RATING RATIONALE
27 Jan 2021
Swapnil Agro Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.20.82 Crs. of Swapnil Agro Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Cash Credit
Sanctioned
Term Loan Sanctioned Covid -19 Emergency Line Credit Sanctioned |
15.00
00.67 03.15 |
Long Term | BWR BB - (Stable) |
| Sub Total | 18.82 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 02.00 | Short Term | BWR A4 |
| Sub Total | 02.00 | ||
| Grand Total | 20.82 | (Rupees Twenty Crores and Eighty Two lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Swapnil Agro Pvt. 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 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 Swapnil Agro Pvt. Ltd. of FY17, FY18, FY19, management certified provisional financials for FY20, and projected financials FY21 and FY22, publicly available information and information/clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the promoters and established strong relations with customers, and moderate financial risk profile driven by a moderate Net Worth and debt service indicators. However, the rating is constrained by the relatively small scale of operations with thin profitability margins, geographical and customer concentration risk along with high competition from other established players in the market and stretched working capital cycle.
Credit Strengths:
- Experienced Promoters and strong relations with customers :
The company is promoted by Mr Satish Munde and Mrs Vanmala Munde with an industry experience of more than two decades in the industry through other firms which has helped him establish strong relationships with the customers and suppliers. The company is now managed by Mrs Apkesha Munde and Mr Hem Thakkar. Mr Satish Munde, however, still extends his expertise in managing the operations of the company.
- Moderate Financial Risk Profile :
The capital structure is moderate driven by a moderate net worth base of Rs 6.74 crs (Rs. 9.12crs- Analysed). The gearing levels,however, stood high. The Debt Service Indicators viz DSCR and ISCR of the company stood moderate at 1.17x and 1.34x respectively, indicating the adequacy of the company to service its debt obligations.
Credit Risks:
- Relatively Small Scale of operations and thin margins :
The company is relatively a smaller player operating in the market. The scale of operations have remained small. The company recorded a revenue of Rs. 78.53crs (Prov FY20) and Rs 85.21 crs (FY19). The revenue has declined marginally during FY19 and FY20 over FY18 levels. Further, due to the trading nature of the business and negligible value addition, the profit margins viz OPM and NPM have remained low. The OPM and NPM stood at 4.27% and 0.69% for FY20. The presence in the highly competitive industry limits the pricing power and margins of the company.
- Geographical and Customer Concentration Risk :
The company faces the geographical concentration of revenue risk as the operations are constrained in Maharashtra only, thus restricting the geographical boundaries of the revenue. Further, majority (Around 60%) of the supplies made by the company is towards a single customer and any slowdown in demand from the customer may impact the revenue. To mitigate the same, the company is exploring new customers, to diversify the customer concentration risk.
- Industry Related Risk :
The company faces risk associated with the agro products climatic risk, as the availability depends on various external factors like monsoon, MSP, price fluctuations, demand scenario, etc. Further, the industry is highly fragmented and the company faces stiff competition from other organized and unorganized players in the market.
- Stretched Working Capital Cycle :
The working capital cycle is Stretched driven by high receivable days of 166 days for FY20. The overall conversion cycle is also high at 107 days. The working capital limits of the company are fully utilised.
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
The ability of the company to scale up its operations while maintaining a comfortable risk profile, maintaining adequate liquidity and profitability, and expanding the customer base would be its key rating sensitivities.
-
Positive: The rating may be upgraded in case the revenue, profitability, capital structure of the company shows significant improvement.
-
Negative: The rating may be downgraded in case there is significant deterioration in the business revenue, profitability or financial risk profile of the company.
Adequate:
The liquidity profile of the company is adequately driven by a moderate current ratio of 1.26x as of FY20 (Prov). The cash and cash equivalents of the company stood at Rs 0.16crs as of March 2020. The Net Cash Accruals of the company are sufficient to discharge the debt obligations. The working capital limits of the company are fully utilized.
PROFILESwapnil Agro Pvt Ltd is a Nagpur based company, incorporated in 1999 by Mr. Satish Munde. The company is now managed by Mrs. Apeksha Munde and Mr. Hem Thakkar. The company is engaged in the trading of food grains, rice and rice products, pulses, and other agro-based products. The company supplies majorly to Vyankateshwara Mahila Audyogik Utpadak Sahakari Sanstha and has a presence majorly in Maharashtra.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 85.21 | 92.71 |
| EBITDA | Rs.Crs. | 2.96 | 3.12 |
| PAT | Rs.Crs. | 0.57 | 1.00 |
| Tangible Net Worth | Rs.Crs. | 6.20 | 5.63 |
| Total Debt/Tangible Net Worth | Times | 3.26 | 3.83 |
| Current Ratio | Times | 1.25 | 1.17 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2021) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2020 | 2019 | 2018 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - SanctionedTerm Loan - SanctionedCovid -19 Emergency Line Credit - Sanctioned | Long Term | 15.0000.6703.15 | BWR BB-(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 02.00 | BWR A4 | NA | NA | NA | |||
| Total | 20.82 | (Rupees Twenty Crores and Eighty Two lakhs 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 | |
|---|---|
|
Srishti Kaushik Rating Analyst srishti.k@brickworkratings.com |
Sushil Kumar Chitkara Associate Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 15.00 | _ | 15.00 |
| 2 | Term LoanSanctioned | 0.67 | _ | 0.67 |
| 3 | Covid -19 Emergency Line CreditSanctioned | 3.15 | _ | 3.15 |
| 4 | Bank GuaranteeSanctioned | _ | 2.00 | 2.00 |
| Total | 18.82 | 2.00 | 20.82 | |
| TOTAL (Rupees Twenty Crores and Eighty Two lakhs 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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