|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 5.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 20.25 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 25.25 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed its long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and the short-term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs.25.25 crore bank facilities of ABC Chemical Exports Private Limited (ACEPL). The outlook is ‘Stable’.
Rationale for Rating Reaffirmation The rating reaffirmation considers ACEPL’s management’s long standing experience along with its established track record of operations and geographically diversified business risk profile. Further it takes into consideration the stable operating performance and moderate financial risk profile in FY2023. The operating revenue stood at Rs.384.91 Cr in FY2023 against Rs.390.53 Cr in FY2022. In 9MFY2024, company has recorded revenue of Rs.383.84 Cr. The operating profitability stood range bound at 3.29 percent in FY2023 as against 3.17 percent in FY2022 and 3.30 percent in FY2021. The financial risk profile is moderate with moderate net worth, low gearing and comfortable coverage indicators. The rating is however constrained on account of moderately intensive working capital operations and low profitability margins on account of trading nature of business. |
| About the Company |
|
Maharashtra based ABC Chemical Exports Private Limited was incorporated in 1997 and is promoted by Mr. Hiroo Thadani and Mr. Vijay Thadani. The company is primarily engaged in trading and exports of pigments, resins chemicals and additives that are used in manufacturing of printing inks, paints, packaging, plastics, textile and rubber. The company has offices India, USA, China, Egypt, UAE, Nigeria and Thailand.
|
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
|
Acuité has considered the standalone business and financial risk profile of ACEPL to arrive at the rating
|
| Key Rating Drivers |
| Strengths |
| Extensive experience of the promoters and their established presence in chemical trading segment
The promoter, Mr. Hiroo Thadani has an extensive experience in the chemical trading segment for more than three decades. He is equally supported by second generation management comprising of Mr. Vinay Thadani who has experience of around two decades in the industry. The extensive experience of the promoters and established presence in the industry has helped the company to generate healthy relations with various customers and suppliers in both domestic as well as global market. The operating income stood at Rs. 384.91 Cr in FY23 as against Rs.390.53 Cr in FY22. The company has generated a revenue of approx. Rs.383.84 Cr in 9 months period ended December 2023. Acuité believes that the company will continue to benefit from the promoters' experience and established track record of operations in improving its business risk profile over the medium term. Moderate Financial Risk Profile The financial risk profile of the company is moderate marked by moderate net worth, low gearing and comfortable coverage indicators. The tangible net worth of the company improved to Rs. 34.65 Cr. as on March 31, 2023, as against Rs.27.33 Cr. as on March 31, 2022. The improvement in net-worth is primarily due to accretion of profits to reserves. The total debt of the company stood at Rs. 9.26 Cr as on March 31, 2023, which includes Rs. 3.63 Cr of long-term borrowings, Rs. 0.42 Cr of unsecured loans and Rs.5.21 Cr of short-term borrowings. The gearing level of the company remained low at 0.27 times as on March 31, 2023 as against 0.33 times as on March 31,2022. The TOL/TNW improved to 3.89 times as on March 31, 2023 as against 4.96 times as on March 31,2022. The Interest Coverage Ratio (ICR) stood at 4.74 times in FY23 as against 5.01 times in FY22. The NCA/TD stood at 0.89 times in FY23 as against 0.92 times in FY22. Acuité expects the financial risk profile to remain moderate over the medium term in absence of any major debt-funded capex plan. |
| Weaknesses |
| Moderately intensive nature of working capital operations.
The company’s working capital operations are moderately intensive in nature. The GCA days stood at 128 days as on March 31, 2023 as against 125 days as on March 31, 2022. The GCA days are driven by high debtor days. The debtor days stood at 116 days as on March 31, 2023 as against 109 days as on March 31, 2022. The company offers credit period of 45-90 days from Bill of lading or LC at sight to its customers depending on the relationship. It obtains credit insurance from ECGC in India and Coface in UAE on all its trades. The inventory days stands low at 1 day as on March 31,2023 as well in the previous year. The company procures material from market, only after receiving the order from the client and majority of its sale is made on port-to-port basis. Hence, this results in lower price risk and lower inventory levels. The creditor days stood at 100 days as on March 31,2023 as against 104 days as on March 31, 2022.The Company’s reliance on working capital limits is moderate, marked by utilisation of fund-based limits at ~ 26 % for the last nine months ended September 2023 and non-fund-based limits utilisation at ~81 percent for the same period. Low profitability margins marked by trading nature of operations ACEPL’s has lower operating margins mainly on account of trading nature of business and competitive industry limiting the bargaining power with the customer. The operating profit margin stood range bound at 3.29 percent in FY2023 as against 3.17 percent in FY2022 and 3.30 percent in FY2021. |
| Rating Sensitivities |
|
Improvement in scale of operations and profitability
Elongation of working capital cycle Deterioration in liquidity position |
| Liquidity Position |
| Adequate |
|
The liquidity of the company is adequate marked by generation of sufficient net cash accruals as against debt repayment obligations. The company generated NCA of Rs. 8.22 Cr. in FY2023 against nominal maturing debt obligations of Rs.0.91 Cr during the same period. Going forward, the net cash accruals are expected to remain in the range of Rs.10.13-11.84 Cr. in FY23-25 as against maturing debt obligations of Rs.0.44-0.52. The GCA days stood at 128 days as on March 31, 2023. The current ratio of the company stood at 1.20 times as on March 31, 2023 as against 1.14 times as on March 31, 2022 the Company’s reliance on working capital limits is moderate, marked by utilisation of fund-based limits at 26 % for the last nine months ended September 2023 and non-fund-based limits utilisation at ~81 percent for the same period.
The cash and bank balance stood at Rs. 12.12 Cr. as on March 31, 2023 as against Rs.11.14 Cr. as on March 31, 2022. |
| Outlook:Stable |
|
Acuité believes that the company will continue to maintain a ‘Stable’ outlook over near to medium term owing to its established market position and experienced management The outlook may be revised to ‘Positive’ in case the company achieves higher than expected growth in revenues and improvement in profitability margins, working capital management and debt protection metrics. Conversely, the outlook may be revised to ‘Negative’ in case of a significant decline in revenues and operating profit margins, or deterioration in the capital structure and liquidity position on account of higher-than-expected working capital requirements.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 384.91 | 390.53 |
| PAT | Rs. Cr. | 7.32 | 7.27 |
| PAT Margin | (%) | 1.90 | 1.86 |
| Total Debt/Tangible Net Worth | Times | 0.27 | 0.36 |
| PBDIT/Interest | Times | 4.74 | 5.01 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
|
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
|
In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
|
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||
|
| |
|
Contacts |
|
|
|
About Acuité Ratings & Research |
