Brickwork Ratings upgrades long-term rating & reaffirms short-term rating for the Bank Loan Facilities of Rs. 8.22 Crs. of R Chem Organics (Bangalore) Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (21 Oct 2020) |
Present | ||
| Fund Based | 8.89 | 4.72 | Long Term |
BWR BB-/Stable
Upgrade |
BWR BB
/Stable Upgrade |
| Non Fund Based | 3.50 | 3.50 | Short Term |
BWR A4/Stable
Reaffirmation |
BWR A4
/Stable Reaffirmation |
| Grand Total | 12.39 | 8.22 | (Rupees Eight Crores and Twenty Two lakhs Only) | ||
The Rating Outlook is Stable because BWR expects that R Chem Organics(Bangalore) Pvt Ltd’s or the company’s financial 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 DRIVERSCredit Strengths:
Mr. N.V. Prasad promoted RChem during the year 1978. Initially the proprietor's concern was engaged in trading of chemicals and supplying to well-known laboratories in and around Bangalore. Over a period of time, developed products suitable for watch industries especially concerning gold coating and started supplying the same to Horological industries such as HMT, Titan. Subsequently, RChem diversified it's activity into the production of fine chemicals and eventually set up an industrial unit in the SME sector at Hosur in 1995. Mr. N.V. Prasad set-up a Modern Bulk Drug Intermediate Manufacturing Unit at Somanahalli, Karnataka. The promoter is experienced in this chemical field for the last four decades and in the manufacturing of Sodium Azide and its derivatives from past 20 years.
The company is in existence for 11 years and has seen complete business cycles.
The company`s revenue from operations has grown substantially by 36.32 % in the FY 21.
Net worth of the company is increasing Y-O-Y due to retention of profits.
DSCR and ISCR of the company stand at 0.91 and 2.04 respectively in FY21 indicating the company’s adequacy to meet its debt obligations.
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
Account receivable is 108 days in FY21 and 82 days In FY20.
Sodium Azide market growth is correlated with Pharma, Automotive, Health care Hospitality, explosives and agriculture pesticide industry so slowdown of these industries may decrease revenues.
Profit margins improved from 0.60% in FY19,0.83 %in FY20 and 0.99% in FY21 but remain low.
Raw materials expenses in FY21 is 83% and 78% in FY20 of total expenses, and volatility of price in raw materials & exchange rate fluctuation may decrease the profitability of the company since it imports basic raw materials.
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).The Rating is defined by Standalone financials.
RATING SENSITIVITIES
Going forward the ability of the company to increase its scale of operations, improve its net worth, decrease gearing, improve its working capital cycle and improve overall financial risk profile shall be key rating sensitivities.
Positive: The ratings may be upgraded if profitability, liquidity and overall credit profile show substantial improvement.
Negative: The rating may be downgraded in case there is a significant deterioration in the business and financial risk profile of the company from its current level.
LIQUIDITY INDICATORS - Adequate
The company’s current ratio stands at 2.85 times in FY 20 and 3.91 in FY21 .Net Cash Accruals stand at Rs0.47 Crs for FY 20 Aud versus Rs 0.35 Crs in FY 19 Aud & 0.62 in FY21 Aud. The Cash and Bank balance for FY 20 Aud stands at Rs 0.04 Crs. versus Rs 0.19 Crs in FY 19 Aud & 0.02 Crs. in FY21 Aud. The Average Cash Credit Utilization is 30.51% from 03-04-2020 to 20-10-2021.
ABOUT THE ENTITYR Chem Organics (Bangalore) Pvt Ltd was incorporated in the year 2010 and is promoted and managed by Managing Director Mr. N.V. Prasad and the Company is has set up a Sodium Azide manufacturing plant at Maddur – Mandya Karnataka. The product has varied uses as a Pharma bulk drug intermediate for Anti AIDS and BP drugs, component in automotive safety air bags, an eco- friendly pesticide etc.The manufacturing product is hazardous in nature with limited players in the market and requires precaution while handling. Mr. N.V Prasad and Ms. Padmavathi and Sri N.V Santosh Kumar are directors of the Company.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 22.30 | 16.36 |
| EBITDA | Rs.Crs. | 1.29 | 1.44 |
| PAT | Rs.Crs. | 0.22 | 0.14 |
| Tangible Net Worth | Rs.Crs. | 11.07 | 10.85 |
| Total Debt/Tangible Net Worth | Times | 0.49 | 0.76 |
| Current Ratio | Times | 3.91 | 2.85 |
NA
ANY OTHER INFORMATIONNA
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 | 4.72 |
BWR BB/Stable
(Upgrade) |
20Mar2020 |
BWR B- Stable
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
NA |
NA
|
| NA |
NA
|
21Oct2020 |
BWR BB-Stable
(Upgrade) |
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 3.50 |
BWR A4/Stable
(Reaffirmation) |
20Mar2020 |
BWR A4Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
NA |
NA
|
| NA |
NA
|
21Oct2020 |
BWR A4Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
||
| NFB SubLimit | ST | NA |
NA
|
20Mar2020 |
BWR A4 Stable
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
NA |
NA
|
| Grand Total | 8.22 | (Rupees Eight Crores and Twenty 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| Analytical Contacts | |
|---|---|
|
Koppula Shyam Sundar Ratings Analyst shyamsundar.k@brickworkratings.com |
Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@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 Maharashtra | Term LoanOut-standing | _ | _ | 0.00 | |
| 2 | Bank of Maharashtra | Working Capital Term LoanOut-standing | _ | _ | 0.00 | |
| 3 | Bank of Maharashtra | Cash CreditSanctioned | 3.50 | _ | 3.50 | |
| 4 | Bank of Maharashtra | Bank GuaranteeSanctioned | _ | _ | 0.00 | |
| 5 | Bank of Maharashtra | Foreign Letter of Credit (FLC)Sanctioned | _ | 3.50 | 3.50 | |
| 6 | Bank of Maharashtra | Emergency Credit Line Guarantee Scheme (ECLGS)Out-standing | 1.22 | _ | 1.22 | |
| Total | 4.72 | 3.50 | 8.22 | |||
| TOTAL (Rupees Eight Crores and Twenty Two lakhs Only) | ||||||
The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.
About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
Disclaimer
Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.
BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).
BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.
The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.
BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.
BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.
Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.
BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.
This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.
BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.