RATING RATIONALE
17Jan2022
Aroma Agrotech Pvt. Ltd.
Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 175.00 Crs. of Aroma Agrotech Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (04 Dec 2020) |
Present | ||
| Fund Based | 16.43 | 10.00 | Long Term |
BWR BBB+/Stable
|
BWR BBB +
/Stable Reaffirmation |
| 120.00 | 165.00 | Short Term |
BWR A2
|
BWR A2
Reaffirmation |
|
| (57.00) | (81.00) | ||||
| (28.80) | (28.80) | ||||
| Grand Total | 136.43 | 175.00 | (Rupees One Hundred Seventy Five Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
Reaffirmation in the ratings of bank loan facilities of Aroma Agrotech Pvt Ltd (AAPL or the company), factors in stable revenues and moderate financial risk profile, as indicated by improvement in net profit margins, net worth position, gearing and debt coverage metrics, besides the experience and support of the promoters. During FY21, the revenues of the company have remained stable despite challenging economic circumstances and liquidity in the company is adequate as indicated by healthy NWC, moderate utilisation of WC facilities and significantly lower term debt obligations.
The ratings are, however, constrained by decline in operating margins, high industry fragmentation and competition, business concentration risks and susceptibility of the business to agro climatic factors which are beyond the control of the company.
Going forward, the financial risk profile of the company during FY22 and FY23 is expected to remain moderate with improvement in revenues, healthy liquidity and comfortable gearing and debt coverage ratios.
Outlook: Stable
BWR believes the Aroma Agrotech Pvt Ltd.’s business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.
Credit Strengths:
-
Experienced Management :
The company is a family owned and family run business entity with Anil Kumar Garg, Praveen Garg, Sushil Kumar Garg and Vinod Kumar Garg (all brothers) as the directors in the company. All the promoters and directors have decade long experience in this line of activity.
-
Net Profit Margins :
Due to lower depreciation and borrowing expenses during FY21, net profit margins improved from 1.86% in FY19 and 1.84% in FY20 to 2.47% in FY21.
-
Networth and Gearing :
During FY21, TNW of the company has improved to Rs.99.17 crs against Rs.80.81 crs in FY20 and Rs.67.23 crs in FY19 due to retention of profits in the business. Overall gearing has improved to 1.68x (Total Debt/TNW) (P.Y 2.18x) and 2.16x (TOL/TNW) (P.Y 2.73x) due to improvement in net worth position. Tangible net worth position and overall gearing are expected to improve further during FY22 and FY23 due to retention of profits in the business.
-
Debt Protection metrics :
During FY21, debt coverage ratios have improved to 4.50x (ISCR) and 2.98x (DSCR) against 2.45x and 1.96x respectively during FY20. Improvement in debt coverage profile is de to growth in profits whereas borrowing expenses declined due to rational utilisation of working capital facilities.
-
Agro based Industry dependent on vagaries of nature and climatic factors :
Rice (Paddy) is the key input into the business. Paddy is a Kharif crop, production of which depends on monsoons. Any adversity on the timely and adequacy of rainfall, given the highly uneven pattern of rainfall observed in the last few years, would drastically affect the availability and price of paddy thereby affecting profitability of the business.
-
High competition and fragmentation :
Due to lower entry barriers by limited capital and technological requirements, small gestation period and easy availability of RM, industry is characterised by presence of large numbers of small and medium players reducing bargaining power with buyers and creating high fragmentation and competition in pricing of finished goods.
-
Concentration risks :
Revenues are primarily export oriented towards Saudi Arabia (SA), as almost 80% of the total annual revenues are derived from exports and of the total exports, almost 60% of the exports are directed towards SA.
-
Operating Profit Margins :
During FY21, operating margins remained at 4.91% against 4.89% and 5.43% during FY20 and FY19 respectively. Operating margins declined due to disportionate rise in export freight, transportation costs and export related expenses from Rs.34 crs in FY20 to Rs.50 crs during FY21.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below .
Upward: Substantial improvement in scale of operations and operating margins along with stable debt coverage and gearing ratios would support upward rating action.
Downward: Failure in growing scale of operations along with projections and/or deterioration in profit margins and gearing would attract downward rating action.
Liquidity in the company is strong as indicated by cash accruals, NWC and WC utilisation. The company has generated cash accruals of Rs.23.37 crs against term debt obligations of Rs.2.45 crs during FY21 and NWC of the company is Rs.73 crs as on 31st March 2021. Average utilisation of the WC facilities is approx. 65% for 12 twelve months ending October 2021. Business operations of the firm are working capital intensive with high inventory holding of approx. 119 days during FY21 against 131 days during FY19 and 122 days during FY20 respectively. During current FY22, the company has repaid all the existing term debts and does not propose any fresh term debt during remaining FY22 and FY23, due to which term debt obligations of the company are expected to remain almost NIL during remaining part of FY22 and FY23. Company is expected to generate cash accruals of Rs.17.89 crs during FY22 and Rs.21.92 crs during FY23. Average utilisation of the fund based WC facilities is expected to remain moderate between 65% and 75% in line with the past usage patterns.
Aroma Agrotech Pvt Ltd (AAPL), incorporated on 30 Sept 2009, with its registered office at Shop No. 145, First Flor, New Grain Market, Gharaunda, Karnal, is engaged in the manufacturing and sales (export and domestic) of basmati and non-basmati rice. Production facility is located in Gharaunda, Haryana with total installed capacity of 384000 MT per annum. The company is a family owned entity with Anil Kumar Garg, Praveen Garg, Sushil Kumar Garg and Vinod Kumar Garg as the directors in the company.
| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 742.62 | 737.64 |
| EBITDA | Rs.Crs. | 36.47 | 36.10 |
| PAT | Rs.Crs. | 18.36 | 13.58 |
| Tangible Net Worth | Rs.Crs. | 99.17 | 80.81 |
| Total Debt/Tangible Net Worth | Times | 1.68 | 2.18 |
| Current Ratio | Times | 1.36 | 1.31 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
NIL
ANY OTHER INFORMATIONNIL
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 10.00 |
BWR BBB+/Stable
(Reaffirmation) |
NA |
NA
|
04Dec2020 |
BWR BBB+Stable
() |
27Dec2019 |
BWR BBB+ Stable
() |
| Fund Based | ST | 165.00 |
BWR A2
(Reaffirmation) |
NA |
NA
|
04Dec2020 |
BWR A2
() |
27Dec2019 |
BWR A2
() |
| FB SubLimit | ST | (81.00) |
BWR A2
(Reaffirmation) |
NA |
NA
|
04Dec2020 |
BWR A2
() |
NA |
NA
|
| FB SubLimit | ST | (28.80) |
BWR A2
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Grand Total | 175.00 | (Rupees One Hundred Seventy Five Crores Only) | |||||||
Press Release, as on 03Dec2021
Advisory issued for delay in rating review.
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple
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Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Saurabh Agarwal Assistant Manager - Ratings Board : +91 11 2341 2232 saurabh.a@brickworkratings.com |
Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@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 | Canara Bank | Term LoanSanctioned | _ | _ | 0.00 | |
| 2 | Canara Bank | Term LoanSanctioned | _ | _ | 0.00 | |
| 3 | Canara Bank | Cash CreditSanctioned | 6.00 | _ | 6.00 | |
| 4 | Canara Bank | PC/PCFC/FDB/BRD/FBESanctioned | _ | 99.00 | 99.00 | |
| Sub-Limit (PC/PCFC) Sanctioned | (81.00) | |||||
| 5 | HDFC Bank | Cash CreditSanctioned | 1.60 | _ | 1.60 | |
| 6 | HDFC Bank | Export Packing Credit (EPC)Sanctioned | _ | 26.40 | 26.40 | |
| 7 | Punjab National Bank | PC/PCFCSanctioned | _ | 28.80 | 28.80 | |
| Sub-Limit (FDBP/FUDBP) Sanctioned | (28.80) | |||||
| 8 | Punjab National Bank | PC/PCFCProposed | _ | 10.80 | 10.80 | |
| 9 | Punjab National Bank | Cash CreditSanctioned | 2.40 | _ | 2.40 | |
| 10 | UCO Bank | Cash CreditSanctioned | _ | _ | 0.00 | |
| 11 | UCO Bank | EPC/PCFC/BDSanctioned | _ | _ | 0.00 | |
| Total | 10.00 | 165.00 | 175.00 | |||
| TOTAL (Rupees One Hundred Seventy Five Crores Only) | ||||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| N.A | 0 |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NIL |
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