Brickwork Ratings revises/reaffirms the ratings for the Bank Loan Facilities of Rs. 12.00 Crs. of Sri Annapurna Rice Industry
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (13 Mar 2021) |
Present | ||
Fund Based | 5.50 | 6.50 | Long Term |
BWR B /Stable
Reaffirmation |
BWR B +
/Stable Upgrade |
Non Fund Based | 4.50 | 5.50 | Short Term |
BWR A4
Reaffirmation |
BWR A4
Reaffirmation |
Grand Total | 10.00 | 12.00 | (Rupees Twelve Crores Only) |
BWR has essentially relied upon the audited financials up to FY21, provisional financials of FY22, projected financials up to FY24, publicly available information and information/clarifications provided by the firm's management.
The rating upgrades/reaffirms factors of experienced partners, improved revenue and margins in FY22 provisionals basis, locational advantages, and adequate liquidity position. However, the ratings are constrained by the moderate scale of operations, the constitution of the entity, agro-based commodities and intense competition, and the working capital intensive nature of operations.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that Sri Annapurna Rice Industry 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 extensive experience in the paddy processing and trading business, which has enabled the firm to build healthy 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.
The firm has achieved a revenue of around Rs 46.11 Crs for FY21 as against Rs.43.41 Crs for FY20. On a provisional basis, the firm has reported a revenue of around Rs.59.00 Crs for FY22. The profitability margins marked by, operating profit margin and net profit margin were around 1.24% and 3.54 % and 0.59% and 3.19% respectively for FY21and FY22 prov.
Below the average capital structure marked by low partners capital and moderate gearing was around Rs.2.91 Crs and 1.39 times respectively, as on 31 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.
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.
BWR has applied its rating methodology as detailed at the end of the document. BWR has adopted a standalone approach for arriving at its ratings.
RATING SENSITIVITIES
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 1.34 times. The average working capital utilization for the last 12 months is 90% and the firm is expected to generate adequate net cash accruals of Rs.0.35 Crs and Rs.0.43 Crs against the CPLTD of Rs.0.29 Crs and 0.21 Crs in FY23 and FY24 respectively.
ABOUT THE ENTITYSri Annapurna Rice Industry (SARI), established as a partnership firm in March 2017, is located at Mandapeta, East Godavari District of Andhra Pradesh. The firm has entered a lease agreement with Sai Krishna Raw & Boiled Rice Mill and Vijayalakshmi Rice Mill for processing paddy. It is spread across 3 acres of land with 2 rice processing units with a validity period of 6 years (06/01/2020 to 31/10/2026). SARI engaged in the milling of paddy to produce raw rice, parboiled rice, and by-products like broken rice, husk, and rice bran and sold the rice under the unregistered brand name of Gemini. The firm’s installed capacity is 22 Tonnes per hour and the utilized capacity is 90%. The firm procures paddy from the states of Bihar, Bengal, Orissa, Tamil Nadu, and Andhra Pradesh. The go down has a Capacity of 50,000 quintals of paddy. The firm undertakes job work for FCI under the Customs Milled Rice (CMR) scheme.
Mr.M Venkateswara Rao is the managing partner of the firm and has a managing interest in other entities also.
Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 46.11 | 43.71 |
EBITDA | Rs.Crs. | 0.57 | 0.64 |
PAT | Rs.Crs. | 0.27 | 0.18 |
Tangible Net Worth | Rs.Crs. | 2.91 | 2.72 |
Total Debt/Tangible Net Worth | Times | 1.39 | 2.35 |
Current Ratio | Times | 1.34 | 1.30 |
Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 6.50 |
BWR B+/Stable
(Upgrade) |
13Mar2021 |
BWR B Stable
(Reaffirmation) |
27Jan2020 |
BWR B Stable
(Assignment) |
NA |
NA
|
Non Fund Based | ST | 5.50 |
BWR A4
(Reaffirmation) |
13Mar2021 |
BWR A4
(Reaffirmation) |
27Jan2020 |
BWR A4
(Assignment) |
NA |
NA
|
Grand Total | 12.00 | (Rupees Twelve 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 | |
---|---|
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 | HDFC Bank | Cash CreditSanctioned | 6.50 | _ | 6.50 | |
2 | HDFC Bank | Bank GuaranteeSanctioned | _ | 5.50 | 5.50 | |
Total | 6.50 | 5.50 | 12.00 | |||
TOTAL (Rupees Twelve Crores Only) |
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