme. MREL has received capital investment subsidies and interest subsidies under the schemes.

Credit Risks:

Raw Material price volatility :
MREL is exposed to raw material price volatility as raw jute prices are dependent on the crop size. Any adverse movement in the input prices will have a direct impact on the profitability of the Company. However, MREL has tie ups with suppliers in West Bengal and Assam who are large stockists purchasing directly from farmers. The Company gets a 90 days credit period from its suppliers. The company follows an asset light model, and does not stock huge quantities of raw materials. It is continuously buying from the market and engaging in sales at different price levels. No calls are taken for buying or selling during price fluctuations.
Labour Intensive industry :
The Company operates in a labour intensive industry and hence labor costs are the second major costs for the Jute mills low levels of capacity utilisation can lead to under absorption of labour cost.
Intense Competetion :
Jute industry in India faces stiff competetion from Bangladesh with respect to the Jute mills having access to cheap labour as well as better quality of raw jute and government aids in the form of subsidies. Besides, jute mills are also facing competetion from substitues like plastic and hemp which have widespread uses.

RATING SENSITIVITIES

Positive: Increase in revenues and regular and timely flow of lease rentals from STIL resulting in improved profitability leading to ISCR of over 2.5x and DSCR of over 2.0x on a sustained basis.

Negative: Any decline in revenues and delay in receipt of lease rentals from STIL resulting in declining profitability leading to ISCR of below 2.0x and DSCR of below 2.0x on a sustained basis.

LIQUIDITY INDICATORS - Adequate

MREL has an adequate liquidity position. There are only long term secured/unsecured borrowings.As on 31 December 2021, the outstanding balance of Term loans from banks was Rs.148.74Crs. Against a scheduled debt repayments of Rs.4.80Crs in FY22, the Company has projected cash accruals of Rs.13.73Crs indicating an adequate liquidity position.Besides, MREL has an escrow account with Bank of Baroda for receipt of conducting charges from where the debts are serviced as per waterfall mechanism. The Company has also maintained a DSRA of Rs.3.54Crs with its lender equivalent to 2 months interest and principal which provides additional cushion to liquidity. . There are no working capital limits availed by the Company at present.

ABOUT THE ENTITY

Murlidhar Ratanlal Exports Ltd (MREL) was incorporated on 27 November 1981 by Kolkata based Mr. Ajay Kajaria and Mr. Sanjay Kajaria, as a closely held limited company. The company is into manufacturing of jute & related products, and sells its products to both domestic and export markets. The company started operations by setting up a jute stitching plant in 1981 in Ghusuri, and now also has three jute mills in West Bengal, India. MREL is a large conglomerate in the Jute Industry and is a Government of India recognized Export House. The products manufactured by the company include Jute products like Jute Yarn, Carpet Yarn, Blended Yarn, Rope, Traditional Jute Bags, Hessian Clothes and bags, fine hessian clothes etc.The accounts of the company were restructured in September 2020, when, as per the restructuring package approved by the lenders, KMIL acquired 28.06% stake in the company and became the single largest shareholder with management control.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	23.30	108.61
EBITDA	Rs.Crs.	7.64	-27.30
PAT	Rs.Crs.	38.22	-53.59
Tangible Net Worth	Rs.Crs.	-100.69	-146.31
Total Debt/Tangible Net Worth	Times	-1.54	-1.16
Current Ratio	Times	0.37	0.24

KEY COVENANTS OF THE FACILITY RATED

Standard.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

NA.

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	140.46	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	8.28	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		148.74	(Rupees One Hundred Forty Eight Crores and Seventy Four 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
Madhu Sonthalia Senior Rating Analyst Board : +91 80 4040 9940 madhusonthalia@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Murlidhar Ratanlal Exports 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	Bank of Baroda	Term Loan - Sanctioned	7.23	_	7.23
2	Bank of Baroda	Working Capital Term Loan - Sanctioned	59.83	_	59.83
3	Bank of Baroda	Funded Interest Term Loan - Sanctioned	1.19	_	1.19
4	Bank of Baroda	ILC/FLC/BG - Sanctioned	_	3.74	3.74
5	Indian Bank	Working Capital Term Loan - Sanctioned	48.38	_	48.38
6	Indian Bank	Funded Interest Term Loan - Sanctioned	1.56	_	1.56
7	Punjab National Bank	ILC/FLC/BG - Sanctioned	_	4.54	4.54
8	Punjab National Bank	Funded Interest Term Loan - Sanctioned	0.81	_	0.81
9	Punjab National Bank	Working Capital Term Loan - Sanctioned	21.46	_	21.46
Total			140.46	8.28	148.74
TOTAL (Rupees One Hundred Forty Eight Crores and Seventy Four lakhs Only)

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