Saraswati Trading Co.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.10.00 Crs. of Saraswati Trading Co.

Particulars

Facilities**	Amount(Rs.Crs)	Tenure	Rating*
Fund Based Term Loan Cash Credit Cash Credit Proposed	0.19 7.00 2.81	Long Term	BWR BB- (Pronounced as BWR Double B minus) Outlook : Stable
Fund Based Sub-limit: ODBD Sub-limit: Packing Credit	(1.65) (2.00)	Short Term	BWR A4 (Pronounced as BWR B Four) Outlook : Stable
Total	10.00	(Rupees Ten Crores 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 the Saraswati Trading Co.'s 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

BWR has essentially relied upon the audited financial statements of Saraswati Trading Co. ('STC' or 'The firm') up to FY18 and publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the locational advantage and management's experience. However, the rating is constrained by the limitations of a partnership firm, competition in the industry and moderate financial risk profile. 

Going forward, ability of the firm to improve its  scale of operations, profitability, liquidity profile & capital structure by infusion of additional capital and to service its debt obligations in a timely manner  will be the key rating sensitivities. 

Strengths

• Location-specific Advantage: The firm is located in Karnal, Haryana and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost-effective.
• Management Experience: The partners have an experience of over two decades in this line of business. The extensive track record of operations since inception in 1992 indicates the smooth functioning through various business cycles. The experience of the promoters and the management cushions the establishment of trade relations.

Weakness

• Limitation of a partnership firm:  Inherent risks relating to financial flexibility in terms of raising capital & withdrawal of capital as STC being constituted as  Partnership Firm is quite high.
• Competition in the Industry: Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
• Financial Risk Profile:Moderate financial risk profile is indicated by high analysed gearing ratio of 2.46 times in FY18 due to average tangible net worth. DSCR and ISCR of the company stand at 1.36 and 1.26 respectively in FY18 indicating firm’s adequacy to meet its debt obligations.

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).

LIQUIDITY POSITION

STC has no liquid investments and the Cash & Bank balance is of  Rs. 0.02 Crs as on March 31, 2018. The long term borrowings stand at Rs. 1.07crs with Rs.0.39crs of unsecured loans with no fixed repayment schedule. Current ratio was average at 1.28 times in FY18. The company’s debt protection metrics are moderate with ISCR at 1.26 times and DSCR at 1.36 times as on March 31 2018.

Holding/Subsidiary Company: NA

PROFILE

Saraswati Trading Co. ('STC' or 'The Firm') was established in 1992 as a partnership firm of Mr. Vishal Khanna, Mr. Rajan Khanna and Mr. Vijay Khanna. The firm's main line of business is the processing and supplying of basmati and non-basmati rice. The mill is located in Karnal, Haryana with an installed capacity of 5-tonne per hour. STC caters to the domestic as well as the export market, the product is exported to middle eastern countries of Kuwait and Saudi Arabia.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs	22.39	22.41
EBITDA	Rs.Crs	0.69	0.85
PAT	Rs.Crs	0.04	0.04
Tangible Net Worth	Rs.Crs	3.05	2.73
Total Debt/Tangible Net Worth	Times	2.69	1.84
Current Ratio	Times	1.28	1.25

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Amount(Rs.Crs)	Tenure	Rating	2018	2017	2016
1	Fund Based Term Loan Cash Credit Cash Credit Proposed	0.19 7.00 2.81	Long Term	BWR BB- (Pronounced as BWR Double B minus) Outlook : Stable	NA	NA	NA
2	Fund Based Sub-limit: ODBD Sub-limit: Packing Credit	(1.65) (2.00)	Short Term	BWR A4 (Pronounced as BWR B Four) Outlook : Stable	NA	NA	NA
Total			10.00	(Rupees Ten Crores 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.

For More Information Contact:

Analytical Contacts	Investor Contacts
Aditi Bhatt aditi.b@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
V.K.Kukreja Associate Director-Ratings kukreja.vk@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	Canra Bank	10			10
	TOTAL (Rupees Ten Crores Only)	10	0	0	10