Kisan Oleochem and Derivatives Pvt. Ltd.

Brickwork Ratings revises/upgrade the long term ratings and assign short term rating for the Bank Loan Facilities of Rs 50.22 crs of Kisan Oleochem and Derivatives Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (16 Dec 2021)	Present
Fund Based	25.00	45.22	Long Term	BWR BB /Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB + /Stable Upgrade
	(20.00)	(0.00)
	(20.00)	(34.00)
Non Fund Based	0.00	5.00	Short Term		BWR A4 + Assignment
Grand Total	25.00	50.22	(Rupees Fifty Crores and Twenty Two 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

BWR has essentially relied upon the audited financial statements of Kisan Oleochem and Derivatives Pvt. Ltd. FY20 & FY21 and projected financial statements of FY23, FY24 and publicly available information and information / clarifications provided by the entity’s management.

The rating draws strength from the vast business experience of the directors, established track of operations and average financial risk profile. However, the rating is constrained by the thin profit margin and high competition from other established players in the market. Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.

BWR believes that Kisan Oleochem and Derivatives Pvt. Ltd. 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:

Proximity to raw material source :
Gujarat accounts for approximately 75% of the total castor seed production in India. With Gujarat being the main centre for castor seed crop, the company enjoys the advantage of proximity to its main raw material source. The company is located in Palanpur cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective.
Extensive promoters experience and long track record :
The company is being managed by experienced directors, who have now become excel in manufacturing Castor Oil & Derivatives. Having operated in industry since years now, the management has established a strong network with suppliers and customers and has established a good track record
Capacity expansion and timely infusion of funds by directors :
The expansion of the capacity takes place at Kisan Oleochem & Derivatives Pvt Ltd Ahmedabad Palapur Highway, Near Palanpur , which is about few Km's away from Palanpur town. The Company has sufficient piece of land for the present expansion planned. The project site is on the Highway itself and therefore its key strength is its location. Infrastructural facilities like water, telecommunication, and electricity are easily available. The oil mill was previously working on capacity of 200 tonnes a day which is increased to 400 tonnes a day. Timely infusion of funds in the form of USL of Rs 6.04 crs in FY21 provides addition cushion to liquidity.

Credit Risks:

Profitability vulnerable to volatile raw material prices and agro-climatic risk :
Seasonal volatility and fluctuations in raw material prices may impact the revenue and thereby affect the margins. Agro-climatic risks related to castor seed production can impact the production and pricing of castor oil, which is its main raw material.
Exposure to risks related to competition & risk from substitute products :
Some of the castor oil-based derivative products manufactured by the company faces competition from crude based derivative products. The company also faces competition from other organised & unorganised players.
Thin EBITDA margins and high gearing ratio :
Company OPM reduced to 0.63% and NPM to 0.18% in FY20-21 audited due to slight decline in sales marked by reduced PAT of Rs 0.89 crs. The tangible net worth of the company stands at Rs 15.62 crs in FY20-21 wherein total debt is increased by ~49% in FY20-21 marked by high gearing ratio of 3.20 x. The debt protection metrics are average as ISCR stands at 1.86 x and DSCR at 1.72 x in FY20-21.

ANALYTICAL APPROACH - Standalone

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

The firm’s ability to increase its scale of operations, improve profitability, efficiently manage its working capital requirements and strengthen its liquidity and overall credit profile would be the key rating sensitivities.

Positive:

• Substantial & sustained improvement in the Company’s revenue and/or profitability while maintaining the debt protection parameters.

Negative:

• Pressure on the operating margin or stretch in working capital cycle or large capex impacting the liquidity

• Any decline in scale of operations and/or profitability leading to sustained deterioration of liquidity and/or debt protection parameters.

LIQUIDITY INDICATORS - Stretched

Current ratio was moderate at 1.14 times as on 31 Mar 2021. Cash and bank balance remained low at Rs.0.34 Crs. as on 31 Mar 2021. The PAT of the company is declined to Rs 0.89 crs from Rs 1.11 crs due to increase in depreciation and other cost. Net cash accrual of Rs 1.38 crs is not sufficient to meet near term obligations of Rs 1.82 crs in FY21. The average CC utilization remained apprx 90% in past one year. The Net margin and operating margin are declined to 0.18% and 0.63% in FY21 marked by modest Tangible net worth of Rs 15 crs which is improved slightly due to increase in retained earnings by 15% in FY21. Net cash accrual to total debt remains at 3% which is less than ideal ratio.

ABOUT THE ENTITY

Kisan Oleochem & Derivatives Pvt Ltd (KODPL) was established in the year 2009 and is promoted by a well-known Patel family of Palanpur. It has since been operating as a major castor seeds processor having a base in castor seeds processing and oil refining with its unit at Palanpur, Gujarat. The company is a prominent player in the Castor Oil and Castor derivatives industry. It has also developed a strong supply chain network for procurement of seeds from the mandis and farmers directly hence to capitalize on its experience and contacts and also to exploit the growing demand, it has expanded the capacity of its Castor oil Plant at Palanpur. Its present castor oil plant of 200 tonnes a day is slated for expansion by another 200 tonnes a day. To exploit the growing demand, it has expanded the capacity of its Castor oil Plant at Palanpur as 400 tonnes a day. The present board of directors of the Company consists of Shri Ramanbhai Kanjibhai Patel, Shri Shankarbhai Karsanbhai Patel, Shri Bharatkumar Ramanlal Patel, Shri Hetankumar Shakarbhai Patel, Shri Anilkumar Shankarbhai Patel, Shri Kapilkumar Ranchhodbhai Patel.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	502.73	510.55
EBITDA	Rs.Crs.	3.18	6.02
PAT	Rs.Crs.	0.89	1.11
Tangible Net Worth	Rs.Crs.	15.62	14.73
Total Debt/Tangible Net Worth	Times	3.20	1.99
Current Ratio	Times	1.14	1.22

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

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	45.22	BWR BB+/Stable (Upgrade)	16Dec2021	BWR BB Stable (Downgrade/ISSUER NOT COOPERATING*)	23Oct2020	BWR BB+ Stable (Assignment)	NA	NA
FB SubLimit	LT	(34.00)	BWR BB+/Stable (Upgrade)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	5.00	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		50.22	(Rupees Fifty Crores and Twenty Two lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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
Tripti Sharma Ratings Analyst tripti.s@brickworkratings.com	Dileep Narayan Singh Director dileep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Kisan Oleochem and Derivatives Pvt. 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	Bank of Baroda	Term Loan - Out-standing	5.22	_	5.22
2	Bank of Baroda	Cash Credit - Sanctioned	34.00	_	34.00
	Sub-Limit (Sub-Limit (PCFC)) - Sanctioned	(0.00)
	Sub-Limit (Sub-Limit (PCH/FBP/FBD)) - Sanctioned	(34.00)
3	Bank of Baroda	Stand by Line of Credit - Sanctioned	_	_	0.00
4	Bank of Baroda	Forward Contract - Sanctioned	_	5.00	5.00
5	Bank of Baroda	Stand by Limit - Sanctioned	6.00	_	6.00
Total			45.22	5.00	50.22
TOTAL (Rupees Fifty Crores and Twenty Two lakhs Only)

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