RATING RATIONALE
20 Apr 2022
Rama Agro Products
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.9.75 Crs. of Rama Agro Products
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Term Loan
Sanctioned
Working Capital (CC) Sanctioned Industrial Term Loan Sanctioned |
06.25
02.50 01.00 |
Long Term | BWR B + (Stable) |
| Sub Total | 09.75 | ||
| Grand Total | 09.75 | (Rupees Nine Crores and Seventy Five lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR has principally relied upon the Audited Financial statements up to FY21, Provisionals of FY22 and Projected Financials for FY23, and information/ clarification provided by the firm's management. The rating factors, the experience of the management in the crushing of cotton seeds, castor seeds, and all other allied agro products and trading of all type of agro products, it's gradual growth and client base.
BWR believes that Rama Agro Products 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
Credit Strengths:
- Modest Financial Risk Profile :
There is an increase in the Operating Income which is almost 3.39x and stands at Rs. 56.60 Crores in FY22 from Rs. 16.72 Crores in FY21. However, Operating Profit Margin has decreased to 2.60% in FY22 from 4.44% in FY21 due to increase in the Total Operating Expenses to Rs. 55.13 Crores in FY22 from Rs. 15.97 Crores in FY21. Total Operating Expenses has increased owing to massive increase in purchase of raw material, increase in employee cost, manufacturing expenses and selling and administrative expenses. Despite increase in scale of operations of the company, Net Profit Margin of the company has reduced to 0.27% in FY22 from 0.81% in FY21 due to increase in Depreciation and Interest & Finance Charges. Tangible Networth of the Company stands at Rs. 2.95 Crores in FY22 from Rs. 0.17 Crores in FY21 due to increase Equity and Reserves of the company owing to retention of entire profits of the firm. The capital structure of the company has improved owing to improvement in debt to equity ratio to 2.50x in FY22 from 32.94x in FY21. The firm further aims to improve the capital structure at 3.55x in FY23. Debt Protection metrics for of the firm seems comfortable with DSCR and ISCR 1.20x and 1.61x in FY22. .
- Positive Demand Outlook :
Demand of castor oil, D oil cake and High protein cake are high as compared to supply not only in the local market of Siddhpur and but also among very big consumers of castor oil. Therefore, there are ample opportunities to grow as these products relate to the basic needs such as traditional medicine, skin and haircare, etc.
- Experienced Partners :
The company functions under the able leadership of partner having an experience of a more than a decade and other partner having experience of about 3 years in the same industry. They have clear vision regarding the market. The knowledge and healthy relationship of the partners in the industry supports the company's business.
Credit Risks:
- Customer & Supplier Concentration :
The customer concentration is very high as top 5 customers contribute 100% of the revenue which may create adverse effects if any end-user refrain from purchasing products/raw materials even in a small amount. The supplier concentration is also high as top 5 suppliers contribute 100% of the purchases which may create adverse effects if any distributor disapprove selling products/raw materials even in a small amount to the company.
- Inherent Risk associated with Partnership firms :
Being a partnership constitution, the firm is exposed to risk of capital withdrawal by partners, which may adversely affect the capital structure of the firm.
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
Rating Sensitivities
Positive:
- Sustained improvement in scale of operations and profit margins, leading to increase in cash accruals.
- Significant improvement in the Networth of the company.
Negative:
- Large, debt-funded capital expenditure weakening the capital structure.
- Significant decline in liquidity position, affecting the working capital and current ratio.
Liquidity: Stretched
The firm operates under working capital Intensive business. Avg. CC utilization of last 15 months remained high at 99.71% ending on 31.3.2022. Receivable days elongated from 3 days in FY21 to 25 days in FY22 (Prov.). Promoters supported the firm financially by infusing the funds. Continuous financially support by promoters and efficient working capital management will be crucial for maintaining sufficient liquidity. The Current Ratio stands at 1x as on 31.3.2022.
PROFILEThe Partners of Rama Agro Products Commenced the business entity in 2018 at Mehsana, Rama Agro Products is engaged in crushing of cotton seeds, castor seeds, and all other allied agro products and trading of all type of agro products. The manufacturing plant and trading unit is located at Kalyanpura Village, Kadi, Mehsana, Gujarat. Mr. Amrutbhai Patel, the Managing Partner, has more than 10 years experience in this industry.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 16.72 | 2.98 |
| EBITDA | Rs.Crs. | 0.74 | 0.30 |
| PAT | Rs.Crs. | 0.14 | 0.10 |
| Tangible Net Worth | Rs.Crs. | 0.17 | -0.31 |
| Total Debt/Tangible Net Worth | Times | 32.94 | -10.94 |
| Current Ratio | Times | 1.16 | 0.81 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
| Fund Based | ||||||||||
| 1 | Term Loan - SanctionedWorking Capital (CC) - SanctionedIndustrial Term Loan - Sanctioned | Long Term | 06.2502.5001.00 | BWR B+(Stable) | NA | NA | NA | |||
| Total | 09.75 | (Rupees Nine Crores and Seventy Five 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 | |
|---|---|
|
Ambani Forum Lead Analyst forumambani@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 | Term LoanSanctioned | 6.25 | _ | 6.25 |
| 2 | The Mehsana Urban Co-operative Bank | Working Capital (CC)Sanctioned | 2.50 | _ | 2.50 |
| 3 | The Mehsana Urban Co-operative Bank | Industrial Term LoanSanctioned | 1.00 | _ | 1.00 |
| Total | 9.75 | 0.00 | 9.75 | ||
| TOTAL (Rupees Nine Crores and Seventy Five 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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