RATING RATIONALE
29Apr2020
Godawari Traders
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.8.00 Crs. of Godawari Traders
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||||
|---|---|---|---|---|---|---|---|
| Fund Based | |||||||
| Cash Credit Sanctioned | 08.00 | Long Term | BWR | ||||
| Sub Total | 8.00 | ||||||
| Grand Total | 8.00 | (Rupees Eight Crores Only) | |||||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
BWR has assigned a long term rating of BWR B- with a Stable outlook for the bank loan facilities of Godawari Traders.BWR believes that firm's business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERSBWR has essentially relied upon the audited financial statements of Godawari Traders of FY17, FY18, FY19 and projected financial statements of FY20, FY21, publicly available information and information/clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the partner/s. However, the rating is constrained by the scale of operations, weak financial risk profile and the constitution of the firm.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
- Extensive experience of partners :
The firm is currently being managed by experienced partners. The partners of the firm have almost two decades of experience in the industry. Their knowledge and experience has helped them in maintaining long term relationship with their suppliers.
Credit Risks:
- Shrinking Scale of operations :
The firm's operating income has witnessed a sharp decline of 60% at Rs 17.45 Crs in FY19 from Rs 48.08 Crs in FY18. As per the key figures for FY20 submitted the firm clocked sales of Rs 17.00 Crs.
- Financial risk profile :
The financial risk profile of the firm is weak characterized by declining tangible net worth of Rs 3.41 Crs in FY19 as compared to Rs 4.96 Crs in Fy18 due to the withdrawal of capital. The capital structure is leveraged with high gearing of 4.38 in Fy19. The coverage ratios of the firm are below unity for the last couple of years indicating the inability of the firm to service its debt obligations.
- Vulnerability to regulatory changes and COVID 19 Impact :
The alcoholic beverages industry in India is highly regulated with a large portion of the domestic market being controlled by state-owned corporations (the Government market). Tight controls placed by State Governments over distribution have resulted in low penetration of outlets for selling alcoholic beverages in the domestic market. Further, the nationwide lockdown on account of COVID 19 is expected to impact the projected sales in FY21.
- Constitution of the firm :
Godawari Traders being a partnership firm, remains susceptible to capital being withdrawn by the partners.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward the ability of the company to improve its scale of operations, financial risk profile and maintain its liquidity profile will be its key rating sensitivity.
Positive: The ratings may be upgraded with improvement in scale of operations ,profit margins and tangible net worth.
Negative: The ratings may be downgraded in case revenues of the company and profit substantially plunge from the current levels and gearing and debt service metrics deteriorate.
LIQUIDITY INDICATORS -
STRETCHED
Although the current ratio of the firm is 1.80x as of 31st March 2019 the liquidity has been stretched since the Cash Credit facilities are fully utilized. The cash and cash equivalent stood Rs 0.30 Crs and current investment was negligible as on 31t March 2019. The cash accruals as on 31st March 2019 were Rs 0.23 Crs.
ABOUT THE ENTITYGodawari Traders is a partnership firm established in April 1991. The firm is a wholesale distributor of liquor with its storage facility in Nagpur. The registered office is located at Shop No 109-112, Indra Arcade, Gandhi Putla Chowk Road, Sadar, Nagpur. The storage facility is located at Plot No 58, Lichdare layout, Suraksha Nagar,dattawadi Nagpur.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 17.45 | 48.08 |
| EBITDA | Rs.Crs. | 0.73 | 2.08 |
| PAT | Rs.Crs. | 0.17 | 0.45 |
| Tangible Net Worth | Rs.Crs. | 3.41 | 4.96 |
| Total Debt/Tangible Net Worth | Times | 4.38 | 3.59 |
| Current Ratio | Times | 1.80 | 2.39 |
NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY ANY OTHER INFORMATION RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended) COMPLEXITY LEVELS OF THE INSTRUMENTS -
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 | |
|---|---|
|
Nagesh K Ratings Analyst Board : 202267456 nagesh.k@brickworkratings.com |
Sushil Kumar Chitkara Associate Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 8.00 | _ | 8.00 |
| Total | 8.00 | |||
| TOTAL (Rupees Eight Crores Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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About Brickwork RatingsDisclaimer
Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.