Ranar Agrochem Ltd (Formely known as Prathyusha Chemicals & Fertilisers Ltd)

Brickwork Ratings upgrades/reaffirms the ratings for the Bank Loan Facilities of Rs. 48.61 Crs. of Ranar Agrochem Ltd (Formely known as Prathyusha Chemicals & Fertilisers Ltd)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (03 Dec 2021)	Present
Fund Based	34.55	37.61	Long Term	BWR B- /Stable UPGRADE	BWR B /Stable Upgrade
Non Fund Based	11.00	11.00	Short Term	BWR A4 Upgrade	BWR A4 Reaffirmation
Grand Total	45.55	48.61	(Rupees Forty Eight Crores and Sixty One lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork Ratings has upgraded the long term rating to 'BWR B/Stable' and reaffirmed the short term rating at 'BWR A4' for the bank loan facilities of Ranar Agrochem Limited.

The Rating has factored, inter alia , the extensive business experience of promoters and established operational track record of the company, diversified product portfolio, improvement in revenue from operations and profitability margins and improvement in financial risk profile of the company . However, the rating is constrained by low margin and seasonality of fertilizer business and exposure to intense competition. Going forward, the ability of the company to increase revenues, improve its profitability margins, strengthen its financial risk profile and manage its working capital efficiently will remain the key rating sensitivities.

The rating outlook has been assigned as "Stable" as BWR believes that Ranar Agrochem Limited 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 revenue and profitability margins show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.

KEY RATING DRIVERS

Credit Strengths:

Experienced management and long track record of the company :
The Managing Director of the company is Mr. Yelamarti Avinash and has 7 years of experience and is a post graduate by qualification. Mrs. T Nalini is the CFO and Executive Director of the company and has 12 years of experience. The other directors of the company are also qualified and have decades of experience in the industry. The company has a long track record of operations for over 2 decades in fertilizer business.
Diversified product portfolio :
RAL is engaged in manufacturing of Single Super Phosphate [installed capacity of 50000 tonnes per annum], Di-Calcium Phosphate [installed capacity of 9000 tonnes per annum], NPK Fertilizer Mixing Plant [installed capacity of 30000 tonnes per annum] and Sulphuric Acid [installed capacity of 45000 tonnes per annum]. The company also does job work generating additional revenue.
Improvement in revenue from operations and profitability margins :
The operating income of the company improved from Rs. 35.13 crore in FY21 to Rs. 69.19 crore in FY22(Provisional) on account of increase in capacity utilization of its Sulphuric acid product and also increase in the sales of the Sulphuric acid product( from Rs. 20.62 cr in FY21 to Rs. 53.68 cr in FY22). The increase in capacity utilization is due to market demand conditions and increase in sales is due to increase in rate and sales in volume. The company has achieved Rs. 24.73 cr of revenue(majority of which is constituted by Sulphuric Acid of Rs. 17 crores) as on June quarter and is confident of achieving projected revenue of Rs. 71.09 crore by end of FY23. The net profit margin of the company improved from 1.62% in FY21 to 10.27% in FY22(Provisional) . However the operating profit margin of the company marginally moderated from 21.22% in FY21 to 20.03% in FY22(Provisional).
Improvement in financial risk profile of company :
The company's tangible net worth has improved from Rs. 4.85 Crores as on 31 March 2021 to Rs. 11.96 crores as on 31 March 2022(Provisional). The Total debt/Tangible net worth of the company improved from 9.96 times as on 31 March 2021 to 4.31 times as on 31 March 2022(Provisional) on account of accretion of profits to reserve. The Interest coverage ratio of the company improved from 1.82 times in FY21 to 3.56 times in FY22(Provisional). The Debt coverage ratio stood at 1.74 times as on 31 March 2022(Provisional).

Credit Risks:

Low margin and seasonality of fertilizer business :
The fertilizer business is typically a low margin business. Besides, the industry works under the capacity, storage and pricing regulations of the government and is hence, generally unable to transfer the volatility in raw material prices to the consumers. Also, the demand for the fertilizers is cyclical and coincides with the sowing seasons of Rabi (September-October), Kharif (April-May) and Zaid crops (March-April). The Company also gets government subsidies and its revenue is vulnerable to any variability or delay in the receipt of the subsidy.
Exposure to intense competition :
The Company faces strong competition from both organized and unorganized players. Often, the competition is based upon margin, and there is limited bargaining power with both suppliers and customers. Low technology intensity, limited differentiation of the end products and government regulations limit the pricing power of the Company. Besides, the Company faces both customer and supplier concentration risk.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has adopted a standalone approach and applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward the company’s ability to improve the scale of operations, improve and maintain profitability, the debt servicing capability & liquidity and manage its working capital efficiently will be the key rating sensitivities.

Positive:

The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profit margins to improve its cash accruals and thereby the liquidity , with other metrics such as gearing, debt coverage ratios and working capital cycle.

Negative:

The rating may be downgraded if there is lower than expected revenues affecting the profitability margins or deterioration in its financial risk profile from current level.

LIQUIDITY INDICATORS - Adequate

The liquidity position of the company is adequate marked by sufficient net cash accruals vis-a-vis repayment obligations in FY22. The current ratio of the company stood at 1.40 times as on 31 March 2022(Provisional). The average CC utilization is around 80% for January to May 2022. The cash conversion cycle of the company improved from 174 days in FY21 to 121 days in FY22(Provisional) . The EBIDTA of the company in FY22 is Rs.13.86 crores which is sufficient to cover interest and finance charges of Rs. 3.89 crores. Going forward the company is projecting to further improve its cash accruals which will be sufficient for repayment obligations.

ABOUT THE ENTITY

Ranar Agrochem Limited (RAL) was established on 09Apr1999 as Prathyusha Chemicals & Fertilisers Limited as a fertilizer manufacturer in Visakhapatnam. In July 2016, the name of the Company was changed to Ranar Agrochem Limited. The Company is engaged in production of Sulphuric Acid, Single Super Phosphate, Di-Calcium Phosphate and NPK Mixture granules. Principal raw materials for the Company's products are Rock Phosphate and Sulphur. RAL sells its products under its registered brand ‘SIRI’ to its customers in Andhra Pradesh, Telangana, Odisha, Tamil Nadu and Chhattisgarh. The company carrying its activities from its registered office and factory premises situated at Survey No 301-307 , Edula Binangi Village, IDA, Parwada Mandal, Visakhapatnam. The company has a 1.2 MW captive power plant to meet its power requirements.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	35.13	34.22
EBITDA	Rs.Crs.	7.45	7.21
PAT	Rs.Crs.	0.57	-0.54
Tangible Net Worth	Rs.Crs.	4.85	4.28
Total Debt/TNW	Times	9.96	11.50
Current Ratio	Times	0.78	0.74

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

CRISIL continues rating at CRISIL D/CRISIL D under Issuer Not Cooperating category for bank loan facilities of Ranar Agrochem Limited dated 21 July 2021.

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	37.61	BWR B/Stable (Upgrade)	10May2021	BWR D (Reaffirmation)	04Mar2020	BWR D (Downgrade)	30Jan2019	BWR C+ (Assignment)
		0.00	NA	03Dec2021	BWR B- Stable (UPGRADE)	NA	NA	NA	NA
Non Fund Based	ST	11.00	BWR A4 (Reaffirmation)	10May2021	BWR D (Reaffirmation)	04Mar2020	BWR D (Downgrade)	30Jan2019	BWR A4 (Assignment)
		0.00	NA	03Dec2021	BWR A4 (Upgrade)	NA	NA	NA	NA
Grand Total		48.61	(Rupees Forty Eight Crores and Sixty One lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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

Analytical Contacts
Roshan Ranjan Ratings Analyst roshan.r@brickworkratings.com	Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ranar Agrochem Ltd (Formely known as Prathyusha Chemicals & Fertilisers Ltd)

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Union Bank of India	Term Loan - Out-standing	15.41	_	15.41
2	Union Bank of India	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	14.00	_	14.00
3	Union Bank of India	Covid -19 Emergency Line Credit - Out-standing	5.14	_	5.14
4	Union Bank of India	GECL - Out-standing	3.06	_	3.06
5	Union Bank of India	ILC/FLC/BG - Sanctioned	_	11.00	11.00
Total			37.61	11.00	48.61
TOTAL (Rupees Forty Eight Crores and Sixty One lakhs Only)

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