Natraj Proteins Ltd.

Brickwork Ratings reaffirms/revises the ratings for the Bank Loan Facilities of Rs. 45.50 Crs. of Natraj Proteins Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (17 Nov 2020)	Present
Fund Based	38.00	45.00	Long Term	BWR BB (Stable) (INC) Downgraded and migrated to INC	BWR BB /Stable Reaffirmation
Fund Based	17.00	0.00	Short Term	BWR A4 (INC) Downgraded and migrated to INC	_
Non Fund Based	0.50	0.50	Short Term	BWR A4 (INC) Downgraded and migrated to INC	BWR A4 Reaffirmation
Grand Total	55.50	45.50	(Rupees Forty Five Crores and Fifty 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

BWR has considered the audited financial statements upto FY2020, published provisional financials till December, 2020, projected financials upto FY23 and publicly available information and clarifications provided by the Company’s management.

The rating continues to draw strength from the long experience of the promoters in the edible oil industry, location advantage, consistent performance despite heavy competition and adequate net worth. However, the rating remains constrained by thin profit margins, susceptibility of its operating profitability to fluctuation in raw material prices and inherent risks associated with agro based industries and competition from other players in the industry and from substitute products like palm oil.

KEY RATING DRIVERS

Credit Strengths:

Experienced management :
The management has three decades of experience in the edible oil industry and the company has established relationships with its clients and suppliers with a minimum of 6 years with most of the top suppliers and customers.
Comfortable capital structure :
The capital structure marked by a comforatable overall gearing ratio remained comfortable at 1.23 times as per FY21 estimates (FY20: 0.87 times). The company largely avails working capital borrowings with the average utilisation being in the range of 55%. As on Sep 30, 2020, the company had no term debt.

Credit Risks:

Exposure to volatility in raw material :
NPL uses soya seeds or soya crude oil as its major raw material whose prices are globally determined on the basis of demand and supply factors,which in turn depends upon rainfall and area under cultivation.
Exposure to fragmented industry :
Intense competition in the edible oil segment limits bargaining power vis-a-vis suppliers and customers, there by affecting profitability. This is compounded by limited ability to pass on price hikes to customers.
Deterioration in Financial Performance :
Operating profit margin has declined in FY2020 over FY2019, mainly on account of decreased revenue. Further, the company has incurred net loss as per December, 2020 unaudited numbers. TNW stood at Rs. 35.64 crs as on 31Mar2020 (FY19: 35.38 crs). ISCR stood low at 1.25x in FY2020 (FY19: 1.43x).
Mild supplier and customer concentration risk :
Top three customers contributed to more than 30% of the company’s revenue which exposes it to revenue risk in the event of loss of any of these customers. Similarly, the supplier base of the Company is also concentrated with the company procuring more than 45% of its raw material requirements from its top three suppliers, which can cause disruptions in supply due to any major economic downturn.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered NPL’s FY20 financials, provisionals upto December, 2020, projections and applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive:

Substantial increase in revenue on the back of increased scale of operations, and sustenance of key financial metrics could lead to a positive rating action.

Negative:

The rating may be downgraded if revenues and key financial metrics deteriorate substantially.

LIQUIDITY INDICATORS - Adequate

Liquidity is characterized by cash & cash equivalents of Rs. 12.14 crs and cash credit utilization level is at 55% and Current ratio stood at 2.16x as on 30.9.2020. The company does not have any term loans, and thus no scheduled repayment liability.

ABOUT THE ENTITY

NPL, incorporated as a Public Ltd. Co. in 1994, was promoted by Mr. Kailash Sharma, Mr. J P Agarwal and Mr. Sharad Kumar Jain. The company is engaged in solvent extraction and refining of Soybean edible oil and Soya DOC. It procures soybean seeds from local markets/mandis. The Company's manufacturing plant at Itarsi(MP), has a seed crushing installed capacity of 1.00 lakh Tonnes per annum and a refining capacity of 25000 Tonnes per annum. The company's products / by products are Refined Soybean oil, Crude Soybean Oil, Soya DE-Oiled Cakes, Lecithin, Acid Oil, Fatty Acid, Soya Gums/ Sludge and Coal ash.

Company is selling Soya Refined Oil (edible Oil) in consumable packing under the brand name “Poushtik'' and De-Oiled-Cake is sold without brand name. Majority of oil is sold wholesale in drums/tankers to other resellers/re-packers.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	154.13	190.72
EBITDA	Rs.Crs.	4.52	6.00
PAT	Rs.Crs.	0.34	1.15
Tangible Net Worth	Rs.Crs.	35.64	35.38
Total Debt/Tangible Net Worth	Times	0.87	0.87
Current Ratio	Times	1.91	1.84

RATING HISTORY FOR THE PREVIOUS 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	45.00	BWR BB/Stable	17Nov2020	BWR BB (Stable) (INC)	24Jun2019	BWR BB+ (Stable)	29Mar2018	BWR BB+ (Stable)
Non Fund Based	ST	0.50	BWR A4	17Nov2020	BWR A4 (INC)	24Jun2019	BWR A4+	29Mar2018	BWR A4+
Grand Total		45.50	(Rupees Forty Five Crores and Fifty 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
Nilesh Ashok Gupta Rating Analyst nilesh.g@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Natraj Proteins Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	_	_	0.00
2	Packing Credit (PC) - Sanctioned	_	_	0.00
3	Bank Guarantee - Sanctioned	_	_	0.00
4	Secured Overdraft against Hypothecation - Sanctioned	_	_	0.00
5	Cash Credit - Sanctioned	25.00	_	25.00
6	Cash Credit (WHR) - Sanctioned	20.00	_	20.00
7	Bank Guarantee - Sanctioned	_	0.50	0.50
Total		45.00	0.50	45.50
TOTAL (Rupees Forty Five Crores and Fifty lakhs Only)

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