Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 13.04 Crs. of Shubham Foods
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (12 Feb 2021) |
Present | ||
Fund Based | 9.00 | 13.04 | Long Term |
BWR B+
/Stable Upgraded |
BWR D
Downgrade |
Grand Total | 9.00 | 13.04 | (Rupees Thirteen Crores and Four lakhs Only) |
Brickwork rating has downgraded the rating of Shubham Foods to BWR D on account of stretched liquidity leading to delays in repayments of interest obligations of GECL. The rating is also constrained by modest scale of operations, climatic risk, proprietorship constitution and regulatory risk.
KEY RATING DRIVERSCredit Strengths:
Mrs. Saroj Agarwal is the proprietor of the firm. She has more than two decades of experience in the same industry. Daily operations are managed by both Mr Saroj Agarwal and her husband, Mr Pawan Kumar Agarwal. The experience of the management has enabled the firm to establish relations with the farmers and government agencies.
The firm processes non basmati rice which commands a huge demand in the domestic market as well as some of the international markets. The low prices of Indian non-basmati rice gives it a competitive advantage in the international market as compared to various other rice exporting countries.
Credit Risks:
The firm has delayed in interest repayments of GECL on account of stretched liquidity position.
Considering the intense competition and low profitability in the rice industry, the firm's operating income is in moderate range. The scale of operations of the firm over the years has been modest. The firm reported Total Operating Income amounting Rs.42.10 Cr. and Rs.38.00 Cr. in FY19 and FY20 respectively, registering a dip of almost 10% in FY20. In 9MFY21 the firm has achieved the revenue of Rs.32 Cr.
The farmers still rely largely on monsoon rains for their crops and any change in normal course of rains can affect the production of crops and thereby affecting the supply of paddy in the market.
The firm is exposed to an inherent risk of capital being withdrawn by the proprietor due to personal exigencies which may strain the working capital of the business.
The government influences the pricing of crops like wheat & rice in the market by declaring the MSP (Minimum Support Price) every year which may affect the final pricing and profitability of the rice millers and exporters.
Going forward, the company's ability to maintain its business risk profile would be the key sensitivities over the short to medium term.
Positive : The rating may be upgraded if the company shows a continuous track record of 3 months of timely repayment of term loan obligations.
Negative : Further deterioration in current liquidity position will be a credit negative.
LIQUIDITY INDICATORS - Stretched
Liquidity position of the company is also stretched, marked by weak Net Cash Accruals of Rs.0.25 in FY20. However it has been projected to increase to Rs.0.27 Cr. in FY21 (Proj.) Other liquidity indicators are also stretched as reflected by an average utilization of 100% in the last 6 months. Elongated conversion cycle of 121 Days in FY20 mainly on the account to high inventory days. Cash and Cash Equivalents were low at Rs.0.07 Cr. in FY20 with Current Ratio at 1.95X. However the firm has infused Unsecured loans amounting Rs.1.82 Cr. to provide liquidity support.
ABOUT THE ENTITYShubham Foods is a proprietorship firm located in Rudrapur, Uttarakhand. It was established in May 1998. The primary business activity of the firm is rice milling. Paddy is processed to produce rice and other by products such as rice bran and rice husk. Mrs Saroj Agarwal is the proprietor of the firm. She has about 20 years of experience in the industry. Daily operations are managed by both Mrs Saroj Agarwal and her husband, Mr Pawan Kumar Agarwal. Raw material (paddy) is procured directly from farmers or from local mandis. Once the paddy is procured, it is processed to produce rice, rice bran and rice husk. Out of the total output, about 67% is rice, 20% is rice husk, 7% is rice bran and the rest is waste. The installed capacity is 8 Tons/hr and it is 100% utilized. The mill works in two shifts of 8 hours each.There are 15 permanent employees and about 50-60 people are hired as contractual labour. The processed rice is packaged in bags of 25 and 50 Kgs. There are two godowns owned by the firm for storage of raw material and the finished goods. About 50% of the finished products are sold to wholesale dealers and 50% to the government.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 38.00 | 42.10 |
EBITDA | Rs.Crs. | 1.36 | 1.42 |
PAT | Rs.Crs. | 0.20 | 0.16 |
Tangible Net Worth | Rs.Crs. | 5.21 | 5.10 |
Total Debt/Tangible Net Worth | Times | 2.55 | 2.73 |
Current Ratio | Times | 1.95 | 1.99 |
Facilities | Current Rating (2021) | 2021 (History) | 2020 | 2019 | 2018 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 13.04 |
BWR D
|
12Feb2021 |
BWR B+/Stable
|
06Mar2020 |
BWR B Stable (Issuer Not Cooperating)
|
18Jan2019 |
BWR B+/Stable
|
NA |
NA
|
Grand Total | 13.04 | (Rupees Thirteen Crores and Four lakhs 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.
Analytical Contacts | |
---|---|
Aayush Verma Rating Analyst Board : +91 11 2341 2232 aayush.v@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@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 | 10.50 | _ | 10.50 | ||
2 | GECLSanctioned | 1.80 | _ | 1.80 | ||
3 | Term LoanOut-standing | 0.74 | _ | 0.74 | ||
Total | 13.04 | 0.00 | 13.04 | |||
TOTAL (Rupees Thirteen Crores and Four lakhs Only) |
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