Avi Agri Business Limited

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 174.10 Crs. of Avi Agri Business Limited ("AABL" or "The Company")

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (03 Jul 2020)	Present
Fund Based	174.10	174.10	Long Term	BWR BBB/Negative Reaffirmation and change in Outlook	BWR BBB /Stable Reaffirmation and change in Outlook
	(0.00)	(10.90)
	(39.00)	(39.00)
	(109.00)	(90.00)	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
	(109.00)	(90.00)
	(26.10)	(26.10)
	(26.10)	(18.00)
	(39.00)	(39.00)
Non Fund Based	(2.00)	(2.00)	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
Grand Total	174.10	174.10	(Rupees One Hundred Seventy Four Crores and Ten 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

The rating reaffirmation and revision in outlook to Stable factors improvement in the company’s business risk profile supported by significant growth in revenue due to higher demand, favourable commodity prices and also stable financial risk profile during FY2021. The operating performance of the company is expected to remain stable on account of the favourable demand scenario and established position in the refined oil segment.

The rating continues to take comfort from extensive experience of the Company’s promoters and management in the edible oil industry. The rating also factors in the favourable location of the processing unit which is in proximity to soybean growing areas. The rating continues to derive comfort from the comfortable financial and liquidity profile of the Company

The rating however remains constrained by the inherently thin operating margins for companies in this line of business. Further, the rating also considers the susceptibility of the operations & profitability margins to adverse fluctuations in commodity prices and exchange rates. The rating is also constrained on account of the intense competition in the soya processing industry and also exposure to adverse change in government policies.

Outlook: Stable

The outlook has been revised from “Negative” to “Stable” as the Company reported significant revenue growth and stable financial risk profile during FY2021 amidst the disruptions caused by the outbreak of COVID-19 pandemic. Further, the “Stable” outlook reflects the BWR’s expectation that the Company will maintain its strong business risk profile over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Established presence with diversified portfolio: :
The Company has an established presence in the soya bean processing industry for the last one decade. Further, the Company benefits from the integrated nature of operations with a total seed crushing capacity of 1400 metric tonnes per day (TPD) and oil refining capacity of 300 TPD. The Company has also set-up a plant in 2018 for manufacturing powdered lecithin with installed capacity of 25 TPD which will help the Company to diversify its revenue profile and improve profitability. Hence, the Company offers a diversified product portfolio including refined soybean oil, soya de-oiled cake, lecithin, soya grits, soya flour, soya flakes and other products.
Extensive experience of the promoters and management :
The Company is promoted by the Indore based Jain family and is part of the AV Group which has presence in the agri-commodities industry for more than two decades. The extensive experience of the management has helped the Company to establish long standing relationships with its customers and suppliers in the domestic as well as overseas market.
Favourable location of the plant :
The manufacturing unit of the Company is favourably located in Ujjain, Madhya Pradesh a leading soybean producer state in the country. Further, the Company has set-up an authorised collection center at its unit to source soya bean seeds from local farmers. Hence, the Company benefits from low transportation cost and easy access to soybean seeds because of its proximity to raw material sources. The Company has also established mutually beneficial relationships with the nearby soya farmers, which helps in ensuring a regular supply of the seeds.
Comfortable Financial Risk Profile :
The Company also benefits from a comfortable financial risk profile marked by modest tangible net worth of Rs. 105.04 crores as on 31.03.2021 (provisional) as against Rs. 98.47 crores in the previous year. The gearing is comfortable at 2.15 times as on 31.03.2021 (provisional) as against 1.33 times in the previous year. The debt protection metrics is comfortable with interest coverage at 2.01 times and debt service coverage ratio at 1.69 times as on 31.03.2021 (provisional). The Company is expected to maintain a comfortable financial risk profile going forward inpsite of addition in the long term borrowings in the form of Working Capital Term loans (WCTL) under the GECL scheme due to expected improvement in net cash accruals of the company.

Credit Risks:

Susceptibility of the operations and profitability to volatility in commodity prices :
The operating income and profitability is vulnerable to adverse fluctuation in prices of raw material prices i.e. soya seeds. The company’s revenue varied between Rs. 853 to Rs. 1285 crores over the last three years ended fiscal 2021. The prices of the soya bean seeds have remained volatile in the past and the same is expected to remain so over the medium term.Also, the company is operating in the edible oil segment which is characterized by thin margin due to low value additive nature. The profitability is also vulnerable to volatility in forex rate in the absence of adequate hedging mechanisms as the company derives around 27 percent of its revenue from exports. Hence, the ability of the company to maintain stable operating performance amidst adverse movements to remain a key sensitivity factor.
Presence in the highly fragmented and competitive industry: :
The Company operates in a highly fragmented soya processing industry with a large number of companies in the organised and unorganised sector due to low entry barriers. This has resulted in severe competition and inherently thin profitability margins.
Exposure to adverse change in government regulations: :
The edible oil segment is vulnerable to government policies in the form of duties imposed on import of refined and crude edible oil, and volatility in edible oil prices. Further, the regulatory risks like the ban on soya seed imports, might also adversely affect the operating profitability of soya players, in case of high soya seed prices in the domestic market vis-a-vis the international market.

ANALYTICAL APPROACH - Standalone

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). BWR has principally relied upon the standalone audited financials up to FY20 and provisional financials for twelve months ended as on 31.03.2021, publicly available information and clarification/information provided by the Company.

RATING SENSITIVITIES

Positive:

Significant improvement in the net cash accruals resulting in the improvement in the debt coverage indicators.
Significant reduction in external debt of the Company.

Negative:

Significant decline in operating income and profitability leading to deterioration in debt coverage indicators and liquidity profile of the Company.
Majorly debt funded capacity expansion plan resulting in highly leveraged capital structure.

LIQUIDITY INDICATORS - Adequate

Although, the company has reported stable net cash accruals at Rs. 18.99 crores in FY2021(provisional) as compared to previous year. The current ratio stood at 1.28 times as on 31.03.2021(provisional) as majority of the current assets are funded through current liabilities. Further, the company’s average working capital limit utilisation stood at around 38 percent for the period from June, 2020 to July, 2021.

The company did not avail moratorium period under the COVID-19 scheme during the period from March 2020 to August 2020 indicating comfortable liquidity profile.However, the company has availed Working Capital Term Loan (WCTL) of Rs. 23.53 crores under the GECL scheme and same is expected to be repaid within 60 months including 12 months moratorium period. Hence, the annual debt repayment for the next two years is estimated at Rs. 12.10 crores and the same is expected to be adequately met through internal accruals.

ABOUT THE ENTITY

Avi Agri Business Limited was initially incorporated in the year 2009 as a private limited company with a registered office located in Indore, Madhya Pradesh. Subsequently, the constitution of the company was converted to a closed held public limited company under the present name. The company is presently promoted by Excel Agri Business Private Limited, Suraj Agri Business Pte. Limited, Koyna Enterprises Private Limited and Mr. Vipul Kumar Jain.The company commenced its operations in the year 2010.

The company is engaged in soya bean processing by carrying out solvent extraction and oil refining activities. The company sells a wide range of products including refined soybean oil, high protein de-oiled cake, soya lecithin, soya grits, soya flour, soya flakes, powdered lecithin and other products. The manufacturing unit of the company is located in Ujjain, Madhya Pradesh with a solvent extraction capacity of 1400 metric tonnes per day (MTPD), oil refining capacity of 300 MTPD and powder lecithin capacity of 25 MTPD. The key raw material required is soybean seeds which are mainly procured from traders mainly located in Madhya Pradesh with payment against delivery or advance payment. The company derives around 73 percent of its revenue from export to Southeastern and European countries against letter of credit at sight while the remaining 27 percent is derived from sales to the domestic market spread all over India against a credit period of 10 to 15 days. The company is part of the AV group which is engaged in a similar line of business; however AABL does not have any major purchase/sales transactions with any of the group companies.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	853.83	1277.28
EBITDA	Rs.Crs.	37.54	59.40
PAT	Rs.Crs.	6.97	14.05
Tangible Net Worth	Rs.Crs.	98.47	91.43
Total Debt/Tangible Net Worth	Times	1.33	1.24
Current Ratio	Times	1.28	1.44

KEY COVENANTS OF THE FACILITY RATED

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

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

ANY OTHER INFORMATION

Not Applicable

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	174.10	BWR BBB/Stable (Reaffirmation and change in Outlook)	03Jul2020	BWR BBBNegative (Reaffirmation and change in Outlook)	05Apr2019	BWR BBBStable (Assignment)	NA	NA
FB SubLimit	LT	(10.90)	BWR BBB/Stable (Reaffirmation and change in Outlook)	NA	NA	NA	NA	NA	NA
		(39.00)	BWR BBB/Stable (Reaffirmation and change in Outlook)	NA	NA	NA	NA	NA	NA
FB SubLimit	ST	(90.00)	BWR A3+ (Reaffirmation)	03Jul2020	BWR A3+ (Reaffirmation)	05Apr2019	BWR A3+ (Assignment)	NA	NA
FB SubLimit	ST	(90.00)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
FB SubLimit	ST	(26.10)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
FB SubLimit	ST	(18.00)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
FB SubLimit	ST	(39.00)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
NFB SubLimit	ST	(2.00)	BWR A3+ (Reaffirmation)	03Jul2020	BWR A3+ (Reaffirmation)	05Apr2019	BWR A3+ (Assignment)	NA	NA
Grand Total		174.10	(Rupees One Hundred Seventy Four Crores and Ten lakhs Only)

Rating Advisory, as on 14Jul2021
Press Release, as on 14Jul2021
As more than 12 months have lapsed since the last rating, BWR hereby informs that it has not been possible to review the rating within the stipulated time, mainly due to non-receipt of essential information required for 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
Shashikala Umanath Hegde Senior Ratings Analyst Board : +91 22 2831 1426, +91 22 2831 1439 shashikala.h@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Avi Agri Business Limited

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	Central Bank of India	Cash Credit - Sanctioned	26.10	_	26.10
	Sub-Limit (EBN/EBP/EBD/EBRD) - Sanctioned		(18.00)
	Sub-Limit (Export Packing Credit) - Sanctioned		(26.10)
2	Punjab National Bank	Cash Credit - Sanctioned	109.00	_	109.00
	Sub-Limit (Export Packing Credit) - Sanctioned		(90.00)
	Sub-Limit (FOBP / FOUBP /FOBNLC /) - Sanctioned		(90.00)
	Sub-Limit (Letter of Credit) - Sanctioned		(2.00)
	Sub-Limit (Working Capital Demand Loan) - Sanctioned	(10.90)
3	Union Bank of India	Export Packing Credit (EPC) - Sanctioned	39.00	_	39.00
	Sub-Limit (Cash Credit) - Sanctioned	(39.00)
	Sub-Limit (FOBP/FUDBP) - Sanctioned		(39.00)
Total			174.10	0.00	174.10
TOTAL (Rupees One Hundred Seventy Four Crores and Ten lakhs Only)

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