Ali Agro Food Products

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.5.60 Crs. of Ali Agro Food Products

Particulars

Facilities**	Amount(Rs.Crs)	Tenure	Rating*
Fund Based	5.60	Long Term	BWR B (Pronounced as BWR Single B ) (Outlook: Stable)
Total	5.60	(Rupees Five Crores and Sixty lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: The total fund based facilities includes outstanding term loan of INR 1.60 crores and cash credit limit of INR 4.00 crores. RATING ACTION / OUTLOOK : Stable

BWR believes the Ali Agro Food Products business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of the rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

Brickwork Ratings has primarily relied upon the audited financial results up to FY 2018, projections up to FY 2020, publicly available information and information /clarifications provided by the firm's management. The rating draws strength from the family business of the partners and the growing scale of operations. The rating is however, constrained by low profitability margins, moderate financial risk profile, the susceptibility of raw material availability to agro-climatic conditions and constitution of the entity as a partnership firm. Going forward, the ability of the firm to sustain growth momentum in the scale of operations, improve profitability margins, comfortable financial risk profile and efficient management of working capital requirements shall be the key rating sensitivities.

Strengths

• Family business of the partners

  The rice milling business is the family business of the partners, their ancestors were into this business for over eight decades through which the partners gathered knowledge and expertise. Although the firm is a start-up the partners' prior knowledge and skills may benefit the firm in the long term.

• Growing scale of operations

  The firm's scale of operations though is modest but growing. The firm registered the sales of INR 5.20 crores in FY 2018 and as per the information from the management, the firm has achieved the sales of INR 15.00 crores in FY 2019. The sales are expected to grow further in the medium term.

Weakness

• Low profitability margins

  The profitability margins of the firm are low marked by the operating profit margin and net profit margin which stood at 8.96% and 0.30% in FY 2018. The profitability margins are expected to slip further as the firm has very less control over input costs.

• Moderate financial risk profile

  The gearing levels of the firm are at a moderate level marked by Total Debt/TNW and TOL/TNW of 3.65x and 3.28x respectively in FY 2018. The levels may be higher in the medium term due to low tangible net worth and moderate debt level. The debt protection metrics marked by DSCR and ISCR at 1.75x and 1.73x respectively in FY 2018 are at a moderate level. The metrics are projected to deteriorate in the medium term.

• Susceptibility of raw material availability to agro-climatic conditions

  The industry is exposed to raw material availability in adverse agro-climatic conditions resulting in an adverse effect on scalability and profitability.

• Constitution of the entity as a partnership firm

  Being a partnership firm, the entity faces the risk of capital being withdrawn by the partners at the time of personal exigency which affects the business operations adversely.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For arriving at its rating, BWR has applied its rating methodology as detailed in the Rating Criteria mentioned below (hyperlinks provided at the end of this rationale).

LIQUIDITY POSITION

The firm's liquidity position is supported by cash and cash equivalents of INR 0.01 crores in FY 2018 and a manageable debt repayment schedule. The total amount of fund-based working capital limit of INR 4.00 crores has been utilized to the extent of 97%. The current ratio and a quick ratio of 1.49x and 0.38x respectively in FY 2018 are moderately adequate.

PROFILE

Established in 2017, Ali Agro Food Products is a Bahraich-based partnership firm engaged in the business of rice milling. The rice milling business is the family business of the partners, Mr. Ali Asim Mekrani, Mr. Ali Sanam Mekrani, and Mr. Ali Atif Mekrani. The partners' ancestors were in this business for more than eight decades. At present, the firm's capacity utilization is 100% and it processes and sells approximately 94% rice and the remaining 6% in rice bran. The main raw material required by the firm is paddy which it procures from nearby villages.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs	5.42	0.00
EBITDA	Rs.Crs	0.49	0.00
PAT	Rs.Crs	0.02	0.00
Tangible Net Worth	Rs.Crs	0.89	0.00
Total Debt/Tangible Net Worth	Times	3.65	0.00
Current Ratio	Times	1.49	0.00

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
1	Fund Based	Long Term	5.60	BWR B (Pronounced as BWR Single B ) (Outlook: Stable)	NA	NA	NA
Total			05.60	(Rupees Five Crores and Sixty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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 :

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies
• Trading Entities

For More Information Contact:

Analytical Contacts	Investor Contacts
Akshay Rastogi Ratings Analyst B : +91 11 2341 2232 akshay.r@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Satvinder Kumar Gakhar Associate Director - Ratings B : +91 11 2341 2232 satvinder.g@brickworkratings.com
1-860-425-2742

SL.No.	Name of the Bank	Long Term(Rs.Crs)		Short Term(Rs.Crs)	Total(Rs.Crs)
		CC	TL
1	Allahabad Bank	4	1.6	0	5.6
	TOTAL (Rupees Five Crores and Six lakhs Only)	4	1.6	0	5.6

Note: The total fund based facilities includes outstanding term loan of INR 1.60 crores and cash credit limit of INR 4.00 crores.