Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.15.00 Crs. of Tirupati Industries
ParticularsFacility** | Amount (Rs.Crs) | Tenure | Rating* |
---|---|---|---|
Fund Based | |||
Cash Credit Sanctioned | 15.00 | Long Term | BWR B + (Stable) |
Sub Total | 15.00 | ||
Grand Total | 15.00 | (Rupees Fifteen Crores Only) |
BWR believes that Tirupati Industries 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 revised 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 Tirupati Industries of FY19,FY20,FY21, provisional financial statement of FY22 and projected financial statements of FY23,FY24 publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the partner/s, established track of operations and above average financial risk profile. However, the rating is constrained by the scale of operations, constitution of the firm and high competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities
Credit Strengths:
The management has 15 years of experience in the cotton industry which has helped to understand local market dynamics and establish a relationship with customers & suppliers.
The spinning facility of the firm is located at Visnagar ,Gujarat . Gujarat produces around one-third of total production of cotton in India. The firm's presence in the cotton producing region results in benefit derived from a lower logistic expenditure (both on transportation and storage), easy availability and procurement of raw materials at effective prices and consistent demand for finished goods resulting in a sustainable and clear revenue visibility.
The firm has witnessed increase in operations indicated by total operating income which stood at Rs. 71.40 Crs in FY22, increasing from Rs. 49.52 Crs in FY21 and Rs. 50.73 Crs in FY20 respectively. Thus recovering the lost ground in FY 21 due to Covid-19 impact.
The firm remains exposed to the volatility in the prices of its key raw material, cotton bales. However, availability of cotton is mainly dependent on the vagaries of rainfall. Government intervention is very high with respect to the cotton industry and its pricing which puts pressure on profitability
The company operates in a highly fragmented industry with a large number of organized and unorganized players. The Company’s operations are capital intensive to operations as reflected by higher inventory holding period owing to the nature of the business.
Though profitability margins have marginally increased in FY 21 against in FY 20, still they are on a lower side. OPM in FY 21 has increased to 1.83% vs 1.75% in FY 20. Similarly, NPM has also marginally increased to 0.03% in FY 21 against 0.02% in FY 20. TNW increased marginally to Rs 2.79 Crs in FY 21 against Rs 2.65 Crs in FY 20,which coupled with increased debt to Rs 9.97 Crs in FY 21 against Rs 4.04 Crs in FY 20 has increased the gearing ratio, Total Debt/TNW and TOL/TNW to 3.49x and 3.58x respectively against 1.76x and 1.53x in FY 20. Current ratio in FY 21 is at 1.20x which has marginally decreased against 1.49x in FY 20 and is projected to improve to 1.38x in FY 22.
Given the entity’s constitution as a partnership firm, it remains exposed to discrete risks, including the possibility of withdrawal of capital by the partners and the risk of dissolution of the firm upon the death, retirement or insolvency of partners.
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 the ability of the firm to improve scale of operations, to improve capital structure and maintaining overall financial risk profile will be the key rating sensitivities.
Positive: Ability to scale up the operations and improve its working capital management along with improved profitability and liquidity.
Negative: Deterioration in revenue and profitability along with decline in its working capital
LIQUIDITY POSITION
Liquidity Adequate: The liquidity profile remained adequate and improved over previous year marked by current ratio to 1.38x as on March 2022 (Prov.) asagainst1.20x as on March 2021 (A). While, the working capital cycle also improved and deteriorated to 54 days from 61 days in FY21 and reduction in inventory cycle to 50 days from 60 days over previous year. The working capital utilization limits remained at around ~38 % for the past 6 months ended May, 2022. Liquidity support from promoters in form of unsecured loans provide some cushion.
PROFILETirupati Industries was established in the year 2006 as a partnership firm. The firm is engaged in business of cotton ginning and oil mill and factory is located at Paldi chowk, Vadnagar road- Visanagar. There are 8 partners in the firm of which, the key partner Mr. Gulabbhai Patel is in the industry since 2006 and has 15 years of experience in the same industry.
KEY FINANCIAL INDICATORSKey Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 49.52 | 50.73 |
EBITDA | Rs.Crs. | 0.91 | 0.89 |
PAT | Rs.Crs. | 0.01 | 0.01 |
Tangible Net Worth | Rs.Crs. | 2.79 | 2.65 |
Total Debt/Tangible Net Worth | Times | 3.49 | 1.76 |
Current Ratio | Times | 1.20 | 1.49 |
S.No | Current Rating (2022) | Rating History | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
Fund Based | ||||||||||
1 | Cash Credit - Sanctioned | Long Term | 15.00 | BWR B+(Stable) | NA | NA | NA | |||
Total | 15.00 | (Rupees Fifteen Crores Only) |
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 : For More Information Contact:Analytical Contacts | |
---|---|
Lakhani Megha Lead Analyst lakhani.m@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
---|---|---|---|---|---|
1 | The Mehsana Urban Co-operative Bank | Cash CreditSanctioned | 15.00 | _ | 15.00 |
Total | 15.00 | 0.00 | 15.00 | ||
TOTAL (Rupees Fifteen Crores Only) |
Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
---|---|---|---|---|---|
NA | NA | NA | NA | NA | NA |
Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
---|---|---|---|
NA | NA | NA | NA |
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