Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 175.00 Crs. of Vishwaraj Sugar Industries Ltd. (VSIL or the Company)
ParticularsFacilities** | Amount(Rs.Crs.) | Tenure | Rating# | |
---|---|---|---|---|
Fund Based | 175.00 | Long Term |
BWR BB +
/Stable Assignment |
|
Non Fund Based | (10.00) | Short Term |
BWR A4 +
Assignment |
|
Grand Total | 175.00 | (Rupees One Hundred Seventy Five Crores Only) |
BWR Assigns a rating of BWR BB+/A4+(Stable) for the Bank Loan Facilities of Vishwaraj Sugar Industries Ltd.
The rating reflects extensive experience of VSIL's management team in the sugar industry, diversified revenue profile, integrated operations, healthy net worth base and improving profit margins. These strengths are partially offset by high debt levels, below average debt coverage indicators, cyclicality in the sugar business, susceptibility to regulatory changes, volatility in sugar prices and working capital intensive nature of business. KEY RATING DRIVERSCredit Strengths:
The Chairman of VSIL, Mr. Umesh Katti has more than 25 years of experience in the sugar industry. His son Mr. Nikhil Katti, Managing director of the Company has also gained 12 years of experience in operating the business of VSIL. He is supported by a highly experienced and qualified management team in day to day operations of the Company.
The revenue profile of VSIL is diversified as the Company generated revenue from Sugar sales, power generation and distillery product sales. The Company has a fully integrated manufacturing setup located on 132 acres of land at Belgaum, Karnataka.
The manufacturing setup of VSIL is located at Bellad, Belgaum, which is a high sugar recovery zone. Notwithstanding the dip in the sugar recovery rate in FY20 to 10.98% (FY19: 11.20%), the same increased to 11.7% in FY21. The weather in the region is suitable for sugarcane crop production due to which raw material is easily available to VSIL from local farmers.
TNW of VSIL improved marginally to Rs.226.01 Crs as on March 31, 2021 (FY20:Rs.221.83 Crs). Further, due to commencement of the ethanol plant in Dec 2020 the operating profit margin for FY21 improved to 14.58% as against 10.16% in FY20 as the margins on sale Ethanol are relatively higher.
While the operating profit margin declined to 3.20% in Q1FY22, BWR expects the same to improve from Q3 onwards as the crushing season is expected to start and revenue from distillery operations is expected to increase with increase in raw material availability.Due to the working capital intensive nature of operations and debt funded capex undertaken in the last 3 financial years, the total debt of the Company stood high at Rs.314.96 Crs as on June 30, 2021. Due to this, the Net Cash Accruals/Total Debt of the Company though improved but remained low at 0.07x for FY21. However, with increase in profitability and gradual repayment of term loans, the same is expected to improve in the medium term.
Further, the ISCR of the Company was moderate at 1.74x for FY21 as against sub 1x levels in last 2 fiscals. However, due to decrease in profitability ISCR for Q1FY22 decreased to 0.40x. DSCR for FY21 was also average at 1.16x.The sugar cane crop, being an agri-commodity, is dependent on the weather conditions and also susceptible to plant pests and disease that might adversely impact the yield and recovery rate for the crop. Hence, the cyclicality in the sugar production leads to volatility in sugar prices. Further, the performance is also dependent on the government support in the form of Minimum Support Price for sugar, Fair Remunerative Price for sugarcane and export subsidy.
The business operations of VSIL are working capital intensive due to seasonality in availability of Sugarcane crop. As a result, the inventory days of the Company stood high at 302 days as on March 31, 2021 as against 356 days as on March 31, 2020. Due to this the working capital requirements of the business are relatively high.
BWR has relied upon audited financials of the Company upto FY21, unaudted Q1FY22 financial results and projection upto FY23, publicly available data and information/clarifications provided by the management.
RATING SENSITIVITIES
Positive: If the Company manages to achieve its projections and improve the profitability margins as envisaged it would be positive for the ratings.
Negative: Deterioration in sales and key financial indicators, higher than projected debt would be negative for the ratings.
LIQUIDITY INDICATORS - Adequate
The liquidity position of the Company is adequate as its current ratio as on June 30, 2021 stood moderate at 1.23x. The average CC utilisation of the Company for last 7 months stood moderate at 75% and it has cash & bank balance of Rs.2.11 Crs.
Further, the Company is expected to generate cash accruals of around Rs.59 Crs in FY22 as against principal debt repayment of Rs.27.28 Crs.
ABOUT THE ENTITYVishwaraj Sugar Industries Limited (VSIL) is Belgaum, Karnataka based company incorporated in May 1995 by Mr.Umesh Katti and family. The Company is listed on BSE & NSE. It is engaged in manufacturing of Sugar, Alcoholic Spirits by Distillation including Ethanol, Natural Alcohol Vinegar and Generation of Power. The Company has a fully integrated plant at Bellad Bagewadi, Belgaum District in North Karnataka. The Company procures only sugarcane as a raw material from local farmers and utilises the by-products for distillery unit and power generation.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 426.46 | 376.74 |
EBITDA | Rs.Crs. | 62.19 | 38.28 |
PAT | Rs.Crs. | 8.29 | -7.88 |
Tangible Net Worth | Rs.Crs. | 226.01 | 221.83 |
Total Debt/Tangible Net Worth | Times | 1.66 | 1.56 |
Current Ratio | Times | 1.12 | 1.06 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 175.00 |
BWR BB+/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
NFB SubLimit | ST | (10.00) |
BWR A4+
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
Grand Total | 175.00 | (Rupees One Hundred Seventy Five 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 CriteriaAnalytical Contacts | |
---|---|
Prashant Sahadev Mondkar Ratings Analyst Board : +91 22 2831 1426, +91 22 2831 1439 prashant.sm@brickworkratings.com |
Chintan Dilip Lakhani Director- Ratings chintan.l@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 | Bank of India | Cash CreditSanctioned | 46.00 | _ | 46.00 | |
2 | Bank of India | Working Capital Demand LoanSanctioned | 69.00 | _ | 69.00 | |
3 | State Bank Of India (SBI) | Cash Credit (WHR)Sanctioned | 60.00 | _ | 60.00 | |
Total | 175.00 | 0.00 | 175.00 | |||
TOTAL (Rupees One Hundred Seventy Five Crores Only) |
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