Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 66.38 Crs. of Uttam Chand Rakesh Kumar
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (05 Jan 2022) |
Present | ||
Fund Based | 44.60 | 65.98 | Long Term |
BWR BB /Stable
Downgrade/ISSUER NOT COOPERATING* |
BWR BB +
Upgrade |
(0.00) | (25.00) | ||||
(0.00) | (5.00) | ||||
Non Fund Based | 0.40 | 0.40 | Short Term |
BWR A4
Downgrade/ISSUER NOT COOPERATING* |
BWR A4 +
Upgrade |
(10.00) | (10.00) | ||||
Grand Total | 45.00 | 66.38 | (Rupees Sixty Six Crores and Thirty Eight lakhs Only) |
BWR has essentially relied upon the audited financial statements of Uttam Chand Rakesh Kumar upto FY21, management certified provisional financials of 9MFY22 and projected financial statements of FY23, publicly available information and information/clarifications provided by the entity’s management.
The rating upgrade is based on established track of operations and stabilization of operation during FY22. However, the rating is constrained by the above-average financial risk profile, risk of withdrawal of capital being a partnership nature of constitution, vulnerable profit margins due to trading nature of business and risk associated with bulk imports from various countries.
BWR believes the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of a rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
The promoter Mr. Rakeshkumar Bhatia has experience of about four decades in the agro-industry. The extensive experience of the promoter and their understanding of the dynamics of the industry will continue to support the business risk profile.
The firm booked a net trading sales of Rs. 644.81 Crs in FY20, however, it drastically decreased to Rs. 303.35 Crs in FY21 due to prolonged lockdown and overall slowdown happened due to covid pandemic. Though, the sales increased during the in the current fiscal FY22 and recorded net sales of Rs. 425.13 Crs as on 31st December 2021.
The firm's financial risk profile is above average with analysed tangible net worth of Rs. 17.26 Crs in FY21, against Rs. 19.82 Crs in FY20. Analysed gearing is 3.81x in FY21 against 2.64x in FY20 on the back increase in debt. Nonetheless, promoters supported the firm in a way of interest free unsecured loans worth Rs. 12.40 Crs in FY21. Interest service coverage is 1.11x as on 31st March 2021.
Given the intense competition in the segments and trading nature of business, the firm’s operating profitability remains vulnerable. Also, the firm purchases around 80% of the material from countries like USA, Singapore , Europe etc, which carries the risk of fluctuation in forex rates. Even after the adverse situation arised due to pandemic the firm was able to improve the operating profit margins at 0.76% to 1.61% and net profit margins at 0.10% to 0.19% in FY20 & FY21 respectively.
The firm remains susceptible to risks associated with its constitution as a partnership firm, including the risk of capital withdrawal. However, the promoters supports the firm financially as and when required.
For arriving at its ratings, BWR has considered a standalone financials of the firm and applied its rating methodology as detailed in the Rating Criteria:
RATING SENSITIVITIES
Positive :
Improvement in operating income and profitability margins, and timely realization of collection.
Timely infusion of funds by promoters, thereby improvement in gearing below 2x.
Negative:
Any incremental increase in debt and deterioration of working capital cycle leading to stressed liquidity position.
LIQUIDITY INDICATORS - Adequate
Liquidity remains adequate in the absence of any major long term liabilities in the near term and financial support by promoters as and when required. The firm’s operates in a working capital intensive operation, which impacted the receivable cycle of the firm during covid pandemic. The collection cycle elongated from 24 days in FY20 to 67 days in FY21. Further, the firm’s average cash credit limit utilisation stood around 85% for the last six months ended as on 31 January, 2022. However, BWR expects that the liquidity will remain comfortable in near term with availment of guarantee emergency credit lines.
ABOUT THE ENTITYThe Delhi-based, UCRK was established in 2008 as a partnership firm by Mr. Rakesh Kumar Bhatia and his son, Mr. Akshay Kumar Bhatia. The firm is engaged in the trading of dry-fruits (mainly almonds and pistachios) and spices (cloves, poppy seeds, cumin seeds). UCRK imports mainly from the U.S., Dubai, Turkey, Australia, Germany and Madagascar.
KEY FINANCIAL INDICATORS (Standalone)
Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 303.35 | 644.81 |
EBITDA | Rs.Crs. | 4.88 | 4.89 |
PAT | Rs.Crs. | 0.57 | 0.67 |
Tangible Net Worth | Rs.Crs. | 11.58 | 13.36 |
Total Debt/Tangible Net Worth | Times | 6.16 | 4.41 |
Current Ratio | Times | 1.44 | 1.70 |
ACUITE and CRISIL Ratings has migrated its ratings of the bank loan facilities of the company to Issuer Not Cooperating* category vide its press release dated 25 June 2021 and 30 November 2020 respectively.
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)Facilities | Current Rating (2022) | 2022 (History) | 2021 | 2020 | 2019 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 65.98 |
BWR BB+
(Upgrade) |
05Jan2022 |
BWR BB Stable
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
19May2020 |
BWR BB+ Stable
(Assignment) |
NA |
NA
|
0.00 |
NA
|
NA |
NA
|
NA |
NA
|
05Oct2020 |
BWR BB+ Stable
(Reaffirmation) |
NA |
NA
|
||
FB SubLimit | LT | (25.00) |
BWR BB+
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
(5.00) |
BWR BB+
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
Non Fund Based | ST | 0.40 |
BWR A4+
(Upgrade) |
05Jan2022 |
BWR A4
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
19May2020 |
BWR A4+
(Assignment) |
NA |
NA
|
0.00 |
NA
|
NA |
NA
|
NA |
NA
|
05Oct2020 |
BWR A4+
(Reaffirmation) |
NA |
NA
|
||
NFB SubLimit | ST | (10.00) |
BWR A4+
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NA |
NA
|
Grand Total | 66.38 | (Rupees Sixty Six Crores and Thirty Eight 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 | HDFC Bank | Working Capital Demand LoanSanctioned | 25.00 | _ | 25.00 | |
Sub-Limit (WCDL) | (25.00) | |||||
Sub-Limit (Working capital loan) | (5.00) | |||||
2 | Kotak Mahindra Bank | Dropline ODOut-standing | 0.26 | _ | 0.26 | |
3 | Kotak Mahindra Bank | Forward ContractSanctioned | _ | 0.40 | 0.40 | |
4 | Kotak Mahindra Bank | Working Capital Term LoanOut-standing | 1.30 | _ | 1.30 | |
5 | Kotak Mahindra Bank | Cash CreditSanctioned | 20.00 | _ | 20.00 | |
Sub-Limit (Letter of Credit) Sanctioned | (10.00) | |||||
6 | State Bank Of India (SBI) | Cash CreditSanctioned | 15.00 | _ | 15.00 | |
7 | State Bank Of India (SBI) | Cash CreditProposed | _ | _ | 0.00 | |
8 | State Bank Of India (SBI) | GECLSanctioned | 4.42 | _ | 4.42 | |
Total | 65.98 | 0.40 | 66.38 | |||
TOTAL (Rupees Sixty Six Crores and Thirty Eight lakhs Only) |
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About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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