Vanshika Sugar & Power Industries Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 36.53 Crs. of Vanshika Sugar & Power Industries Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (11 Aug 2020)	Present
Fund Based	37.90	36.53	Long Term	BWR BB-/Stable Initial Rating	BWR BB - /Stable Reaffirmation
Grand Total	37.90	36.53	(Rupees Thirty Six Crores and Fifty 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

RATING ACTION / OUTLOOK

Brickwork Ratings reaffirms the rating to BWR BB- (Stable) for the bank loan facilities amounting to Rs. 36.53 Crs. of Vanshika Sugar & Power Industries Ltd. BWR believes that Vanshika Sugar & Power Industries Ltd.'s 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 backed by a favorable industry scenario. The rating outlook may be revised to 'Negative' if the revenues and profit margins show lower than expected figures.

BWR has essentially relied upon the audited financial statements of Vanshika Sugar & Industries Ltd. for FY18, FY19 and FY20, provisional for FY21 and projections for FY22 and FY23, and publicly available information and information/clarifications provided by the entity’s management.

The rating draws strength from the experienced management, location advantage, moderate scale of operations, moderate financial risk profile, and infusion of funds in the business. The rating is however constrained by suspectibility to agro-climatic risks and inherent cyclicality of sugar industry, regulated nature of the industry, and high level of gearing.

Going forward the ability of the company to improve its margins, scale of operations, gearing, along with strengthening its overall financial risk profile would be its key rating sensitivity.

KEY RATING DRIVERS

Credit Strengths:

Experienced management :
Mrs Nisha Sharma is a graduate by qualification and has business experience of 8 years.Mr Dinesh Sen is a whole time director and is associated with the firm since inception.He looks after the day to day business of the company.The directors are also engaged in business activities like construction,mining and liquor trading. Thus the firm is professionally managed.
Location advantage :
The Sugar Mill of VSPIL is located in close proximity to the sugar growing areas resulting in low transportation cost for the company. However, there are 7-8 mills in the area due to which limited raw marterials is available in the area.
Moderate scale of operations and achieveability of sales :
TOI of the company has decreased to Rs. 60.82 Crs. in FY21 v/s Rs. 64.36 Crs. in FY20. The company is projecting to achieve TOI of Rs. 66.58 Crs. in FY22 and in lieu with the past trend the projected figure seems achieveable. Also, the client has provided us with the monthwise sales figure for the period April 2021 - September 2021 and they have achieved sales of Rs. 25.33 Crs. The company also plans to start the ethanol plant of 60 KLPD capacity of dual feed nature. It has started preparation of DPR and will soon proceed for necessary licenses, which will lead to increase in topline of the company.
Moderate financial risk profile :
TNW of the company though increased is almost stagnant standing at Rs. 29.12 Crs. in FY21 v/s Rs. 28.56 Crs. in FY20 on account of ploughing back of profits in the business. Total debt of the company has declined to Rs. 48.34 Crs. in FY21 v/s Rs. 53.95 Crs. in FY20. The profit margins of the company is moderate with OPM and NPM standing at 14.75% and 1.05% respectively in FY21. The profit margins are projected to increase further to 14.89% and 2.54% respectively in FY22. The current ratio of the company has increased to 1.08x in FY21. The debt protection metrics of the company is moderate with ISCR standing at 3.01x in FY21 v/s 3.25x in FY20, whereas DSCR of the company is standing at 1.23x in FY21 v/s 1.17x in FY20. The debt protection metrics of the company is projected to increase in FY22.
Infusion of funds in the business :
Since last rating the Company has injected funds of Rs. 12.75 Crs. in the business as Term Loans from Friends/Family.

Credit Risks:

High level of gearing :
TD/TNW of the company stands at 1.66x in FY21 and the same is projected to increase to 1.95x in FY22.
Susceptibility to agro-climatic risks and inherent cyclicality of sugar industry :
The profitability of sugar mills remains exposed to agro-climatic risks such as vagaries of monsoon and risks such as an outbreak of diseases related to cane production . The absence of integrated operations like lack of forward integration into distilleries and co-generation makes the company’s performance more vulnerable to vagaries of the sugar cycle.
Regulated nature of the industry :
The domestic sugar industry is highly regulated because of central and various government policies with respect to sugarcane prices, export and import of sugar, and the sugar release mechanism.

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 private limited company. Hence, BWR has adopted a standalone approach for arriving at its ratings.

RATING SENSITIVITIES

Going forward the ability of the company to improve its scale of operations, overall financial risk profile will be the key sensitivities.

Positive: The outlook may be revised to Positive if a sustained increase in scale of operations and improvement in financial risk profile.

Negative: The outlook may be revised to Negative if the company reports significantly lower than expected performance and deterioration in the overall financial risk profile.

LIQUIDITY INDICATORS - Stretched

The current ratio stands at 1.08x in FY21 cash and cash equivalents stands at Rs 0.79 Crs. The net cash accruals in FY21 are Rs 5.52 Crs v/s the debt obligations of Rs 1.43 Crs. As per Banker's Feedback there are ocassional delays in the servicing of debt obligations.

ABOUT THE ENTITY

Vanshika Sugar and Power Industries Ltd was incorporated on 31/8/2012 and is registered office is located at Rajmarg,Deori, Dist Narsinghpur, Madhya Pradesh.
The company is promoted by Mr Sanjay Sharma and his family. Mr Sanjay Sharma and his wife Mrs Nisha Sharma were earlier associated with Mahakaushal Sugar and Power Industries.
Mrs Nisha Sharma was the director of the company and then later resigned. After gaining experience by working with Mahakaushal Sugar and Power Industries and considering that family owns around 500 acres of land near Deori area the Sharma family decided to start a sugar mill at their native place.
VSPIL’s portfolio of products comprising of sugar, molasses and bagasse. The installed crushing capacity of plant is 216000 per day (TCD). The company does not own any distilleries and co-generation

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Provisional)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	60.82	64.36
EBITDA	Rs.Crs.	8.97	9.46
PAT	Rs.Crs.	0.64	1.01
Tangible Net Worth	Rs.Crs.	29.12	28.56
Total Debt/Tangible Net Worth	Times	1.66	1.89
Current Ratio	Times	1.08	0.77

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	36.53	BWR BB-/Stable (Reaffirmation)	11Aug2020	BWR BB-Stable (Initial Rating)	NA	NA	NA	NA
Grand Total		36.53	(Rupees Thirty Six Crores and Fifty 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

Analytical Contacts
Mita Ghanshyam Gupta Ratings Analyst mita.g@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Vanshika Sugar & Power Industries 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	5.10	_	5.10
2	Union Bank of India	vehicle loan - Out-standing	0.24	_	0.24
3	Union Bank of India	GECL - Out-standing	1.19	_	1.19
4	Union Bank of India	Cash Credit (WHR) - Out-standing	30.00	_	30.00
Total			36.53	0.00	36.53
TOTAL (Rupees Thirty Six Crores and Fifty Three lakhs Only)

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