Goyal Rice Mills

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.11.16 Crs. of Goyal Rice Mills

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Warehouse Receipts (WHR) - Sanctioned Term Loan - Out-standing	05.00 06.00 00.16	Long Term	BWR B + (Stable)
Sub Total	11.16
Grand Total	11.16	(Rupees Eleven Crores and Sixteen 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 has assigned Long term rating of BWR B+ Stable to bank loan facilities of Goyal Rice Mills. The rating takes into account extensive experience of the partners, favourable location of the plant and continuous growth in revenues over the last FYs. However, the rating is constrained by its small scale of operations, weak financial risk profile, constitution of being a partnership firm and its presence in fragmented industry.

KEY RATING DRIVERS

Credit Strengths:

• Extensive Experience of the Partners:

  The firm is being run by partners who are having more than four decades of extensive business experience in the rice industry. Partners namely Rajesh Kumar, Rakesh Kumar, Suresh Kumar and Raj Kumar had been Commission Agents for Food Grains since 1973 which has improved their understanding of the market and strengthened their relationship with suppliers as well as customers.

• Favorable location of plant:

  Location of the manufacturing unit of the firm in Sangrur, Punjab gives an advantage to the firm over its competitors operating elsewhere as raw material is easily available at the location along with favorable pricing terms. The area is one of the hubs for paddy/rice leading to its easy availability.

• Continuous Growth in Revenues over the last FYs:

  There has been a continuous growth in Total Operating Income over the years ranging from Rs.13.34 crores in FY17 to Rs.23.78 crores in FY19. In addition to this, Sales till date in FY20 stands at Rs.31.29 crores indicating that the firm is continuing in increasing its revenue in future as well.

Credit Risks:

• Small scale of operations of the Firm:

  Though there is an increase in revenues Year on Year basis, the scale of operations still remains at a lower level at Rs.23.78 crores in FY19. The small scale limits the firm's financial flexibility in times of stress and deprives it from scale benefits.

• Weak Financial Risk Profile:

  The debt protection metrics are weak, with Interest Coverage Ratio (analysed) of 1.59x along with DSCR (analysed) of 0.81x in FY19. Tangible net worth (Analysed) stands low at Rs.2.66 crs in FY19. Also, net profit margin stood weak at 0.27% along with lower operating profit margin of 5.16% in FY19. Looking at the above parameters, the financial risk profile of the firm is likely to remain weak over the medium term.

• Partnership nature of Constitution:

  Firm's constitution has the inherent risk of possibility of withdrawal of partner's capital in case of personal needs of the partners thereby affecting the capital structure of the firm.

• Presence in Fragmented Industry:

  The firm is a part of industry which is highly fragmented with numerous players operating in the unorganized sector with very less product differentiation.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For arriving 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

Going forward, ability of the company to improve its scale of operations, tangible net worth, servicing of interest and principal repayment obligations as well as liquidity would be the key rating sensitivities.

Positive: The outlook may be revised to Positive if the company is able to achieve significant growth in revenue and profitability backed by a favourable industry scenario and optimum utilization of resources.

Negative: The outlook may be revised to negative if revenue and profit margins show lower than expected figures, and there is an overall deterioration in the financial position of the firm.

LIQUIDITY POSITION

Liquidity Position: Stretched

Current Ratio stands at  1.50x in FY19. Cash and cash equivalents stand at Rs.0.05 crores in FY19. The company has generated cash surplus of Rs.0.35 crores in FY19. CC utilisation stands at 85%. DSCR (Analysed) stands lower at 0.81x in FY19.

The overall liquidity is stretched.

PROFILE

Goyal Rice Mills (GRM) was established as a partnership firm which is engaged in the processing of paddy at its unit located in Moonak, Sangrur, Punjab as well as further processing of Basmati Rice. The firm's business commenced in 1997 which primarily mills and sorts Basmati Rice, which is sold in the domestic market as well as to the big exporters who directly export Basmati Rice to countries like UAE,USA,Dubai,Europe etc. The unit of the firm has a capacity of processing 4 metric tonnes per hour paddy for Steam Rice production and 3 metric tonnes per hour paddy for Sella Rice production. The firm is currently being run by four partners viz Mr. Suresh Kumar, Mr. Raj Kumar, Mr.Rajesh Kumar and Mr. Rakesh Kumar sharing profits and losses equally.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	23.78	22.08
EBITDA	Rs.Crs.	1.23	1.19
PAT	Rs.Crs.	0.06	0.06
Tangible Net Worth	Rs.Crs.	1.14	1.24
Total Debt/Tangible Net Worth	Times	7.19	5.81
Current Ratio	Times	1.50	1.36

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2020)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Cash Credit - Sanctioned Warehouse Receipts (WHR) - Sanctioned Term Loan - Out-standing	Long Term	05.00 06.00 00.16	BWR B+ (Stable)	NA	NA	NA
Total			11.16	(Rupees Eleven Crores and Sixteen 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

For More Information Contact:

Analytical Contacts	Investor Contacts
Shweta Tandon Rating Analyst B : +91 11 2341 2232 Ext : 111 shweta.t@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.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	5.00	_	5.00
2	Warehouse Receipts (WHR) - Sanctioned	6.00	_	6.00
3	Term Loan - Out-standing	0.16	_	0.16
Total				11.16
TOTAL (Rupees Eleven Crores and Sixteen lakhs Only)