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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 25.00 | ACUITE BB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 47.50 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 72.50 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) and its short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.72.50 Cr bank facilities of Accord Chemical Corporation (ACC). The outlook is ‘Stable’.
Rationale for rating The rating reaffirmation takes the group’s established operations in the trading industry along with well experienced promoters in account, who have more than two decades of experience in trading industry. The rating also factors in improvement in scale of operations of the group reflected by increase in revenue to Rs. 1339.45 Cr. in FY2023 (Provisional) as compared to Rs.1302.43 Cr. in FY2022 and Rs. 697.61 Cr. in FY2021. The increase in revenue is on account of a high demand for its traded products in the domestic market, especially during the COVID-19 period. The group majorly imports its products (70%) and distributes them across India. However, despite the improvement in revenues, the profitability of the group deteriorated significantly marked by decline in operating profit margin to 0.88 percent in FY2023 (Provisional) as against 2.05 percent in FY2022 and 2.91 percent in FY2021. The decline is majorly on account of foreign exchange losses and increase in other expenses. Furthermore, the Profit After Tax of the group also declined to Rs.6.27 Cr. in FY2023 (Provisional) against Rs.23.00 Cr. in FY2022 and Rs.16.45 Cr. in FY2021. The rating is, further constrained by the cyclicality associated with chemical industry and risks associated towards foreign currency fluctuations |
| About the Company |
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Incorporated in 2009, Accord Chemical Corporation (ACC), a Mumbai-based partnership firm, is engaged in trading, indenting, distribution, imports, and exports of various petrochemicals. It is led by its partners, Mr. Jinesh Shah and Mrs. Meghna Shah, who have more than two decades of experience in the petrochemical industry. Jinesh Shah used to work at Tresent Organics as a business manager for around 10 to 12 years before launching his own firm.
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| About the Group |
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Incorporated in 2014, Accord Chemcorp Private Limited has been established with a vision to cater the fast-growing needs of the Chemical Industry in terms of providing the customers innovative solutions with dedicated and quality services. The company understands demands of various chemicals with the multiple industrial applications and give the upper edge to source and procure the products at competitive price and deliver the same to the customers to maintain cost effectiveness.
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| Analytical Approach |
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Acuite has considered the consolidated business and financial risk profile of Accord Chemical Corporation (ACC) and Accord Chemcorp Private Limited (ACPL) together referred to as Accord Group. The consolidation is mainly on account of the similar line of business and common management. Extent of Consolidation Full |
Key Rating Drivers
| Strengths |
| Established operations with improvement in revenues and experience management
The group has established a presence since 2009 and is engaged in trading, indenting, distribution, imports, and exports of various petrochemicals. Accord Group is promoted by Mr. Jinesh Shah and Mrs. Meghna Shah. The promoters have over two decades of experience in the trading business. The group benefits from its experienced management, which is reflected through its longstanding relationship with its customers and suppliers. This has ensured a steady flow of imports and exports of chemicals in a timely manner. The experience of promoters has helped the scaling its operations reflected by increase in revenue to Rs. 1339.45 Cr. in FY2023 (Provisional) as compared to Rs.1302.43 Cr. in FY2022 and Rs. 697.61 Cr. in FY2021. The increase in revenue is on account of a high demand for its traded products in the domestic market, especially during the COVID-19 period. The group majorly imports its products (70%) and distributes them across India. Acuité believes that the established operations and experience management will continue to benefit the operations of the group over the medium term. Above average financial risk profile The financial risk profile of the group is above average marked by moderate networth, moderate gearing and comfortable debt protection metrics. The net worth of the group stood at Rs.95.10 Cr. as of March 2023 (Provisional) as against Rs. 75.84 Cr. as of March 31, 2022. The networth of the group also includes unsecured loans from promoters to the tune of Rs.16.59 Cr. as on March 31, 2023 (Provisional) which is treated as quasi-equity. The gearing of the group deteriorated yet remained moderate at 1.50 times as on March 31, 2023 (Provisional) as against 0.93 times as on March 31, 2022 majorly on account of increase in short term borrowings. The total outside liabilities/tangible net worth (TOL/TNW) stood at 3.06 times as of March 31, 2023 (Provisional) as against 3.99 times as of March 31, 2022. The debt protection matrices of the company remain comfortable marked by Interest Coverage Ratio (ICR) at 3.24 times and Risk Coverage Ratio of 7.15 times for FY2023 (Provisional). However, the debt to EBITDA of the group deteriorated significantly to 10.50 times for FY2023 (Provisional) compared against 2.34 times same period last year majorly on account of significant deterioration in EBITDA of the group. Acuité believes that the financial risk profile of the group will remain at similar levels over the medium term in the absence of any major debt funded capex plan. |
| Weaknesses |
| Significant deterioration in profitability
The group majorly operates into trading, indenting and distribution of various petrochemicals. The company majorly imports is products and distributes in the domestic market. Despite the improvement in revenues, the profitability of the group deteriorated significantly marked by decline in operating profit margin to 0.88 percent in FY2023 (Provisional) as against 2.05 percent in FY2022 and 2.91 percent in FY2021. The decline is majorly on account of foreign exchange losses and increase in other expenses. Furthermore, the Profit After Tax of the group also declined to Rs.6.27 Cr. in FY2023 (Provisional) against Rs.23.00 Cr. in FY2022 and Rs.16.45 Cr. in FY2021. Acuité believes that the improvement in the profitability margins of the company will remain a key rating sensitivity over the medium term. Susceptibility of margins to volatility in raw material prices and foreign currency fluctuations The group’s profitability margins have remained susceptible to fluctuations in the prices of traded chemicals and foreign exchange risks as ~70 percent of products are imported from international countries. The group has not also incurred forex losses in FY2023 which significantly impacted their profitability. Acuité has also taken cognizance of the necessary measures taken by the group to reduce and cover forex fluctuations through forward cover. Highly competitive and fragmented industry The petrochemical trading industry is a highly fragmented industry and presence of large number of organised and unorganised players has created high competition in the industry. The group faces competition from large players as well as numerous players in the unorganised segment. Also, on account of its trading nature of business, the entry barriers are low thereby leading to a highly competitive environment for the group. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Adequate |
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The liquidity position of the group is marked by adequate cash accruals of Rs.8.50 Cr. as against no long-term debt repayment over the same period. The current ratio stood comfortable at 1.26 times in FY23 (Provisional). The cash and bank balances stood at Rs.20.75 cr. in FY23 (Provisional). The Non-fund-based limit utilisation stood at 75.59 per cent and the fund-based limit average utilisation stands at 80 percent over the six months ended Mar 2023. The operations of the group also remain efficient marked by moderate Gross Current Assets (GCA) of 68 days for FY2023 (Provisional) as compared to 81 days as on FY2022. Acuité believes that liquidity of the group is expected to remain adequate on account of adequate cash accruals against no matured repayment obligations
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| Outlook: Stable |
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Acuité believes that the group will continue to maintain a ‘Stable’ outlook and benefit over the medium term owing to diversification of the revenue streams. The outlook may be revised to 'Positive' in case the group records higher than anticipated improvement in its revenue and profitability while maintaining prudent working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of deterioration in the company’s profitability and financial risk profile of the group.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 1339.45 | 1302.43 |
| PAT | Rs. Cr. | 6.27 | 23.00 |
| PAT Margin | (%) | 0.47 | 1.77 |
| Total Debt/Tangible Net Worth | Times | 1.50 | 0.93 |
| PBDIT/Interest | Times | 3.24 | 7.19 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• 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 • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm |
| Note on complexity levels of the rated instrument |
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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
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