Rajan Overseas Inc.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.16.00 Crs. of Rajan Overseas Inc.

Particulars

Facilities**	Amount(Rs.Crs)	Tenure	Rating*
Fund Based Packing Credit Stand by Gold Card	13.50 2.70	Short Term	BWR A4+ (Pronounced as BWR A Four Plu) Outlook : Stable
Total	16.00	(Rupees Sixteen Crores Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: Facility to be rated (Fund Based>Short Term) includes Packing credit amounting to Rs. 13.50 Cr. and Gold Card amounting to Rs. 2.70 Cr. with a total ceiling on Fund based limits amounting to Rs. 16 Cr. Short term rating of BWR A4+ is mapped with long term rating BWR BB+. RATING ACTION / OUTLOOK :

BWR believes the Rajan Overseas Inc. 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 Rajan Overseas Inc. up to FY16, FY17, FY18, provisional financials of FY19, projected financial statements up to FY20, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the partners. However, the rating is constrained by the moderate scale of operations, high competition from other established players in the market and inherent risk associated with partnership entities.

Going forward, the ability of the entity to achieve projected revenue & sustaining profitability margins.

Strengths

• Experienced and qualified management:

  The partners of the firm Mr Rajan Aggarwal and his brother Mr Ranjan Aggarwal are well qualified and have decades of experience in the industry. Their experience and knowledge has helped them in maintaining and establishing long term relationship with their clients.

• Average financial risk profile

  The debt protection metrics being ISCR is 8 times in FY18. Profitability margins of the company are at healthy level with a net profit margin of 7.46% and operating profit margin of 9.54% in FY18. Tangible net worth has increased to Rs. 16.59 Cr in FY18 on account of ploughing back of profits. Gearing ratio is low at 0.93 times in FY18.

Weakness

 

• Moderate scale of operations:

  The total operating income of the firm has reduced from Rs. 74.08 Cr. in FY17 to Rs. 59.86 Cr. in FY18 due to decrease in export orders. Although, as per FY19 provisional financials, the firm has achieved a total operating income of Rs. 75.70 Cr till 31 Mar 2019. However, looking at the size of the industry, the scale of operation of the firm are moderate.

• Inherent risk associated with partnership entities:

  Being a partnership firm, the firm will remains exposed to the inherent withdrawal risk of the partner's capital. The quantum and the material impact of such withdrawals on the firm's net worth as well as leverage, going forward, will remain critical from the credit perspective.

• High degree of competition in the fragmented industry:

  The Indian handicrafts industry is fragmented, with more than seven million regional artisans and more than 67,000 exporters/export houses promoting regional art and craftsmanship in the domestic and global markets. As a result of fragmented market and presence of various small and larger players, the degree of competition is high in the industry which gives the firm limited bargaining power.

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

The liquid assets of the company amounted to Rs. 4.37 Cr. in FY18. The net cash accruals of the firm are Rs. 5.56 Cr. in FY18, the firm didn't have any term loans. The current ratio of the firm is average at 1.15 times in FY18. The firm is utilizing almost 100% of its sanction limit and adhoc limit. The debt protection metrics of the company is good with an ISCR of 8 times in FY18. Conversion cycle of the firm is low at -15 days as a result of credit period of approximately four months. The firm don't  have any group/associate concern.

Considered above, the liquidity position of the firm is moderate.

PROFILE

Rajan Overseas Inc. (ROI) is a partnership firm set up in 1996 by Mr Rajan Aggarwal and his brother Mr Ranjan Aggarwal. Based in Moradabad, the firm manufactures handicraft and decorative items of glass, brass, aluminium and wood, entirely for export.Currently the firm is utilizing 90% of their total installed capacity of 300000 units per year.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs	59.86	74.08
EBITDA	Rs.Crs	5.71	6.63
PAT	Rs.Crs	4.47	4.72
Tangible Net Worth	Rs.Crs	16.59	13.24
Total Debt/Tangible Net Worth	Times	0.93	1.04
Current Ratio	Times	1.15	1.07

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 Packing Credit Stand by Gold Card	13.50 2.70	Short Term	BWR A4+ (Pronounced as BWR A Four Plu) Outlook : Stable	NA	NA	NA
Total			16.00	(Rupees Sixteen 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
Navnica Mishra navnica.m@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	PNB	16			16
	TOTAL (Rupees Sixteen Crores Only)	16	0	0	16

Note: Facility to be rated (Fund Based>Short Term) includes Packing credit amounting to Rs. 13.50 Cr. and Gold Card amounting to Rs. 2.70 Cr. with a total ceiling on Fund based limits amounting to Rs. 16 Cr. Short term rating of BWR A4+ is mapped with long term rating BWR BB+.