Brickwork Ratings reaffirms the long-term ratings for the Bank Loan Facilities of Rs. 16.00 Crs. of Bhardwaj Overseas Pvt. Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (10 Mar 2021) |
Present | ||
Fund Based | 9.53 | 16.00 | Long Term |
BWR BB/Stable
Upgrade |
BWR BB
/Stable Reaffirmation |
Grand Total | 9.53 | 16.00 | (Rupees Sixteen Crores Only) |
The Rating Outlook is Stable because BWR expects that ‘Bhardwaj Overseas Pvt. Ltd.’ financial risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a likelihood of rating change over the medium term. The slight improvement in revenues and profit margins has not made much impact on rating outlook.. The tangible net worth has also improved in FY21(Prov.). The rating outlook may be revised to 'Positive' in case the revenues and profit show show more than expected figures and fresh capital will introduce. The rating is, however, constrained by an elongated conversion cycle, stiff competition from other reputed and established players in the market.
KEY RATING DRIVERSCredit Strengths:
Mr. Vinod Bhardwaj has industry experience of almost 14 years. Mr. Sunil Bhardwaj has an experience of 11 years in the rice industry. Their knowledge and experience have helped them in maintaining a long-term relationship with their clients in domestic and international markets. Initially Company started its operations by taking rice mill on lease but in 2018, it has established its own rice mill. Within 4 years of operations, company has gained access to international market and domestic market. The manufacturing facility of the company is located in Haryana which has an advantage in terms of skilled labourers, logistics, raw material availability and vendor management.
The Scale of operations remained moderate during FY19 amounting to INR 52.39 crores because the company started its own rice mill in December 2018 but in FY 2020, the revenue of the company increased by 86% i.e. to Rs. 97.50 Crs. and further increased to Rs. 110.32 Cr. in FY21. The projected revenue for FY 22 is Rs. 143.50 Crs as per the management of the company. The revenue of the company is in the increasing trend.
The entry barriers are low on account of limited capital, technology requirements, and low differentiation in the end product leading to intense competition from both organized and unorganized players in the rice milling business and limiting the pricing power which ultimately results in low profitability.
The debt protection metrics of the company have slightly increase as ISCR & DSCR stand at 1.27x and 1.13x in FY21(Prov.) against 1.26x & 1.09x in FY 20 which still shows the difficulty of the company to meet its interest and debt obligations in time. The gearing of the company is stretched as Total Debt/TNW and TOL/TNW decreased from 13.82x & 20.85x in FY20 to 6.48x & 6.68x in FY21(Prov.) due to net-worth increased at the same level in FY 21.
The availability of paddy is seasonal and depends on the monsoons and irrigation facilities. Shortage of raw materials may lead to fluctuations in the prices of paddy and rice. This is compounded by the limited scope for passage of hike in raw material costs to customers. Profitability is determined by the minimum support price and prevailing market rice prices.
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, reduction in operating expenses, improve its profitability margins, the debt servicing capability & liquidity would be key rating sensitivities.
Upgrade : The rating may be revised for an upgrade if the company is able to achieve significant growth in revenue along with a significant improvement in profit margins, current ratio and sustained improvement in working capital management.
Downgrade : The rating may be revised negatively if revenue and profit margins substantially deteriorate from current level and if there is an overall deterioration in the financial risk profile of the entity. Any additional borrowing by the company may lead to further deterioration in debt protection metrics and profit margins.
LIQUIDITY INDICATORS - Adequate
The Company has a Cash & Bank balance of INR 3.67 Crs in FY21(Prov.). The current ratio of the company is 1.77x in FY21(Prov.) which is above the industry average. The average % utilization of the CC limits is approximately 67% in the last six months. The firm generated net cash accruals of Rs. 0.96Crs in FY 21(Prov.) against CPLTD of Rs. 0.36 Crs in FY 21(Prov.) and the net cash accruals is projected to be Rs. 1.16 Crs in FY 22 against the CPLTD of Rs. 0.36 Crs in FY 20 indicating the availability of funds to meet its debt obligations. Hence, Overall liquidity is adequate. DSCR & ISCR has been slightly increased from 1.09X and 1.26X in FY20 to 1.13X and 1.27X in FY21(Prov.)
ABOUT THE ENTITYBhardwaj Overseas Private Limited was incorporated in 2015 having its registered office in Jind, Haryana. The company commenced its business operations in 2016. The directors of the company are Mr.Vinod Bhardwaj and Mr. Sunil Bhardwaj. The company is a manufacturer, exporter, and supplier of Basmati rice of different varieties. The company sells its product under its own brand name "Zarifa". The rice processing facility of the company is located at Karnal, Haryana.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 97.50 | 52.39 |
EBITDA | Rs.Crs. | 2.42 | 2.27 |
PAT | Rs.Crs. | 0.24 | 0.10 |
Tangible Net Worth | Rs.Crs. | 2.56 | 2.36 |
Total Debt/Tangible Net Worth | Times | 13.82 | 4.92 |
Current Ratio | Times | 1.52 | 1.36 |
NA
NA
ANY OTHER INFORMATIONNA
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)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 | 16.00 |
BWR BB/Stable
(Reaffirmation) |
10Mar2021 |
BWR BBStable
(Upgrade) |
NA |
NA
|
29Nov2019 |
BWR BB-Stable
(Assignment) |
NA |
NA
|
Grand Total | 16.00 | (Rupees Sixteen Crores 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.
Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Kartik Arora Ratings Analyst kartik.a@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
---|---|---|---|---|---|---|
1 | UCO Bank | Term LoanOut-standing | 1.18 | _ | 1.18 | |
2 | UCO Bank | Cash CreditSanctioned | 13.92 | _ | 13.92 | |
3 | UCO Bank | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 0.90 | _ | 0.90 | |
Total | 16.00 | 0.00 | 16.00 | |||
TOTAL (Rupees Sixteen Crores Only) |
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