Simran Farms Ltd.

Brickwork Ratings downgrades the long term and short term ratings for the Bank Loan Facilities of Rs. 30.00 Crs. of Simran Farms Ltd. based on best available information, as the issuer did not cooperate.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (10 May 2021)	Present
Fund Based	30.00	30.00	Long Term	BWR BBB- /Stable Reaffirmation	BWR BB + /Stable ISSUER NOT COOPERATING* /Downgrade
Non Fund Based	(5.00)	(5.00)	Short Term	BWR A3 Reaffirmation	BWR A4 ISSUER NOT COOPERATING* /Downgrade
Grand Total	30.00	30.00	(Rupees 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
Note: *Issuer did not cooperate; based on best available information.

RATING ACTION / OUTLOOK

The rating of the Bank Loan Facilities of the company has been downgraded based on the available information as the client has not submitted complete information ascertaining the financial risk profile/performance of the company. We therefore continued the rating under the “Issuer Not Cooperating” category. We followed up with the client, vide telephone calls and email for required information. The client has not submitted latest Sanction Letter. BWR reached out to the banker via emails and calls but we have not received Banker feedback. Hence downgrades long term and short term rating to BWR BB+/stable/A4 and continue under Issuer not cooperating category.

KEY RATING DRIVERS

Credit Strengths:

Extensive Experience Of The Promoters :
Extensive experience of the promoters & strong presence of the group companies with over 3 decades of experience in the same line of business.
Moderate Scale of Operations and profitability :
Net Worth has improved to Rs. 26.78 Crs in FY22. Modest yet improving scale of operations with the total operating income improving to Rs. 393.70 Crs in FY22 from Rs 322.08 Crs in FY21. OPM declined to 2.81 % in FY22 as compared to 7.78 % in FY21. NPM is at 2.63% in FY22 as compared to 3.88% in FY21.
Improving Gearing & coverage ratio :
The gearing of the company stands improved at 1.04 times in FY22 VS 1.69 times in FY21. ISCR and DSCR at 5.73 times and 6.45 times in FY22 which declined from 14.15 times and 8.28 times in FY21. Both ISCR and DSCR at a moderate level, fluctuating and yet to stabilize.

Credit Risks:

Invariably exposed towards the cyclicality associated with the poultry sector :

Operating in the poultry industry, SFL stands inherently exposed towards the cyclicality associated with the sector. Any slowdown in the industry or disease outbreaks could therefore impact the revenues as well as profitability of the company.
Exposure to volatility in raw material prices could impact profitability :
The profit margins stand exposed to volatility in prices of maize and soya which are the key raw materials for feeds. The prices of maize and soya (which forms around 70% of the total raw material cost) are in turn dependent on agro-climatic conditions, international prices, Government regulations and demand from the poultry sector. Given the limited ability of SFL to pass on any price fluctuations in key raw materials, any adverse movement in the raw material prices could impact the profitability metrics of YPPL.
Operations in the highly fragmented industry which exerts pressure on margins to an extent; operations also exposed to cyclicality associated with the poultry sector :
SFL operates in the highly fragmented poultry industry, which is characterised by the presence of many small and medium-sized organized and unorganized players. The presence of numerous players fuels competition and limits their ability to command premium on their product offerings, thereby exerting pressure on margins to an extent. Like other entities in the poultry and related businesses, SFL remains exposed to the inherent industry risk of disease outbreaks like avian influenza (bird flu).
Exposed to counterparty risk :

Since Simran Farms Ltd carries out its operations by contracting its work, hence there are chances of high mortality in chicks, misuse of the feeds/grains provided to the chicks, incompetent hatching etc due to negligence of the counterparty.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied upon the standalone Audited financials of the company upto FY22, projections upto FY24, information/clarifications provided by the company.

RATING SENSITIVITIES

Positive: Net Worth improvement is sustainable over a period of time. Improved Gearing to 1.04 times and liquidity at 1.03 times becomes strengthening of overall financial risk profile.

Negative: Increased operating expenses due to rise in the price of raw material results profit margin decrease.

LIQUIDITY INDICATORS - Adequate

The liquidity position of the company is adequate. The current ratio stands at 1.03 times in FY22. Net cash accruals of 10.70 Crs in FY22 which is sufficient enough to repay back the debt obligation.CC utilization is at 100% as per banker's feedback received from Punjab National Bank. Cash and Bank is at Rs. 15.90 Crs.

ABOUT THE ENTITY

The Simran group was established in 1980 by the Bhatia Family. Later on, as a result of strong determination and goal of serving the society with nutritional poultry products and delivering actual value to its customers through products and services at large, the Company, Simran Farms Limited (SFL) was incorporated in 1984 in Indore, Madhya Pradesh and was converted into a public limited company in 1993. Today the group is popularly known as “Simran Group”.

The company is mainly focused on integration and consolidation of poultry products and activities. Its most modernized parent poultry breeding farms are located near Indore in Madhya Pradesh. The company’s hatcheries and contract farms are located in Madhya Pradesh, Chhattisgarh, Gujarat, Rajasthan, Punjab, Jammu & Maharashtra. The breeding farms have state-of-the-art automation systems, cages for scientific rearing and artificial insemination and balanced nutrition management for each bird. The company has also proposed to expand its parent farm capacity and will also be increasing the contract farms in near future.

Simran Farms Ltd is being headed by Mr. Harinder Singh Bhatia, Mr. Kawaljeet Singh Bhatia, Mr. Gurdeep Singh Bhatia as SFL directors and Dr. Surendra Singh, Mr. Surjeet Singh Kohli, Mrs. Jasmeet Kaur Bhatia as independent directors who altogether look after its overall working operations.

The major part of SFL’s revenue is generated from selling broilers. SFL supplies its products to wholesalers & retailers located in various states of India such as Maharashtra, Chhattisgarh, Gujarat and Madhya Pradesh.

SFL has feeds/units/hatchery farms/ shades located mainly in Indore, Bhopal, Chhatisgarh & Madhya Pradesh.

The registered office of the company is located at Indore, Madhyapradesh.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	393.70	322.08
EBITDA	Rs.Crs.	11.05	25.05
PAT	Rs.Crs.	10.35	12.49
Tangible Net Worth	Rs.Crs.	26.78	16.44
Total Debt/TNW	Times	1.04	1.69
Current Ratio	Times	1.03	0.93

KEY COVENANTS OF THE FACILITY RATED

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

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	30.00	BWR BB+/Stable (ISSUER NOT COOPERATING* /Downgrade)	10May2021	BWR BBB- Stable (Reaffirmation)	17Jan2020	BWR BBB- Stable (Reaffirmation)	NA	NA
NFB SubLimit	ST	(5.00)	BWR A4 (ISSUER NOT COOPERATING* /Downgrade)	10May2021	BWR A3 (Reaffirmation)	17Jan2020	BWR A3 (Reaffirmation)	NA	NA
Grand Total		30.00	(Rupees Thirty Crores Only)

Rating Advisory, as on 12May2022
Press Release, as on 12May2022
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
Rujuta Sadanand Zajam Ratings Analyst rujuta.sz@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Simran Farms 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	Punjab National Bank	Cash Credit - Sanctioned	30.00	_	30.00
	Sub-Limit (Inland LC / FLC) - Sanctioned		(5.00)
Total			30.00	0.00	30.00
TOTAL (Rupees Thirty Crores Only)

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