Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 52.80 Crs. of Sangita Sales Pvt. Ltd. (‘SSPL or ‘the Company)
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (04 Oct 2021) |
Present | ||
| Fund Based | 51.00 | 52.80 | Long Term |
BWR BB-/Stable
Downgrade/ISSUER NOT COOPERATING* |
BWR BB +
/Stable Upgrade |
| Non Fund Based | (40.00) | (40.00) | Short Term |
BWR A4
Reaffirmation/ISSUER NOT COOPERATING* |
BWR A4 +
Upgrade |
| Grand Total | 51.00 | 52.80 | (Rupees Fifty Two Crores and Eighty lakhs Only) | ||
The revision in ratings assigned to the bank facilities of SSPL factors in the improvement in the financial risk profile during 9MFY22 characterized by significant improvement in total operating income and cash accruals, coupled with improvement in the tangible net worth adequate liquidity levels. The ratings continue to derive strength from the established track record, experienced promoters, established relations with reputed customers as well as suppliers. The rating, however, continues to remain constrained by moderate scale of operations, inherent business risk characterized by operating profit margins susceptible to price volatility, foreign exchange fluctuations and presence in highly competitive and fragmented industry.
KEY RATING DRIVERSCredit Strengths:
SSPL was incorporated in 1992 and is currently being managed by second generation management comprising Mr. Kishore Bansal and Mr. Pradeep Bansal, each of whom has experience of more than a decade in the coal trading business. The directors are supported by experienced second line management which helped SSPL in establishing its presence in the market which has resulted in growth in scale of operations.
The company provides services, including end to end solutions, to large and reputed corporatesThe company caters to reputed clients such as NTPC Limited,Jaypee Nigrie Super Thermal Power Plant, Bhilai Jaypee Cement Plant, Prayagraj Power Generation co ltd India Glycols Ltd and Jindal Poly Films Ltd
SSPL continues to operate on a moderate scale of operations with total operating income (TOI) remaining in the range of Rs.238.83 crore-Rs.624.07 crore during FY19 to FY21. Further, the TOI of the company had witnessed a dip and stood at Rs.238.83 crore in FY21 (FY20: Rs.312.18 crore) due to the decrease in sales quantity which was attributable to COVID-19 pandemic.Further, during 9MFY21, SSPL has reported TOI of Rs.534.83 crore owing to increase in the market demand coupled with new clientele tie-up. Moreover, SSPL has envisaged to achieve revenue of Rs.700 crore in FY22.
The financial risk profile of SSPL stood moderate with modest tangible net-worth base, moderate capital structure & debt coverage indicators. The debt profile of the company remained high in FY21 mainly due to higher utilization of working capital borrowings coupled with TNW of Rs.24.35 crore in FY21 (FY20: Rs.22.41 crore). Due to said reason, the overall gearing has slightly improved to 2.02 times as on March 31, 2021 (FY20:2.10). On the other hand, the ISCR and DSCR stood moderate at 1.64 times and 1.33 times respectively in FY21 (FY20: 1.72 times and 1.56times respectively).
The profit margins of SSPL stood low, given the trading nature of operations. Moreover, the same has improved to 4.44% in FY21 (FY20: 3.63%) owing to slightly higher realizations. Given the low operating profit margin, the net profit margin also stood low at 0.92% in FY21 (FY20: 0.86%).
The company is into coal handling and related services apart from coal trading which is highly fragmented and competitive in nature due to low entry barriers. Intense competition restricts the pricing flexibility of the company in the bulk customer segment hence the players in the industry do not have pricing power and are exposed to competition induced pressures on profitability.
BWR has essentially relied upon the standalone audited financials of the company up to FY21 & 9MFY22 provisional financial and projections up to FY24, publicly available information and information/clarifications provided by the management.
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
Positive factors –
Sustenance in the scale of operations by strengthening the order book position while maintaining the profit margins, capital structure & debt coverage indicators.
Negative factors –
Decline in scale of operations and / or deterioration in the profit margins, capital structure & debt coverage indicators, and liquidity position.
The company is expected to generate cash accruals of over Rs 10.00 crore against repayment obligations of Rs 3.88 crores and Rs. 0.52 crores in FY22 & FY23 respectively . The current ratio stood comfortable at 1.14 times as on March 31, 2021 (FY20: 1.19 times). Moreover, the company is majorly dependent on working capital bank limits for managing its working capital requirements. Fund-based bank limit was utilized at 93% on an average over the last nine months through Dec 2021. Furthermore, the company has free cash & cash equivalents balance of ~Rs.5.18 crore as on Dec 31, 2021, and fund support in the form of unsecured loans from promoters friends thereby comforting liquidity.
ABOUT THE ENTITY
Incorporated in 1992, SSPL is promoted by Mr. Pradeep Bansal and Mr. Kishore Bansal. SSPL engaged in trading and supplying of domestic coal i.e Steam Coal, ROM Coal, Slack Coal. It also offers coal handling & logistics services to a diversified and reputed clientele. SSPL procures coal from different subsidiaries of Coal India Ltd and supplies coal to steel, power, paper,cement and other related industries. SSPL has its own warehouses located at Nagpur, Wani, Bilaspur, Mumbai, Hyderabad, and Ranchi.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 238.83 | 312.18 |
| EBITDA | Rs.Crs. | 10.60 | 11.34 |
| PAT | Rs.Crs. | 2.20 | 2.67 |
| Tangible Net Worth | Rs.Crs. | 24.35 | 22.41 |
| Total Debt/Tangible Net Worth | Times | 2.02 | 2.10 |
| Current Ratio | Times | 1.14 | 1.19 |
NA
SSPL has not cooperated with Acuite Ratings and Research Limited which has classified it as non-cooperative vide release dated January 27, 2021. The reason provided by Acuite Ratings and Research Limited is non-furnishing of information for monitoring of ratings.
ANY OTHER INFORMATIONNil
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 | 52.80 |
BWR BB+/Stable
(Upgrade) |
04Oct2021 |
BWR BB-Stable
(Downgrade/ISSUER NOT COOPERATING*) |
22May2020 |
BWR BBStable
(Assignment) |
NA |
NA
|
| NFB SubLimit | ST | (40.00) |
BWR A4+
(Upgrade) |
04Oct2021 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
22May2020 |
BWR A4
(Assignment) |
NA |
NA
|
| Grand Total | 52.80 | (Rupees Fifty Two Crores and Eighty 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 | |
|---|---|
|
Roma Gupta Ratings Analyst roma.g@brickworkratings.com |
Chintan Dilip Lakhani Director- Ratings chintan.l@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 | Union Bank of India | Cash CreditSanctioned | 40.00 | _ | 40.00 | |
| Sub-Limit (LC/BG) Sanctioned | (40.00) | |||||
| 2 | Union Bank of India | GECLSanctioned | 12.80 | _ | 12.80 | |
| Total | 52.80 | 0.00 | 52.80 | |||
| TOTAL (Rupees Fifty Two Crores and Eighty lakhs Only) | ||||||
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