Nandyala Satyanarayana

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 31.33 Crs. of Nandyala Satyanarayana

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (03 Aug 2020)	Present
Fund Based	0.10	0.10	Long Term	BWR BB-/Stable Downgrade	BWR BB - /Stable Reaffirmation
	30.00	30.00	Short Term	BWR A4 Reaffirmation	BWR A4 Reaffirmation
	(15.00)	(15.00)
	(15.00)	(15.00)
Non Fund Based	1.23	1.23	Short Term	BWR A4 Reaffirmation	BWR A4 Reaffirmation
Grand Total	31.33	31.33	(Rupees Thirty One Crores and Thirty Three 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
Note: A rating advisory for delay in rating review was published on 13 August 2021.Information has been received since then and accordingly, the rating is reviewed.

RATING ACTION / OUTLOOK

The rating reaffirmation factors in the experience of the proprietor in agro products export business, longstanding relationships with customers and suppliers, trading in multiple agro based products thus diversifying the revenue concentration risk and satisfactory net worth. The ratings are, however, constrained by the average financial risk profile of the Company marked by high gearing, thin profitability margins and average debt coverage indicators. The rating also remains constrained by the susceptibility to volatility in raw material prices and its impact on the profits of the Company.

The Outlook of the concern continues to remain stable as BWR believes that the Nandyala Satyanarayan (‘NS’ or ‘the concern’) business risk profile will be maintained over the medium term in view of its product profile comprising multiple agro based products and reduced bank borrowings with no long term debt obligations. The Outlook may be revised to 'Positive' if revenue and profit margins improves significantly leading to better cash accruals. The Outlook may be revised to 'Negative' if there is decline in sales impacting the cash accruals adversely and there by the overall financial risk profile. 

BWR has principally relied upon the standalone financials of NS up to FY20, provisional financials of FY21, projected financials for FY22 and FY23, and publicly available information and information/clarification as provided by the concern's management. 

KEY RATING DRIVERS

Credit Strengths:

• Experienced promoter and established track record :

  The proprietor of the company is experienced with over three decades of experience in agro exports business. The concern has a long track record of operations since 1985 and benefits from the promoters' experience in the business and retained relationships with customer and suppliers.

• Established relationships with customers & suppliers :

  The long standing experience of the proprietor has led to an established relationship with the customers as well as the suppliers. The concern does not maintain any long term contracts with suppliers but enjoys the flexiblity of procuring required agro products from farmers and wholesales, locally, at prevailing rates. It has maintained a long term relationship with its customers and exports to China, Vietnam, Bangladesh, Malaysia, Singapore, Sri Lanka, Thailand, Indonesia etc. The export clientele of the concern include Tita Express Ltd, Tianjin Huayu Jieda Imp & Exp Co. Ltd., Shanghai Vannawin Trading Co. Ltd., Wenzhou Puca Import and Export Co. Ltd., Shandong Kingsun Foods Co. Ltd. etc. 

• Trading in multiple agro based commodities :

  The concern deals with multiple agro based commodites which primarily include cumin seeds, groundnut kernel, dry chilly and frozen shrimp. Frozen shrimp was added to product profile of the concern during FY20 and it contributed around 47% to the total sales during FY21 business operations which supported the revenue growth in FY21. Trading in multiple agro based commodities has diversified the revenue concentration risk of the concern.

• Satisfactory net worth :

  The concern is supported by moderate proprietor's capital of Rs. 24.53 Cr as of 31 March 2020 which has further improved to Rs. 25.88 Cr as of 31 March 2021(P) due to accretion of profits.

Credit Risks:

• Decline in scale of operations :

  The concern’s proprietor is gradually shifting the business of the concern to the sister company N K Agro Exports (India) Private Limited which is also in the same line of business. This has led to decline in the revenue scale from Rs. 774.47 Cr in FY18 to Rs. 453.56 Cr in FY19 to Rs 263.17 Cr in FY20. The revenue, however, has improved marginally to Rs. 287.66 Cr in FY21 (P).

• Moderate financial risk profile :

  Total debt to tangible net worth decreased from 6.76 times in FY19, however, remained high at 2.31 times in FY20. Proprietors' capital stood at Rs. 24.53 Cr as of 31 March 2020 against Rs. 23.14 Cr as of 31 March 2019. Total debt reduced from Rs. 156.47 Cr in FY19 to Rs. 56.64 Cr in FY20 due to proportionate decline in sanctioned bank limits with shifting of business to its sister concern. Profit margins were low with an operating profit margin of 2.77% and net profit margin of 0.71% in FY20. Thereby, the net cash accruals to total debt stood negative at 0.02 times in FY20. ISCR was adequate at 1.61 times whereas DSCR was negative at 0.65 times in FY20. As per provisional FY21, total debt has increased to Rs. 79.82 Cr due to increase in unsecured loans. Hence, the total debt to tangible net worth has increased to 3.08 times. ISCR and DSCR improved to 2.06 times and 1.31 times, respectively. Operating profit margin and net profit margin were at 2.05% and 0.96%, respectively.

• Susceptibility of profitability to volatility in raw material prices :

  The agricultural products export industry's profitability margins are highly correlated with fluctuations in raw material prices and exposed to agro climatic risks. The concern does not have any long-term contracts with either suppliers or customers for either price or volume. Volumes are exposed to uncertain agro-climatic conditions, global demand-supply situation and price competitiveness of Indian spices and other agricultural products. As a result, the profitability margins of the concern are susceptible to the volatility in raw material prices.

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology as detailed in the Rating Criteria below (hyperlinks provided at the end of this rationale). The rated entity is a proprietorship concern. Hence, BWR has adopted a standalone approach for arriving at its ratings.

RATING SENSITIVITIES

Positive: Substantial Improvement in revenue scale and profit margins with revised product profile along with improvement in capital structure and liquidity, leading to improved financial risk profile.

Negative: Any decline in the revenue and profitability, resulting in the deterioration of overall financial risk profile of the concern. Also, continued low cash accruals to total debt leading to a stressed debt protection metrics can have an adverse impact on the rating. 

LIQUIDITY INDICATORS - Stretched

The liquidity remains stretched due to working capital intensive nature of operations of the concern and low profit margins. The average utilization of bank facilities stood at ~95% in the past six months. Cash and cash equivalents were low at Rs. 0.36 Cr as on 31 March 2021(P). Net cash accruals to total debt stood low at 0.03 times in FY21(P). Debt profile of the Company primarily consists of working capital facilities. Operating profit of Rs. 5.90 Cr stood adequate to cover the interest and finance cost of Rs. 2.86 Cr in FY21(P). Cash conversion cycle stood improved at 41 days as on 31 March 2021(P). Current Ratio stood adequate at 1.49 times as on 31Mar2021 (P).

ABOUT THE ENTITY

Nandyala Satyanarayana, a proprietorship concern, was established in 1985 by Mr. Nandyala Satyanarayana at Tadepalligudem, West Godavari, Andhra Pradesh. NS is a ‘Three Star Export House’ and a 100% export oriented entity. It is engaged in export of various agricultural products viz., spices, oilseeds, pulses, vegetables and marine products. Some of the major products being exported by the company are dry chillies, onion, ginger, garlic, groundnut kernels, rice, cotton, chilli seeds, sesame seeds, sugar, turmeric, coriander, cumin seeds, fennel seeds, cuttlefish, jellyfish, etc. NS’s export market comprises Bangladesh, Malaysia, Singapore, Sri Lanka, Thailand, Indonesia, Vietnam, USA, Philippines, UAE, China, etc.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	263.17	453.56
EBITDA	Rs.Crs.	7.29	11.70
PAT	Rs.Crs.	1.87	2.85
Tangible Net Worth	Rs.Crs.	24.53	23.14
Total Debt/Tangible Net Worth	Times	2.31	6.76
Current Ratio	Times	0.97	1.48

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

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	0.10	BWR BB-/Stable (Reaffirmation)	03Aug2020	BWR BB-Stable (Downgrade)	03Apr2019	BWR BBStable (Assignment)	NA	NA
Fund Based	ST	30.00	BWR A4 (Reaffirmation)	03Aug2020	BWR A4 (Reaffirmation)	03Apr2019	BWR A4 (Assignment)	NA	NA
FB SubLimit	ST	(15.00)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(15.00)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	1.23	BWR A4 (Reaffirmation)	03Aug2020	BWR A4 (Reaffirmation)	03Apr2019	BWR A4 (Assignment)	NA	NA
Grand Total		31.33	(Rupees Thirty One Crores and Thirty Three 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

• General Criteria
• Trading Entities
• Approach to Financial Ratios
• Short Term Debt

Analytical Contacts
Rajaram Gouda Senior Rating Analyst Board : +91 80 4040 9940 rajaram.g@brickworkratings.com	Hemant Sagare Senior Manager - Ratings Board : +91 80 4040 9940 hemant.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	Karur Vysya Bank	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	0.10	_	0.10
2	Karur Vysya Bank	Packing Credit (PC) - Sanctioned	_	15.00	15.00
	Sub-Limit (Packing Credit in Foreign Currency (PCFC)) - Sanctioned		(15.00)
3	Karur Vysya Bank	Foreign Bill Negotiation under Letter of Credit (FBD/FUDBP/FBP/FBDN) - Sanctioned	_	15.00	15.00
	Sub-Limit (Export Bill Discount/Negotiation (EBD/N)) - Sanctioned		(15.00)
4	Karur Vysya Bank	Bank Guarantee - Sanctioned	_	0.10	0.10
5	Karur Vysya Bank	Credit Exposure Limit (CEL) - Sanctioned	_	1.13	1.13
Total			0.10	31.23	31.33
TOTAL (Rupees Thirty One Crores and Thirty Three lakhs Only)