Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 46.33 Crs. of Seron Granito Pvt Ltd
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (27 Jan 2021) |
Present | ||
Fund Based | 47.51 | 43.33 | Long Term |
BWR BB+ /Stable
Upgrade |
BWR BB +
/Stable Reaffirmation |
Non Fund Based | 4.00 | 3.00 | Short Term |
BWR A4+
Upgrade |
BWR A4 +
Reaffirmation |
Grand Total | 51.51 | 46.33 | (Rupees Forty Six Crores and Thirty Three lakhs Only) |
BWR has essentially relied upon the audited financial statements of Seron Granito Pvt Ltd (the 'company' or 'SGPL') upto FY21, management certified latest provisional financials for FY22 and projected financial statements for FY23, publicly available information and information/clarifications provided by the entity’s management.
The rating reaffirmation draws strength from stable operations with moderate capacity utilization, improvement in financial risk profile and adequate liquidity position. Further, the rating is supported by the vast business experience of the promoters, financial support and favorable location at ceramic hub Morvi, Gujarat. However, the rating is constrained by the risk of profitability remains susceptible to raw material, fuel price, foreign exchange fluctuations and high competition from other established players in the market.
BWR believes that the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
The rating draws comfort from promoters who are in the ceramic industry for more than a decade. Hence, the experience of the promoters and their understanding of the dynamics of the industry are expected to support the business risk profile. The company also benefit from their strong relationship with suppliers and customers.
The Company has reported a total operating income (TOI) of Rs. 92.11 Crs in FY20 and Rs. 102.16 Crs in FY21. 15-18% of revenue is generated from export sales to the countries like Russia, Saudi Arabia, and European countries and trading sales is 6% in FY21 as compared to 1% in FY20. The scale of operation remained moderate with 76% of capacity utilization in FY20 & 79% in FY21. On a provisional basis, the company has achieved sales of Rs. 94 crs till 13th January, 2022. Going forward, the company's ability to improve the scale of operation remain a key rating sensitivity.
The manufacturing facility of the Company is situated at ceramic tiles hub; Morbi- Gujarat, which provides easy access to low transportation and raw material costs.
A reduction in term loans on the back of timely repayments, leading to a relatively low gearing level of 1.72x in FY21 against 2.50x in FY20. Tangible net worth is comfortable at Rs. 22.80 Crs as on 31st March, 2021. Promoters have supported the company with interest bearing unsecured loans of Rs. 4.50 Crs in FY21. Debt protection metrics are comfortable with ISCR at 2.88x and DSCR at 1.96x in FY21.
SGPL’s profitability remains susceptible to raw material and fuel price fluctuations. The ceramic tile-manufacturing the industry is fragmented, which results in intense competition and exerts pressure on the profit margins. Further, the company' s 15-18% of revenue generates from export sales which exposes to the forex fluctuation risks. Operating profit margin dipped from 14.52% in FY20 to 12.61% in FY21. Further, it expects to fall further in FY22 due to movements in raw material and gas prices.
The real estate industry is the major end-user of ceramic tiles. Therefore, the company’s profitability and cash flows are highly vulnerable to the cyclicality in the real estate industry and demand/ economic situations of the other countries.
Positive:
Substantial growth in revenue and operating profitability while maintaining working capital cycle and gearing, infusion of funds by promoters as and when required, improvement in gearing and timely collection of payments will be key rating positives.
Negative:
Lower than expected growth in operating income, deterioration in gearing and debt coverage metrics, profitability will be key rating sensitivities.
LIQUIDITY INDICATORS - Adequate
The company generated a net cash accruals of Rs 8.84 Crs and Rs. 8.81 Crs in FY20 & FY21 respectively, which is sufficient against the current liability of long term debt. Further, the average cash credit utilization is 61% in the past six months ending on 30th November, 2021. The receivable period elongated from 111 in FY20 to 135 days in FY21 and conversion cycle stretched from 15 to 44 days in the last two fiscals. Current ratio is comfortable at 1.44x as on 31st March, 2021.
ABOUT THE ENTITYSeron Granito Pvt Ltd is promoted and managed by Harshil Patel and Ravi Patel and incorporated on 16th August 2016 at Morvi, Gujarat. The company is carrying out an activity of manufacturing Slab Glazed Vitrified Tiles (SGVT) with an installed capacity of 80,000 MTPA.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 102.16 | 92.11 |
EBITDA | Rs.Crs. | 12.89 | 13.37 |
PAT | Rs.Crs. | 3.48 | 3.05 |
Tangible Net Worth | Rs.Crs. | 22.80 | 19.32 |
Total Debt/Tangible Net Worth | Times | 1.72 | 2.50 |
Current Ratio | Times | 1.44 | 1.35 |
Not Applicable
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 | 43.33 |
BWR BB+/Stable
(Reaffirmation) |
27Jan2021 |
BWR BB+ Stable
(Upgrade) |
08Jan2020 |
BWR BB Stable
(Reaffirmation) |
NA |
NA
|
Non Fund Based | ST | 3.00 |
BWR A4+
(Reaffirmation) |
27Jan2021 |
BWR A4+
(Upgrade) |
08Jan2020 |
BWR A4
(Reaffirmation) |
NA |
NA
|
Grand Total | 46.33 | (Rupees Forty Six Crores and Thirty Three lakhs 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 | |
---|---|
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@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 | State Bank Of India (SBI) | Term LoanOut-standing | 27.66 | _ | 27.66 |
2 | State Bank Of India (SBI) | Cash CreditSanctioned | 15.00 | _ | 15.00 |
3 | State Bank Of India (SBI) | Bank GuaranteeSanctioned | _ | 3.00 | 3.00 |
4 | State Bank Of India (SBI) | Common Covid Emergency Line of Credit (CCECL)Out-standing | 0.67 | _ | 0.67 |
Total | 43.33 | 3.00 | 46.33 | ||
TOTAL (Rupees Forty Six Crores and Thirty Three lakhs Only) |
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