Suman Mfg. Works Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.8.20 Crs. of Suman Mfg. Works Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	08.00	Long Term	BWR BB + (Stable)
Sub Total	08.00
Non-Fund Based
Bank Guarantee - Sanctioned	00.20	Short Term	BWR A4 +
Sub Total	00.20
Grand Total	08.20	(Rupees Eight Crores and Twenty lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

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

KEY RATING DRIVERS

Credit Strengths:

• Experienced Management & established track record of operation :

  The promoters of the company have more than three decades of experience in the tea processing business. The company has been into operations since 2004 and established a track record in the processing of black tea under Crush, tear & curl method (CTC*).

• Comfortable financial risk profile :

  SMWL's financial profile remained comfortable marked by moderate net worth, low gearing, moderate profitability and healthy debt protection metrics. The networth of the company stood at Rs.9.01 crore as on 31st March, 2018 as against Rs.8.33 crores as on 31st March, 2017. The gearing of the company stood low at 0.77 times in FY18. The interest coverage ratio (ISCR) and debt service coverage ratio (DSCR) of the company stood at 3.78 times and 1.66 times respectively in FY18 as compared to 3.74 times and 1.60 times in FY17.

• Proximity to raw materials: :

  The strategic location of the tea processing unit. The Company has established its operations in the Siliguri district of West Bengal which has proximity to tea leaf procurement from suppliers.

• Established Brand :

  The company has established its own brand of tea and sells under the brand name of Cauvery Value, Mudipara Value, Gaganbari Value, Cauvery, Mudipara and Gaganbari.

Credit Risks:

• Susceptibility to vagaries of nature :

  The production of tea, besides being cyclical, is susceptible to vagaries of nature. SMWL has its processing facility in Siliguri in West Bengal, the largest tea producing state in India. However, the region has witnessed sometimes erratic weather conditions in the past. Though demand for tea is expected to have a stable growth rate, supply can vary depending on climatic conditions in the major tea growing areas. Therefore adverse natural events have a negative bearing on the productivity of tea gardens in the region.

• Volatility in tea price :

  The prices of tea are linked to the auctioned prices, which in turn, are linked to the prices of tea in the international market. Hence, significant price movement in international tea market affects SMWL’s profitability margins.

• Stiff competition :

  The tea industry is an organized agro-industry, it is highly fragmented in India with presence of many small, mid-sized and large players.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

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

RATING SENSITIVITIES

Positive: Rating may be upgraded if the company is able to increase its revenue and profit margins substantially while maintaining the gearing at the same level.

Negative: The rating may be downgraded if there is any significant deterioration in the financial position of the company. Any deterioration in the scale of operation from existing levels and profit margins may result in a rating downgrade.

LIQUIDITY POSITION

The liquidity position of the company stood moderate with adequate net cash accruals of Rs. 1.72 Crs. The Current Ratio of the company stood at 1.17 times in FY18. The cash conversion cycle of the company stood  high at 84 days in FY18  on account of high receivables and inventory.  

PROFILE

Suman Mfg. Works Ltd. (SMWL) is a Closely held company promoted by Siliguri based Bansal family in 2004. It's part of MJB Group of companies, engaged in manufacturing of black tea under Crush, Tear and  Curl method (CTC). The processing units  are located in Siliguri, West Bengal. SMWL has Seven line CTC setup with an aggregate installed processing capacities of around 3.8 million kg per annum. The company sells its tea under the brand name of Cauvery Value, Mudipara Value, Gaganbari Value, Cauvery, Mudipara and Gaganbari.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs.	33.99	31.86
EBITDA	Rs.Crs.	2.65	2.79
PAT	Rs.Crs.	0.67	0.45
Tangible Net Worth	Rs.Crs.	9.01	8.33
Total Debt/Tangible Net Worth	Times	0.77	0.66
Current Ratio	Times	1.17	1.42

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
Fund Based
1	Cash Credit - Sanctioned	Long Term	8.00	BWR BB+ (Pronounced as BWR Double B plus) (Outlook: Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Short Term	0.20	BWR A4+ (Pronounced as BWR A Four plus)	NA	NA	NA
Total			08.20	(Rupees Eight Crores and Twenty 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
• Short Term Debt
• Manufacturing Companies

For More Information Contact:

Analytical Contacts	Investor Contacts
Saroj K Das Ratings Analyst D : +91 90739 18940 sarojkumar.d@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
K.Venkateswara Raju Associate Director - SME & Vendor Gradings B : +91 80 4040 9940 kvraju@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank Guarantee - Sanctioned	_	0.20	0.20
2	Cash Credit - Sanctioned	8.00	_	8.00
Total				8.20
TOTAL (Rupees Eight Crores and Twenty lakhs Only)