Shri Gurudatt Sugars Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 768.12 Crs. of Shri Gurudatt Sugars Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (30 Jun 2021)	Present
Fund Based	538.57	766.12	Long Term	BWR BBB/Stable Reaffirmation	BWR BBB /Stable Reaffirmation
Non Fund Based	1.00	2.00	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Grand Total	539.57	768.12	(Rupees Seven Hundred Sixty Eight Crores and Twelve lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
Note: Rated amount enhanced from Rs 539.57 crore

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has reaffirmed the rating of BWR BBB/ Stable/ BWR A3 to the bank loan facilities of Rs. 768.12 crore of Shri Gurudatt Sugars Limited (“SGSL” or “The Company”).

The ratings continue to reflect the established position of SGSL in the sugar and distillery business and its healthy operating efficiency and average financial risk profile. These strengths are partially offset by the large working capital requirement and susceptibility to regulatory changes and fluctuations in sugar prices.

Outlook: Stable

SGSL will continue to benefit from its established market position in the sugar and distillery industry. A stable outlook indicates a low likelihood of rating change over the medium term

KEY RATING DRIVERS

Credit Strengths:

Healthy operating efficiency, driven by integrated operations :
The company has an integrated nature of operations as it houses, the crushing unit (6000 TCD), a co-generation plant of 21MW, to meet its power requirements along with the regular sale of surplus electricity to the power distribution companies (discom) and a Distillery plant of (60 KLPD) which provides a cushion against the cyclicality of the sugar operations. The power is sold to Maharashtra State Electricity Distribution Company Ltd, vide a PPA valid till 2027; wherein the applicable tariff for FY2023 is Rs 6.76 per unit. The diversified operations help the company to maintain its revenue and profitability.

Sustainability of the improved performance and expected improvement in sales post operationalisation of the additional 140 KPLD Distillery unit will remain a key monitorable
Average financial risk profile :
Financial risk profile is marked by a moderate networth and average gearing of Rs 219 crore and 2.28 times, respectively, estimated as on March 31, 2022. (based on Management certified provisional financials) Debt protection metrics are average too, with interest coverage 1.72 times, estimated for fiscal 2022. (FY 2021 - 1.47 times)
Established presence in the sugar and distillery industry :
The two-decade-long experience of the promoters in the sugar and distillery industry, their strong understanding of market dynamics, and healthy relationships with suppliers and customers should continue to support the business. The company is actively engaged with the farmer community to enable them to improve cane production. The continued support by way of providing fertilizer and education on the betterment of farming has resulted in cane yield going up from 40-50 qtls /hectare to 100 qtls/hectare. Revenue is estimated at around Rs 509 crore for FY 2022.

Credit Risks:

High regulatory risks and volatility in sugarcane yield and prices :
The government regulates the sugar industry by fixing raw material prices in the form of State Advised Prices and Fair & Remunerative Prices. The government also regulates the domestic demand and supply through the restrictions on imports and exports. Additionally price fluctuations of sugar products exposes SGSL to volatility in revenue.
Susceptibility of profitability to volatility in raw material prices and Agro climatic risks. :
The raw material (sugarcane) and the final product (sugar) are sensitive to fluctuations in commodity prices and thereby impacting the overall revenue of the Company. While the price of sugarcane is dependent on the monsoons, the price of sugar is inherently dependent on the production of sugarcane and the quantity of sugar in the open market. However this risk is mitigated to some extent as the price of sugar is supported by MSP. The raw material i.e. sugarcane is an agricultural crop with high water requirements and is dependent on monsoons. Any changes in monsoons adversely affects the crops growth and hence in turn affects the Company’s revenues. This is mitigated to a certain extent by the availability of irrigation facility in the Kolhapur area of Maharashtra where the plant is located.
Large working capital requirement :
Operations are working capital intensive as reflected in a conversion cycle of over 340 days for the last 4 financial years through FY 2022. Driven by a huge inventory of over 360 days. As crushing begins from November-December and lasts till April, the company has to maintain a huge inventory to meet demand throughout the year. The same leads to higher dependence on working capital debt to meet the requirements.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered SGSL’s standalone financials and applied its rating methodology as detailed in the Rating Criteria

RATING SENSITIVITIES

Positive:

Revenue growth and steady operating margin, leading to higher-than-expected cash accrual
Significant improvement in financial risk profile with improved gearing

Negative:

A steep decline in revenues and/or profitability, resulting in lower than expected cash accruals
Further sizeable stretch in the working capital cycle

LIQUIDITY INDICATORS - Adequate

Liquidity is adequate, the company is expected to generate cash accruals of over Rs 80 crore in FY2023 and FY 2024 against repayment obligations of Rs 27.5 crore and Rs 31.65 crore in FY 2023 and FY 2024 respectively, The bank limit utilisations are moderate with average utilisation for the past 6 months through April 2022 being ~50%. Liquidity is further supported by unencumbered cash and cash equivalents of over Rs 25 crore. The current ratio is however modest for FY 2022 estimated at 1.06 times.

ABOUT THE ENTITY

SGSL was incorporated on 12th Jan 2000 and is promoted by Shri Bhagwanrao G Ghatge & his son Shri Madhavrao B Ghatge. It is engaged in the business of manufacturing sugar and allied activities such as generating Power & distillery unit. The factory is located in Takliwadi village, Kolhapur district of Maharashtra which is a sugarcane rich belt. It has access to sugarcane from Maharashtra & Karnataka border villages (4kms away from factory). ~ 10,958 farmers are associated with the company for sugarcane production

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	457.90	442.86
EBITDA	Rs.Crs.	62.90	60.96
PAT	Rs.Crs.	11.20	18.54
Tangible Net Worth	Rs.Crs.	164.78	154.55
Total Debt/TNW	Times	2.49	1.74
Current Ratio	Times	1.09	0.94

KEY COVENANTS OF THE FACILITY RATED

Not Applicable

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

ANY OTHER INFORMATION

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	766.12	BWR BBB/Stable (Reaffirmation)	30Jun2021	BWR BBBStable (Reaffirmation)	01Jun2020	BWR BBBStable (Reaffirmation)	26Mar2019	BWR BBBStable (Reaffirmation)
Non Fund Based	ST	2.00	BWR A3 (Reaffirmation)	30Jun2021	BWR A3 (Reaffirmation)	01Jun2020	BWR A3 (Reaffirmation)	26Mar2019	BWR A3 (Reaffirmation)
Grand Total		768.12	(Rupees Seven Hundred Sixty Eight Crores and Twelve lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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 Criteria

Analytical Contacts
Arbez Noshir Karbhari Ratings Analyst arbez.k@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Shri Gurudatt Sugars Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

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 Loan - Sanctioned	23.46	_	23.46
2	Canara Bank	Term Loan - Sanctioned	40.36	_	40.36
3	Canara Bank	Term Loan - Sanctioned	0.92	_	0.92
4	Canara Bank	Term Loan - Sanctioned	0.27	_	0.27
5	Canara Bank	Term Loan - Sanctioned	83.00	_	83.00
6	Canara Bank	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	63.00	_	63.00
7	Canara Bank	Bank Guarantee - Sanctioned	_	2.00	2.00
8	Canara Bank	GECL - Sanctioned	11.02	_	11.02
9	Canara Bank	GECL - Sanctioned	18.44	_	18.44
10	Cosmos Cooperative Bank	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	75.00	_	75.00
11	Dombivli Nagari Sahakari Bank Ltd.	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	30.00	_	30.00
12	Sangli Urban Co-operative Bank	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	8.50	_	8.50
13	ShamRao Vitthal Co-operative Bank	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	70.00	_	70.00
14	State Bank Of India (SBI)	Cash Credit (WHR) - Sanctioned	_	_	0.00
15	The Kalyan Janta Sahakari Bank Limited	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	25.00	_	25.00
16	Union Bank of India	CECL - Sanctioned	_	_	0.00
17	Union Bank of India	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	135.00	_	135.00
18	Union Bank of India	Term Loan - Sanctioned	83.00	_	83.00
19	Union Bank of India	Term Loan - Sanctioned	20.44	_	20.44
20	Union Bank of India	Cash Credit - Sanctioned	_	_	0.00
21	Union Bank of India	Term Loan - Sanctioned	1.77	_	1.77
22	Union Bank of India	Term Loan - Sanctioned	39.75	_	39.75
23	Union Bank of India	GECL - Sanctioned	15.90	_	15.90
24	Union Bank of India	GECL - Sanctioned	21.29	_	21.29
Total			766.12	2.00	768.12
TOTAL (Rupees Seven Hundred Sixty Eight Crores and Twelve lakhs Only)

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