Mangalam Global Enterprise Ltd.

Brickwork Ratings reaffirms the ratings for the Enhanced Bank Loan Facilities of Rs. 145.73 Crs. of Mangalam Global Enterprise Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (06 Aug 2020)	Present
Fund Based	40.00	105.73	Long Term	BWR BBB-/Stable Assignment	BWR BBB - /Stable Reaffirmation
Fund Based	10.00	35.00	Short Term	BWR A3 Assignment	BWR A3 Reaffirmation
Non Fund Based	0.00	5.00	Short Term	BWR A3 Assignment	BWR A3 Reaffirmation
Grand Total	50.00	145.73	(Rupees One Hundred Forty Five Crores and Seventy Three 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 essentially relied on audited results upto FY21, Projections upto FY24, publicly available information and clarification/information provided by the company.

The rating continues to derive strength from the extensive experience of the management, its diversified business profile, established relationships with customers and suppliers, locational advantage, revenue growth, and adequate financial risk profile.

The ratings however continue to remain constrained on account of its thin profitability due to its presence in an intensely competitive agro-commodity industry along with limited value addition. The ratings also take into account the vulnerability of profit margins to volatile raw material prices, agro-climatic risk , foreign currency fluctuation and its presence in a highly fragmented and competitive industry. The ratings are further constrained due to the limited operating history of operations for wheat, rice, soya oil, mustard oil and allied products

The stable outlook indicates low likelihood of rating change over medium term. BWR believes that Mangalam Global Enterprise Limited’s business risk profile will be maintained over medium term

KEY RATING DRIVERS

Credit Strengths:

Experienced and competent management :
The company is promoted by Ahmedabad based Mangalam Group. The Promoter of the Company are: Vipin Prakash Mangal, Chanakya Prakash Mangal and Chandragupt Prakash Mangal. Mr. Vipin Prakash Mangal has more than 3 decades of experience in trading business. Mr. Chankya Prakash Mangal and Mr. Chandragupt Prakash Mangal decided to join the family business as a fourth generation. Apart from this, the company has a management team of qualified and experienced professionals adding value to the organization through their expertise.
Diversified Revenue profile :
The company is mainly into Manufacturing and Trading of Agricultural Products such as Castor Oil, Castor Seed, Castor Oil cake, High Protein Oil Cake, Cotton Bales, Cotton Seeds etc. The company has also started manufacturing and trading of Mustard seed, Mustard oil, Mustard cake, Soya seed, Soya refined oil, Soya cake, Wheat and Rice and other agri products from FY21. Apart from this the company generates revenue as service provider for liaising and clearing service and from lease rentals
Locational Advantage :
Gujarat accounts for approximately 75% of the total castor seed production in India. With Gujarat being the main centre for castor seed crop, the company enjoys the advantage of proximity to its main raw material source.
Revenue growth :
The Company has registered rapid growth in turnover in last 4 years. Revenue growth of 58% registered in FY21 after registering 74% growth in previous year. The Company has achieved revenue of Rs. 907.78 Crs with Net profit of 5.29 Crs in FY21. MGEL achieved a TOI of Rs225.83 Crores for the Q1FY22
Adequate financial Risk Profile :
The company has adequate net worth at around Rs 66.68 crs and capital structure is comfortably marked by moderate total outside liabilities to net worth of around 1.41 times for FY21. ISCR at 1.55 times and DSCR at 2.34 times is comfortable for FY21.

Credit Risks:

Profitability vulnerable to volatile raw material prices and agro-climatic risk :
Seasonal volatility and fluctuations in raw material prices may impact the revenue and thereby affect the margins. Agro-climatic risks related to castor seed production can impact the production and pricing of castor oil, which is its main raw material. Moreover, MGEL is exposed to unexpected foreign exchange price movements, as the export realisations are generally in USD terms. However, it tries to cover a bulk of the forex exposure through forward contracts.
High volume low margin business model and intense competition :
MGEL operates under high volume low margin business model. The financial operations are largely dependent on the volume of the business. The company has to generate higher volume in terms of quantity to increase profitability and to maintain commercial feasibility. The ratings are constrained by inherently thin margins in this line of business. Gross profit margin ranges from 1.5-4% for manufacturing of these agro based products. Apart from this the company faces competition from organised as well as unorganised players in the industry.

ANALYTICAL APPROACH - Standalone

Standalone

While assigning the ratings, BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive : BWR could revise the rating if it demonstrates substantial growth in revenue and profitability along with an improvement in its liquidity profile.

Healthy growth in scale of operations with total operating income (TOI) of more than Rs.1,000 Crs on sustained basis; the growth being primarily led by castor oil manufacturing segment
Improvement in profit margins to more than 2% on sustained basis while maintaining overall gearing below 1.50x

Negative : Negative pressure on the ratings could arise from weak performance and deterioration in liquidity or leverage metrics.

Decline in operating margin to below 1% or lower than expected revenue resulting in lower accruals.
Deterioration in capital structure beyond 1.50x on account of increase in working capital intensity or any major debt-funded capex.

LIQUIDITY INDICATORS - Adequate

The company has an adequate liquidity profile with absence of any major long-term repayment obligations and major capex plans. Further, the company had cash accruals of around Rs. 7.48 Crs and average utilization of bank limits is below 65% for the past 12 months. The company
has a short conversion cycle of 21 days and current ratio for FY21 is1.45 times. Going forward, company is expected to generate cash accruals of around Rs.10-15 crs which are adequate to meet scheduled nominal yearly debt repayments of Rs.1.5-Rs.2.0 crs over the next two years.

ABOUT THE ENTITY

Incorporated in 2010, Mangalam Global Enterprise Limited is set up by Ahmedabad based Mangalam group. The Promoter of the Company are: Vipin Prakash Mangal, Chanakya Prakash Mangal and Chandragupt Prakash Mangal. The company is mainly engaged in the business of manufacturing and trading of Castor Oil (F.S.G.), Castor De-Oiled Cake and High Protein Castor De-Oiled Cake for domestic and international markets. The company also engaged in the manufacturing and trading of cotton bales and cotton seeds. The company has also started manufacturing and trading of Mustard seed, Mustard oil, Mustard cake, Soya seed, Soya refined oil, Soya cake, Wheat and Rice and other agricultural products from FY21.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	907.78	574.06
EBITDA	Rs.Crs.	8.16	8.81
PAT	Rs.Crs.	5.29	3.75
Tangible Net Worth	Rs.Crs.	66.68	57.74
Total Debt/Tangible Net Worth	Times	1.17	0.56
Current Ratio	Times	1.45	2.24

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

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	105.73	BWR BBB-/Stable (Reaffirmation)	06Aug2020	BWR BBB-Stable (Assignment)	NA	NA	NA	NA
Fund Based	ST	35.00	BWR A3 (Reaffirmation)	06Aug2020	BWR A3 (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	5.00	BWR A3 (Reaffirmation)	06Aug2020	BWR A3 (Assignment)	NA	NA	NA	NA
Grand Total		145.73	(Rupees One Hundred Forty Five Crores and Seventy Three lakhs Only)

Press Release, as on 11Aug2021
Rating advisory for delay in periodic review

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
Priya Depala Senior Rating Analyst priya.d@brickworkratings.com	Dileep Narayan Singh Director dileep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Mangalam Global Enterprise 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	HDFC Bank	EPC/ PCFC/ FBP/ PSFC - Sanctioned	35.00	_	35.00
2	HDFC Bank	Bill Discounted (BD) - Sanctioned	_	30.00	30.00
3	HDFC Bank	GECL - Sanctioned	2.34	_	2.34
4	HDFC Bank	Short term loan-Pledge Funding - Sanctioned	_	5.00	5.00
5	HDFC Bank	Credit Exposure Limit (CEL) - Sanctioned	_	5.00	5.00
6	Punjab National Bank	Cash Credit - Sanctioned	25.00	_	25.00
7	Punjab National Bank	Covid -19 Emergency Line Credit - Sanctioned	1.95	_	1.95
8	Punjab National Bank	GECL - Sanctioned	1.44	_	1.44
9	Un tied portion	Cash Credit - Proposed	40.00	_	40.00
Total			105.73	40.00	145.73
TOTAL (Rupees One Hundred Forty Five Crores and Seventy Three lakhs Only)

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