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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.60 | ACUITE B+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 0.40 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding | 8.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed long-term rating to ‘ACUITE B+’ (read as ACUITE B plus) and reaffirmed short term rating of 'ACUITE A4' (read as ACUITE A four) to the Rs. 8.00 crore bank facilities of Aradhya Chemicals and Fertilizers (ACF). The outlook is 'Stable'.
Rationale for the Reaffirmation The rating reaffirmation considers stable operating and financial performance of ACF marked by stable operating income and improved operating margin. The revenue of the firm stood at Rs.28.93 Cr in FY2023 as against Rs.32.54 Cr in FY2022, while the operating margins stood at 5.38% and 4.05% during the same period. The rating also derives strength from the long track record of operations and experience of the management. The above strengths are constrained by the working capital-intensive nature of operations and MI’s presence in a competitive industry with low entry barriers. |
| About the Company |
| Established in 2010, Aradhya Chemicals and Fertilizers (ACF) is engaged in manufacturing of NKP fertilizers. The product line includes NPK fertilizers 17:17:17, 20:20:0, 14:06:21 and CMS fertilizers 10:05:05. The day to day operations are managed by its Partners, Mr. I S Prasanna, Mr. I P Prasheel Aradhya, Mr. I P Prajwal Aradhya and Mr. Mallappa S Angadi. The manufacturing unit is located at Mallashettihalli in Davangere (Karnataka) with installed capacity of 10 tonnes per hour. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered standalone business and financial risk profile of ACF to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management The firm is promoted by its Managing Partner, Mr. I S Prasanna along with other partners, I P Prasheel Aradhya, I P Prajwal Aradhya and Mallappa S Angadi who collectively possess experience of more than three decades in agriculture industry. The extensive experience has enabled the firm forge healthy relationships with customers and suppliers. Acuité believes that ACF will continue to benefit from its experienced management and established relationships with customers. |
| Weaknesses |
| Average financial risk profile The financial risk profile of the company remained average marked by moderate net worth, high gearing and robust debt protection metrics. The net worth of Rs.5.84 Cr as on FY2023 as against Rs.5.36 Cr as on FY2022. The gearing (debt-equity) stood at 1.54 times as on FY2023 as against 2.22 times as on FY2022. The total debt of Rs.8.99 Cr as on FY2023 consists of long-term of Rs.1.42 Cr. and short term of Rs.7.10 Cr. of bank borrowings and USL of Rs.0.46 Cr. The interest coverage ratio stood at 2.24 times for FY2023 as against 5.99 times for FY2022. The DSCR stood at 2.06 times for FY2023 as compared to 5.30 times for FY2022. The Net Cash Accruals to Total debt stood at 0.13 times for FY2023 as against 0.10 times for FY2022. The Total outside liabilities to Tangible net worth stood high at 2.00 times for FY2023 as against 2.84 times in FY2022. Working capital management The working capital management of the company remained intensive marked by high Gross Current Assets (GCA) of 259 days for FY2023 as compared to 323 days as on FY2022. The debtor period stood at 185 days for FY2023. Further, the inventory holding stood at 76 days for FY2023 as against 96 days for FY2022. The payment cycle varies from 15-30 days. The working capital cycle of the Company is expected to remain at similar levels over the medium term. Highly fragmented industry and agro-climatic risk Indian fertilizers industry is highly fragmented sector having large number of players from unorganised sector. In this industry, the barriers to entry are very low on account of low capital investment requirement. Further, the operations of the firm are exposed to agro climatic risk as it is highly dependent upon the rainfall. Any adverse climatic changes may severely impact the business of the firm. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The company has a stretched liquidity profile as reflected from its adequate net cash accruals against repayment obligations. The company generate net cash accruals of Rs. 1.19 Cr in FY2023 against repayment obligations of Rs. 1.42 Cr. The gross current asset days of the company stood at 259 days in FY2023. The bank limit utilisation of the company stood at 93.00% for the November months ended 2023. Current ratio stood modest at 1.44 times in FY2023.
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| Outlook: Stable |
| Acuité believes that ACF will maintain ‘Stable’ outlook over the medium term from the industry experience of its promoters. The outlook may be revised to 'Positive' if there is substantial and sustained improvement in ACF's operating income or profitability, while maintaining its working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of weakening of its capital structure and debt protection metrics. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 19.84 | 19.30 |
| PAT | Rs. Cr. | 0.77 | 0.81 |
| PAT Margin | (%) | 3.86 | 4.22 |
| Total Debt/Tangible Net Worth | Times | 1.54 | 2.22 |
| PBDIT/Interest | Times | 2.24 | 5.99 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.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. |
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