Brickwork Ratings reaffirms and simultaneously withdraws the ratings for the Bank Loan Facilities of Rs.163.36 crs. of Aries Agro Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (08 Feb 2021) |
Present | ||
Fund Based | 136.16 | 136.16 | Long Term |
BWR BBB /Stable
Reaffirmation |
BWR BBB
/Stable Reaffirmation/Withdrawal |
Non Fund Based | 27.20 | 27.20 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation/Withdrawal |
Grand Total | 163.36 | 163.36 | (Rupees One Hundred Sixty Three Crores and Thirty Six lakhs Only) |
Brickwork Ratings (BWR) has reaffirmed the long-term rating to BWR BBB (Stable) and short-term rating to BWR A3+ to the bank loan facilities of Aries Agro Ltd (AAL or the company) and simultaneously withdrawn it with immediate effect. The issuer has requested via mail dated 17th January, 2022 to withdraw the rating and submitted No Objection Certificate (NOC) from all the bankers.
Reaffirmation of ratings factors in the improved financial performance of the company in FY21 and H1FY22, coupled with continued strength such as company’s experienced promoters, established long track record of over five decades with a demonstrated execution capability, diversified product portfolio with wide spread distribution network and comfortable financial risk profile. However, these strengths are partially offset by the working capital intensive nature of operations with an elongated operating cycle and inherent risk associated with agricultural sector along with intense competition.
BWR has principally relied upon the consolidated audited financial results of AAL upto 31st March 2021, H1FY22 unaudited financials and publicly available information.
Credit Strength
Improved financial performance with comfortable financial risk profile :
Aries Agro Ltd (AAL) reported Total operating income which grew by 28% y-o-y to Rs.381cr in FY 2021 from Rs.296 cr in FY20, driven by healthy monsoons during this period. The revenue growth continued into H1FY22 having revenues of Rs.226cr, a y-o-y growth of 10% over the corresponding period H1FY21 : Rs.205cr. Operating margins of the company also remained healthy at 15.44% in FY21 (PY 14.28%). The company has shown consistent improvement in its financial risk profile as depicted by a comfortable Net worth of Rs.217cr (PY Rs.202cr) and moderate gearing of 0.63 times as on March 31, 2021. Debt protection metrics for FY21 also remained adequate with Interest Service Coverage ratio (ISCR) of 2.27 times and Net Cash Accruals to Total Debt at 0.19 times. The same is expected to improve going forward with increase in cash generation and repayment of total debt which stood at Rs.138cr in FY21 (PY154cr).
Extensive experience of the promoters in the agro-chemicals industry:
The company commenced its operations in 1969 and has a successful track record of more than five decades in the existing agrochemical business line. AAL’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 Mirchandani family, holding 52.66% equity stake in AAL as of December 31, 2021. Furthermore, the promoters are assisted by a team of experienced professionals in managing the company’s daily business operations.
Diversified product portfolio, wide customer base and established distribution network :
The company manufactures & sells nutrients including chelated micronutrients, speciality fertilizers, secondary nutrients and water soluble NPK fertilizers for plants and currently owns around 85 brands. The product portfolio finds application at various stages of farming. The company’s strong distributorship emanates from a strong network of 6800 plus registered dealers & distribution network.
Credit Risks
Working capital intensive nature of operations :
AAL sells its products to dealers/ distributors who in turn offer credit period to farmers as per the crop cycle, thus leading to high receivable days. On account of seasonality in sales and to ensure product loyalty, AAL's hold a huge stock of inventory thus leading to high inventory days. Thus AAL's operations are working capital intensive in nature as evident by elongated operating cycle of 218 days in FY21 (304 days in FY20), however it improved in FY21.
Inherent risk associated with the agricultural sector along with intense competition :
The industry derives sales from the agriculture sector which is highly dependent upon the sowing season and vagaries of rainfall. One of the other major restraints to growth of the agriculture micronutrients market is the lack of awareness among farmers in developing countries regarding appropriate dosage and proper application of micronutrients, thereby limiting its demand. Further, the company faces stiff competition from unorganized players in the market due to non regulated nature of the industry.
Aries Agro Limited (AAL) was founded in 1969 by the Mirchandani family, having more than four decades of experience in agrochemical business. The promoter group holds 52.66% equity stake in the company as on December 31, 2021. It is primarily engaged in manufacturing and sale of nutrients including micronutrients, speciality fertilisers, secondary nutrients and water soluble NPK fertilizers for plants in India and abroad. It is listed on both Bombay Stock Exchange (BSE)and National Stock Exchange (NSE). They have 4 manufacturing units in India with a capacity of 95,400 MT per annum which are located in Mumbai, Hyderabad, Chhatral & Lucknow. It is an ISO certified company. They have 85 brands which are successfully tested at over 100 research institutions in India and abroad.
STATUS OF NON-COOPERATION WITH PREVIOUS CRANIL
ANY OTHER INFORMATIONKey Financial Indicators (Consolidated)
Particular | Unit |
FY19 | FY20 | FY 21 |
Result Type | Audited | Audited | Audited | |
Total Operating Income | Rs. Cr | 265.32 | 296.14 | 381.47 |
OPBDIT | Rs. Cr | 43.76 | 42.28 | 58.89 |
PAT | Rs.Cr | 7.70 | 7.80 | 16.40 |
Tangible Net Worth | Rs. Cr | 212.58 | 202.82 | 217.41 |
Total Debt/TNW | Times | 0.81 | 0.74 | 0.63 |
Current Ratio | Times | 1.47 | 1.42 | 1.45 |
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 | 136.16 |
BWR BBB/Stable
(Reaffirmation/Withdrawal) |
08Feb2021 |
BWR BBB Stable
(Reaffirmation) |
03Feb2020 |
BWR BBB Stable
(Assignment) |
NA |
NA
|
Non Fund Based | LT | NA |
NA
|
08Feb2021 |
BWR
() |
03Feb2020 |
BWR
() |
NA |
NA
|
Non Fund Based | ST | 27.20 |
BWR A3+
(Reaffirmation/Withdrawal) |
08Feb2021 |
BWR A3+
(Reaffirmation) |
03Feb2020 |
BWR A3+
(Assignment) |
NA |
NA
|
Grand Total | 163.36 | (Rupees One Hundred Sixty Three Crores and Thirty Six 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.
Analytical Contacts | |
---|---|
Akanksha Ratings Analyst akanksha@brickworkratings.com |
Tanu Sharma Director - Ratings tanusharma@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 | Axis Bank Ltd. | Cash Credit | 46.00 | _ | 46.00 | |
2 | Axis Bank Ltd. | Letter of Credit | _ | 2.00 | 2.00 | |
3 | Bandhan Bank | Cash Credit | 10.00 | _ | 10.00 | |
4 | Canara Bank | Term Loan | 2.86 | _ | 2.86 | |
5 | Canara Bank | Cash Credit | 47.80 | _ | 47.80 | |
6 | Canara Bank | Letter of Credit | _ | 5.20 | 5.20 | |
7 | Canara Bank | Covid -19 Emergency Line Credit | 2.50 | _ | 2.50 | |
8 | HDFC Bank | Cash Credit | 7.00 | _ | 7.00 | |
9 | HDFC Bank | Letter of Credit | _ | 20.00 | 20.00 | |
10 | HDFC Bank | Working Capital Demand Loan | 14.00 | _ | 14.00 | |
11 | ICICI Bank | Cash Credit | 6.00 | _ | 6.00 | |
Total | 136.16 | 27.20 | 163.36 | |||
TOTAL (Rupees One Hundred Sixty Three Crores and Thirty Six lakhs Only) |
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