Brickwork Ratings reaffirms the rating for the Bank Loan Facilities of Rs. 13.80 Crs. of Sri Buchiyyamma Rice Mill
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (04 Feb 2021) |
Present | ||
Fund Based | 13.80 | 13.80 | Long Term |
BWR BB- /Stable
Reaffirmation |
BWR BB -
/Stable Reaffirmation |
(0.00) | (3.00) | ||||
Grand Total | 13.80 | 13.80 | (Rupees Thirteen Crores and Eighty lakhs Only) |
BWR has essentially relied upon the audited financials up to FY21, 8MFY22 provisional financials of FY22, projected financials up to FY23, publicly available information, and information/clarifications provided by the firm's management.
The rating reaffirms factors of experienced partners, adequate capital structure and adequate liquidity position, and locational advantages. However, the rating is constrained by revenue remains a moderate scale of operations and low profitability margins, moderate debt service coverage metrics, Constitution of the entity, agro-based commodities and intense competition, customer and working capital intensive nature of operations.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that the Sri Buchiyyamma Rice Mill business risk profile will be maintained over the medium term. The outlook may be revised to Positive in case of better than expected operating income and improvement in financial risk profile debt-protection indicators. The outlook may be revised to Negative if the operating metrics weaken or if larger than anticipated Capex leads to deterioration in credit metrics and liquidity
Credit Strengths:
The partners have experience in paddy processing and trading, which has helped the firm to understand local market dynamics and establish relationships with customers and suppliers.
The processing unit is located at East Godavari, Andhra Pradesh and is close to the paddy growing belt in Andhra Pradesh, which ensures availability of raw material (Paddy) directly from farmers and it incurs lower transport costs.
Adequate capital structure marked by the Partners capital, and gearing ratio were around Rs.13.91 Crs and 0.23 times, respectively as on 31st March 2021.
Revenue remains moderate at around Rs 59.65 Crs for FY21 as against Rs.55.46 Crs for FY20. On a provisional basis, the firm has reported a revenue of around Rs. 40 Crs for 8MFYFY22. The firm has achieved a moderate scale of operations despite of COVID-19 pandemic. Low profitability margins marked by net profit margin and operating profit margin were around 0.50% and 4.68% in FY21 respectively.
Constitution as a partnership firm has the inherent risk of a possible withdrawal of the capital by partners, which can adversely affect its capital structure.
Moderate debt service coverage metrics marked by the interest service coverage ratio and debt service coverage ratio were around Rs.1.26 times and 1.15 times, respectively as on 31st March 2021.
Since paddy and its by-product of rice bran is an agricultural commodity, its yield depends on the vagaries of the monsoon. It is exposed to inherent price fluctuation risk associated with agro-based commodities. Entry barriers in the rice milling industry are low on account of limited capital & technology requirements and low differentiation in the end product. This leads to intense competition and limits players’ pricing power, resulting in lower profitability.
As it is a firm, a standalone approach has been adopted and BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
Upward - Sustained improvement in scale of operations with improved profitability margins and capital structure. Specific credit metrics that could lead to an upgrade of the firm's rating include (1) Total Debt/Partners capital below 1.00 times on a continuous basis, (2) DSCR and ISCR greater than 3.0 times on a continuous basis.
Downward - Specific credit metrics that could lead to a downgrade if there is any decline in revenue, debt service coverage metrics and further there is a significant deterioration in the credit profile of the firm.
LIQUIDITY INDICATORS - Adequate
The liquidity position of the firm is adequate as its current ratio as on March 31, 2021, is moderate at 3.61 times and it had a cash & bank balance of Rs.4.83 Crs. The average CC utilization for the last 12 months is 60% and the firm is expected to generate net cash accruals of Rs.0.50 Crs and Rs.0.50 Crs as against the CPLTD Nil in FY22 and FY23 respectively.
ABOUT THE ENTITYSri Buchiyyamma Rice Mill(SBRM) was established in 1983, Tossipudi, East Godavari, Andhra Pradesh. SBRM procures Paddy from the farmers and commission agents and engages in the rice processing and trading. SBRM engages in the boiled rice process and does the raw rice process under the CMR scheme. The firm procures paddy majorly from the states of Andhra Pradesh, Telangana and Orissa and sells in Kerala. SBRM sells rice under the unregistered brands of Hindu Sitara and Star Sitara. The installed capacity of the firm is 144 MT per day and average utilization is more than 70% of the capacity. The SBRM's rice processing unit is spread across around 2 acres of the firm's own land. The firms entered a lease agreement with Sree Buchiyyamma Agro Private Limited for the godown facility. The firm has a 380 kva power facility to run the operations smoothly.
Mr. K Papa Reddy is the managing partner of the firm and is also director in the Sree Buchiyyamma Agro Private Limited.
Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 59.65 | 55.46 |
EBITDA | Rs.Crs. | 2.79 | 3.10 |
PAT | Rs.Crs. | 0.30 | 0.30 |
Tangible Net Worth | Rs.Crs. | 14.66 | 12.35 |
Total Debt/Tangible Net Worth | Times | 1.33 | 0.08 |
Current Ratio | Times | 2.02 | 4.38 |
ICRA has continued the rating of CRISIL B+/Stable, Issuer Not Cooperating on 9th June 2021 for the bank loan facilities Rs.25.00 Crs of Sri Buchiyyamma Rice Mill.
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 | 13.80 |
BWR BB-/Stable
(Reaffirmation) |
04Feb2021 |
BWR BB- Stable
(Reaffirmation) |
04Mar2020 |
BWR BB-Stable
(Assignment) |
NA |
NA
|
FB SubLimit | LT | (3.00) |
BWR BB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
Grand Total | 13.80 | (Rupees Thirteen Crores and Eighty 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 | |
---|---|
Prashanth Boorala Ratings Analyst Board : +91 40 2331 0161 / 2331 0071 prashanth.b@brickworkratings.com |
Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@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 | Union Bank of India | Open Cash Credit / Cash Credit (Hypothecation/Pledge)Sanctioned | 13.80 | _ | 13.80 |
Sub-Limit (Letter of Guarantee) Sanctioned | (3.00) | ||||
Total | 13.80 | 0.00 | 13.80 | ||
TOTAL (Rupees Thirteen Crores and Eighty lakhs Only) |
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