| Benefits derived from Experienced promoters
The operations of the company is ably managed by Mr. Ajay Bangur, Executive Director under the supervision of two Non-Executive Directors namely, Mr. Hemant Bangur and Mr. Binod Kumar Khaitan and two Independent Directors namely, Mrs. Sonali Sen and Mr. Gautam Bhattacharya. All the directors have experiences in different industries like jute, timber, plantation, tea fertilizer among others. Collectively, their business acumen has driven the business to develop longstanding ties with its customers and suppliers. The company has also horizontally diversified into trading of Crop Protection Chemicals, Plant Growth promoters and high yielding variety seeds under Samadhan Brand. Acuite believes that the experience of promoters over decades in manufacturing fertilizers and relationship with customers and suppliers will benefit the company going forward.
Moderate Financial risk profile
The financial risk profile is moderate marked by an increase in the net worth to Rs. 84.59 Cr. as on March 31,2024 as compared to Rs. 82.82 Cr. as on March 31,2023 due to accretion of reserves. Gearing stood at 0.24 times as on March 31, 2024 as against 0.40 times as on March 31,2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 0.41 times as on March 31, 2024 as compared to 0.70 times as on March 31,2023. The debt protection metrics is marked by Interest Coverage Ratio at 2.22 times as on March 31, 2024 as compared to 3.16 times as on March 31,2023 and Debt Service Coverage Ratio at 1.43 times as on March 31, 2024 as compared to 2.08 times as on March 31,2023. Net Cash Accruals/Total Debt (NCA/TD) stood at 0.15 times as on March 31, 2024 as compared to 0.17 times as on March 31,2023. Acuité believes that going forward the financial risk profile will remain moderate over the medium term with steady cash accruals in the absence of any major debt funded capex plans.
Moderate working capital management
The moderate working capital management is marked by Gross Current Assets (GCA) of 114 days as on March 31, 2024 as compared to 125 days as on March 31, 2023. The debtor days stood at 19 days as on March 31,2024 as compared to 29 days as on March 31, 2023. The subsidy is also received within 60 days from day of raising bill. Furthermore, the inventory days stood at 59 days as on March 31, 2024 as compared to 81 days as on March 31,2023. 50% of the raw materials are imported from Middle East countries like Egypt, Jordan, Israel, Morocco, Jordan among others. The other current assets amount to Rs. 7.20 Cr. as on March 31, 2024 as compared to Rs. 8.26 Cr. as on March 31, 2023 majorly comprises of Input Tax Receivable. The creditor days stood at 42 days as on March 31, 2024 as compared to 48 days as on March 31,2023. The imports backed by Letter of Credit typically of about backed 180 days. Acuité believes that going forward the working capital operations of the company will remain moderate over the medium term. |
| Declining Revenues and stable yet decline in operating profitability
The revenues have declined to Rs. 114.97 Cr. as on March 31, 2024 as compared to Rs. 146.97 Cr. as on March 31, 2023 due to prolonged dry spell in West Bengal during 2023-2024 during the Kharif season. Further, the Government of India had reduced the subsidy with effect from October 2023 on the sale of fertilizer from Rs. 6872/tonne to Rs. 3540/tonne in the second half of the year comprising of peak season and the average selling price could not be fully adjusted to account for this revised reduction in subsidy, leading to lower sales. The company has achieved revenues of Rs. 101.03 Cr. in 9MFY25. However, despite a decline in revenues, the Company could maintain its operating profitability which stood at 6.38 percent as on March 31, 2024 as compared to 6.66 percent as on March 31, 2023 due to reduction in administrative and selling costs. .Acuite believes that the susceptibility of revenues and margins to regulated nature of industry alongwith volatility in prices of raw material would remain a key monitorable.
Exposure to regulatory risks in the fertilizer industry
The fertilizer industry is strategic, but highly controlled, with fertilizer subsidy being an important component of profitability. The phosphatic-fertilizer industry was brought under the NBS (Nutrient Based Subsidy Scheme) regime from April 1, 2010. Under this scheme, the Government of India fixes the subsidy payable on nutrients for the entire fiscal (with an option to review this every six months), while retail prices are market driven. Manufacturers of phosphatic fertilizers are dependent on imports for their key raw materials such as rock phosphate and phosphoric acid. The regulated nature of the industry and susceptibility of complex fertilizer players to raw material price volatility under the NBS regime continues to be key rating sensitivity factors. Fertilizer companies are also exposed to subsidy payments from the government, which may get delayed leading to reliance on short-term working capital borrowings. Any change in the regulatory scenario in the fertilizer industry remain key monitorable.
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