Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.244.63 Crs. of Vishwaraj Sugar Industries Ltd. Particulars.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (20 May 2022) |
Present | ||
Fund Based | 175.00 | 244.63 | Long Term |
BWR BBB-/Stable
Upgrade |
BWR BBB -
/Stable Reaffirmation |
Non Fund Based | (10.00) | (10.00) | Short Term |
BWR A3
Upgrade |
BWR A3
Reaffirmation |
Grand Total | 175.00 | 244.63 | (Rupees Two Hundred Forty Four Crores and Sixty Three lakhs Only) |
Brickwork Ratings (BWR) reaffirms the bank loan rating of Vishwaraj Sugar Industries Ltd (VSIL or the company).
The rating continues to factor in the experience of promoters in the sugar industry, the favorable location, the diversified revenue profile of the integrated unit, and established relationships with farmers for the procurement of sugarcane. The ratings remain constrained by working capital-intensive operations, agro-climatic risks, susceptibility to regulatory changes, and the cyclicality of the sugar industry.
BWR believes that VSIL’s 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.
Credit Strengths:
VSIL is based in Belgaum, Karnataka, with an established track record of operations of more than three decades in the sugar industry. The company has been able to maintain long-standing relations with its customers and has also undertaken the diversification of the revenue mix to mitigate the risk arising from cyclicality in the sugar industry. The company has benefited from qualified and experienced management, supported by a team of well-qualified and experienced professionals as the second line of management. The vast experience of the management has helped the company maintain long-standing relations with its customers and suppliers.
The revenue profile of VSIL is diversified as the company generated revenue from sugar sales, power generation, and distillery product sales. The company has a fully integrated manufacturing set-up on 132 acres of land at Belgaum, Karnataka.
The manufacturing set-up of VSIL is at Bellad, Belgaum, a high sugar recovery zone. The weather in the region is suitable for sugarcane crop production, due to which raw material is easily available to VSIL from local farmers. The recovery rate for FY22 improved to 12.01% from 11.70% in FY21.
Due to the accretion of profits, the company’s TNW had increased to Rs.282.59 Crs as on 31 March 2022 as against Rs.226.01 Crs as on 31 March 2021.
Owing to this, the company’s total gearing improved to 1.31x as on 31 March 2022 as against 1.66x as on 31 March 2021.
Due to an increase in revenue from the distillery division from 13% in FY21 to 32% in FY22, the operating profit margin for FY22 improved to 19.98% as against 14.58% in FY21 since the margins on Ethanol are relatively higher than on sugar.
Due to increased revenue from the distillery division from 13% in FY21 to 32% in FY22, the debt coverage indicators of the company improved in FY22. The ISCR and DSCR for FY22 improved to 2.90x and 1.81x, respectively, as against 1.74x and 1.16x in FY21.
The sugarcane crop, being an agri-commodity, is dependent on weather conditions and is also susceptible to plant pests and diseases that may adversely impact the yield and recovery rate for the crop. Hence, the cyclicality in sugar production leads to volatility in sugar prices. Furthermore, the performance is also dependent on government support in the form of a Minimum Support Price for sugar, a Fair Remunerative Price for sugarcane, and export subsidy.
The business operations of VSIL are working-capital-intensive due to seasonality in the availability of the sugarcane crop. As a result, the inventory days of the company stood high, at 328 days as on 31 March 2022 as against 302 days as on 31 March 2021. Due to this, the working capital requirements of the business are relatively high.
BWR has relied on the standalone audited financial results of VSIL up to FY22, unaudited financial results for Q1FY23, projected financials up to FY24, publicly available information, and clarifications/information provided by the management.
RATING SENSITIVITIES
Positive: If the company manages to achieve its projections and improve the profitability margins as envisaged, the same would be positive for the ratings.
Negative: A deterioration in sales and key financial indicators, and higher-than-projected debt would be negative for the ratings.
LIQUIDITY INDICATORS - Adequate
The company’s current ratio was comfortable, at 1.14x as on 31 March 2022, and it had a cash and bank balance of Rs.13.16 Crs as on 31 March 2022. The average CC utilization for the last 6-month period ending July 2022 is around 53%.
The company is expected to generate cash accruals of Rs.60.13 Crs and Rs.65.98 Crs in FY23 and FY24, respectively, against a principal debt repayment of Rs.38.26 Crs and Rs.30.91 Crs.
ABOUT THE ENTITYVishwaraj Sugar Industries Ltd. (VSIL) based in Belgaum, Karnataka, and was incorporated in May 1995; it is listed on the BSE and NSE. It is engaged in the manufacturing of sugar, alcoholic spirits by distillation including ethanol and natural alcohol vinegar, and generation of power. The company has a fully integrated plant at Bellad Bagewadi, Belgaum District in North Karnataka. The company procures only sugarcane as raw material from local farmers and utilises the by-products for distillery unit and power generation.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 21-22 (Audited) |
FY 20-21 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 468.75 | 426.46 |
EBITDA | Rs.Crs. | 93.45 | 62.19 |
PAT | Rs.Crs. | 60.16 | 8.29 |
Tangible Net Worth | Rs.Crs. | 282.59 | 226.01 |
Total Debt/TNW | Times | 1.31 | 1.66 |
Current Ratio | Times | 1.14 | 1.12 |
India Ratings has migrated the Bank loan rating of VSIL to IND BB/Issuer Not Cooperating in Jan 2022.
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 | 244.63 |
BWR BBB-/Stable
(Reaffirmation) |
20May2022 |
BWR BBB-Stable
(Upgrade) |
27Aug2021 |
BWR BB+Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NFB SubLimit | ST | (10.00) |
BWR A3
(Reaffirmation) |
20May2022 |
BWR A3
(Upgrade) |
27Aug2021 |
BWR A4+
(Assignment) |
NA |
NA
|
NA |
NA
|
Grand Total | 244.63 | (Rupees Two Hundred Forty Four Crores and Sixty Three 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 | |
---|---|
Prashant Sahadev Mondkar Ratings Analyst Board : +91 22 2831 1426, +91 22 2831 1439 prashant.sm@brickworkratings.com |
Chintan Dilip Lakhani Director- Ratings chintan.l@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 | Bank of India | Cash CreditSanctioned | 46.00 | _ | 46.00 | |
2 | Bank of India | Working Capital Demand LoanSanctioned | 69.00 | _ | 69.00 | |
3 | Bank of India | GECLSanctioned | 39.63 | _ | 39.63 | |
4 | State Bank Of India (SBI) | Cash Credit (WHR)Sanctioned | _ | _ | 0.00 | |
5 | State Bank Of India (SBI) | Working Capital Demand LoanSanctioned | 90.00 | _ | 90.00 | |
Total | 244.63 | 0.00 | 244.63 | |||
TOTAL (Rupees Two Hundred Forty Four Crores and Sixty Three lakhs Only) |
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