Ajanta Soya Ltd.

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 130.00 Crs. of Ajanta Soya Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (13 May 2021)	Present
Fund Based	15.00	15.00	Long Term	BWR BBB /Stable Upgrade	BWR BBB + /Stable Upgrade
Non Fund Based	115.00	115.00	Short Term	BWR A3+ Upgrade	BWR A2 Upgrade
Grand Total	130.00	130.00	(Rupees One Hundred Thirty Crores 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

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has upgraded the long-term rating to BWR BBB+ (Stable) and short-term rating to BWR A2 for the bank loan facilities of Ajanta Soya Ltd (ASL or “the company”).

The revision in the ratings takes into account the overall improvement in business and financial risk profile of the company in FY22 and Q1FY23, marked by increasing scale of operations and healthy capital structure and comfortable debt coverage indicators. The ratings continue to derive strength from the established track record of the operations, experienced promoters, diversified product portfolio, widespread distribution network and reputed client base. The ratings are, however,constrained by the susceptibility of margins to any adverse fluctuations in the raw material prices and forex rates coupled with inherent risk in the industry of intense competition.

Outlook: Stable

BWR believes that the business and financial risk profile of ASL will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The outlook may be revised to 'Positive' in case revenue, profitability and solvency position show a sustained improvement leading to an improved financial and liquidity profile. The rating outlook may be revised to 'Negative' in case the profitability generated is much lower than anticipated, there are aggressive debt-funded capex plans, or there is a significant deterioration in the overall liquidity profile of the company.

KEY RATING DRIVERS

Credit Strengths:

Established track record of operations and experienced management :
The company commenced its operations in 1992 and has a successful track record of three decades in the existing line of business. ASL’s long track record and the extensive experience of promoters have helped establish relations with various stakeholders for its business. The company was established and is managed by the Goyal family, holding 46.85% equity stake in ASL as of March 31, 2022. Furthermore, the promoters are assisted by a team of experienced professionals in managing the company’s daily business operations.
Increasing scale of operations with a healthy solvency profile :
Total operating income (TOI) of the company has improved from Rs. 931.40 crs in FY21 to Rs. 1345.14 crs in FY22, with an increase of 44.50% on the year-on-year basis. The same was on the back of better sales realizations and increased volume sold in some of the product categories (Vanaspati and Bakery products). The TOI of the company has increased at a CAGR of 25% over the last four years. The operating profit (in absolute value terms) of the company improved from Rs. 36.34 crs in FY21 to Rs. 47.48 crs in FY22, while the PAT improved from Rs. 25.14 crs in FY21 to Rs. 42.20 crs in FY22. The operating and net profit margins stood at 3.53% and 3.14%, respectively (PY:3.90% and 2.70%, resp). The ISCR of the company improved significantly to 54x in FY22 compared to 21x in FY21. This was on the back of improved profitability in absolute value terms and lower interest cost incurred during the year. The overall gearing ratio stood at Nil, as on March 31, 2022 (PY:0.04x).

In Q1FY23 (UA), the company has achieved an operating income of Rs. 361.05 Cr. (a year-on-year increase of 7.5%). The operating and net profit margins stood at 4.30% and 3.04% (3.99% and 2.58% in Q1FY22), respectively; while the ISCR stood at 50.65x during the quarter (75.77x in Q1FY22).
Wide spread distribution network and reputed clientele :
The brands of ASL are backed by an extensive distribution network as the company operates through its strategically located depots in Jaipur, Noida, Meerut, Agra. Also, ASL has penetrated deeply in the market with its emphasis on providing value goods to consumers through its C&F agents and 500 dealers. ASL’s client base consists of reputed players like Britannia Industries Ltd, Parle Biscuits Pvt Ltd, Anmol Bakers Ltd, ITC Limited, Bector Food Specialities Ltd, Surya Food Agro Ltd. and many more. ASL is currently catering with over 100 different packing sizes for more than 10 brands. The most popular brand of ASL for vanaspati/ cooking oil are “Dhruv” and “Anchal”.
Diversified product portfolio and geographical presence :
The company manufactures & sells refined oil (72.43%), vanaspati oil (9.47%) and shortening products for bakeries (18.10%). The products manufactured by the company find end use in FMCG, restaurants & household consumption. The company sells their products under brands viz. “Dhruv, Anchal, Parv, Nuti 1992, ASL Pure and Fine Fingers” and enjoys reputed market share particularly in North and East Indian market i.e. Rajasthan, Delhi, Haryana, Uttar Pradesh, Punjab, Himachal, Uttarakhand , Uttar Pradesh, Jammu & Kashmir, Bihar, Madhya Pradesh & Guwahati.

Credit Risks:

Susceptibility of margins to fluctuations in raw material prices and forex rates :
The profitability margins of the company are vulnerable to fluctuations in the prices of raw materials,crude edible oil, the prices of which generally exhibit high volatility. Out of the total purchases, more than 70% purchases are imports, which exposes the profitability margins to any adverse fluctuations in the forex rates also. However, in order to mitigate the risk of price volatility, ASL uses forward contracts to hedge against its foreign currency exposures relating to the underlying transactions. Out of its total imports arounds 50% are only hedged, on an average. Since the company is not hedging its forex exposure fully, the company is exposed to volatility in forex prices.
Intense competition in the industry :
The edible oil industry is highly fragmented with the presence of both organized and unorganized players in the downstream segment providing similar products. The operating margins of edible oil refiners are generally low owing to low value addition involved in the business and fragmented nature of industry with the presence of a large number of small-sized players and few large players in the branded segment. Hence, the company faces competition from larger domestic players leading to intense competition.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the rating criteria detailed in the criteria links below.

RATING SENSITIVITIES

Positive: BWR may revise the ratings upward in the case there is substantial improvement in revenue, profitability and overall financial risk profile of the company.

Negative: BWR may revise the rating downward in the case there is substantial decline in revenues, profitability or there is a material moderation in the solvency or overall liquidity profile of the company.

LIQUIDITY INDICATORS - Adequate

The company has an adequate liquidity position. There are no long term secured/unsecured borrowings from banks/NBFC as on March 31, 2022. The company generated cash accruals of Rs. 42.45 Crs in FY22 against a NIL CPLTD. For FY23 also, the company is projected to generate cash accruals of Rs. 39.58 Crs against a NIL CPLTD. thereby indicating an adequate liquidity position. Working capital utilization for the FB limit stood at almost NIL in the last 12 months ended July-2022; while, for the NFB limits it remained at ~85%.

ABOUT THE ENTITY

Ajanta Soya Ltd. (ASL) was incorporated on 13th January 1992 under companies Act, 1956. The Company is engaged in the primary business of manufacturing of Vanaspati and various kinds of cooking oil with shortening products for bakery like biscuits, puffs, pastries and other applications. Various brand names used by the company include Dhruv, Aanchal, Parv, ASL Pure, Nutri 1992 and Fine Fingers. ASL also offers its products as food ingredients to serve food manufacturers and the food service industry. Listed on Bombay Stock Exchange Ltd., the company went Public with the Initial Public Offering in the year 1993. The plant of the company is located in the industrial town of Bhiwadi, Rajasthan.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	1345.14	931.40
EBITDA	Rs.Crs.	47.48	36.34
PAT	Rs.Crs.	42.20	25.14
Tangible Net Worth	Rs.Crs.	123.19	79.35
Total Debt/TNW	Times	Not Available	0.04
Current Ratio	Times	1.58	1.58

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	15.00	BWR BBB+/Stable (Upgrade)	13May2021	BWR BBB Stable (Upgrade)	07Apr2020	BWR BBB- Stable (Assignment)	NA	NA
Non Fund Based	ST	115.00	BWR A2 (Upgrade)	13May2021	BWR A3+ (Upgrade)	07Apr2020	BWR A3 (Assignment)	NA	NA
Grand Total		130.00	(Rupees One Hundred Thirty Crores 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
Aanchal Gupta Ratings Analyst aanchal.g@brickworkratings.com	Sudeep Sanwal Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ajanta Soya 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	Standard Chartered Bank	Letter of Credit - Sanctioned	_	30.00	30.00
2	Standard Chartered Bank	Credit Exposure Limit (CEL) - Sanctioned	_	4.00	4.00
3	State Bank Of India (SBI)	ILC/FLC - Sanctioned	_	73.00	73.00
4	State Bank Of India (SBI)	Credit Exposure Limit (CEL) - Sanctioned	_	6.00	6.00
5	State Bank Of India (SBI)	Cash Credit - Sanctioned	15.00	_	15.00
6	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	2.00	2.00
Total			15.00	115.00	130.00
TOTAL (Rupees One Hundred Thirty Crores Only)

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