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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 48.00 | - | ACUITE A3 | Reaffirmed & Withdrawn |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 48.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed and withdrawn the short-term rating of 'ACUITE A3' (read as ACUITE A three) on the Rs. 48.00 crore bank facilities of Asian Solvochem Private Limited. The rating is being withdrawn on account of the request received from the company and the NOC received from the banker as per Acuité’s policy on withdrawal of ratings.
Rationale for Rating Reaffirmation The rating takes into account the improvement in the revenues of the Crescent Group (CG) in FY2022(Prov.). The rating also derives strength from CG’s healthy financial risk profile over the same period. Further, the ratings continue to derive strength from the established track record of operations of CG with experienced management in the chemical industry. The ratings, however, continue to remain constrained by working capital intensive nature of operations and susceptibility of profitability to volatile chemical prices & foreign exchange fluctuation, and presence in highly competitive & fragmented chemical trading industry. |
| About Company |
| Incorporated in 2010 by the Shah family, Asian Solvochem Private Limited (ASPL) based out of Mumbai is engaged in trading of bulk chemicals and solvents. The company is a part of CG which is engaged in the similar line of business. The products dealt with by the company find varied application in diversified sectors viz. pharmaceuticals, chemicals, agrochemicals, paints, food packaging, petrochemicals, etc. |
| About the Group |
| CG includes three companies viz. Crescent Oganics Private Limited (COPL), Asian Solvochem Private Limited (ASPL) and Crescent Chemicals (CC). It has its presence in the industry since 1964 and was established by the Shah family. It is engaged in trading of bulk chemicals and solvents. Apart from trading, the entities in CG are also engaged in manufacturing of PP bags and fabrics with installed capacity of 55 lakh bags per month. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the business and financial risk profiles of COPL, ASPL and CC (together referred to as the CG (Crescent Group)), to arrive at the rating. The consolidation is in view of the similarities in the lines of business, operational and financial synergies and common management. |
Key Rating Drivers
| Strengths |
| Established track record of operations with experienced management CG possesses a long track record of operations of over six decades in the chemical trading business. This has helped the entities in the group to establish long-term relationships with its customers, suppliers, and other stakeholders. This is reflected through the long-term relationships with its customers & suppliers, thereby ensuring a steady flow of orders and a regular supply of raw materials in a timely manner. The day-to-day operations of the group are looked after by Mr. Gunvantrai Shah, Mr. Ashit Shah, Mr. Dilip Sheth, and Mr. Aditya Shah, who possess decades of experience in the said business. The experience of the management and established relations with customers and suppliers has helped the Group achieve a robust scale of operations. The consolidated revenues stood Rs.1247.51 Cr. in FY2022(Prov.) against Rs.808.99 Cr. in FY2021. Acuité believes that the group shall continue to benefit from the established track record of operations and experienced management. Diversified product portfolio with varied application in variegate sectors coupled with diverse geographical reach The product portfolio of CG is well-diversified with more than 60 chemical products traded, including methanol, phenol, methyl ethyl, normal butanol, normal propanol, cyclohexanone, heavy aromatics, toluene, techsol-100, and hexane, as the major ones. Moreover, the products dealt with by the group find varied application in diversified sectors such as pharmaceuticals, chemicals, agrochemicals, paints, food packaging, petrochemicals, etc. However, the revenues are concentrated from methanol with a contribution of around 60 percent in FY2022(Prov.) and around 73 percent in FY2021. Healthy financial risk profile The financial risk profile of CG stood healthy marked by healthy tangible net-worth base, comfortable capital structure & debt coverage indicators. The tangible net-worth base stood healthy at Rs.144.09 crore as on March 31, 2022 (Prov.) as against Rs.107.37 crore as on March 31, 2021, owing to accretion in reserves. Moreover, the capital structure stood improved with an overall gearing of 0.87 times as on March 31, 2022 as against 0.94 times as on March 31, 2021, given the higher accretions to reserves. The total debt as on March 31, 2022 (Prov.) comprised the term loans from banks & NBFCs worth Rs. 6.54 crore. The unsecured loans from promoters & related parties stood at Rs.5.13 crore and working capital bank borrowings stood at Rs.113.71 crore (comprising CC & buyer’s credit). Whereas the total debt as on March 31, 2021 comprised the term loans from banks & NBFCs worth Rs.5.65 crore, unsecured loans from promoters & related parties worth Rs.5.59 crore, and working capital bank borrowings worth Rs.89.71 crore (comprising CC & buyer’s credit). Moreover, the debt coverage indicators stood improved with healthy interest coverage and DSCR of 7.03 times and 4.50 times respectively in FY2022 (Prov.) as against 6.25 times and 3.88 time in FY2021. |
| Weaknesses |
| Working capital intensive nature of operations The operations of CG are working capital intensive in nature reflected by the although improved but high GCA of 138 days in FY2022 (Prov.) against 166 days in FY2021. This is majorly driven by the debtors of 93 days in FY2022 as against 100 days in FY2021, given the credit period of over 90-100 days required to be extended to them, which is the prevalent industry practice. The inventory holding period stood at 32 days in FY2022 (Prov.) as against 49 days in FY2021. On the other hand, the creditors’ period stood at 82-108 days, given the LC period ranging from 90-120 days in case of foreign LCs. Acuité believes that the operations shall continue to remain working capital intensive in nature and the management’s ability to maintain the working capital cycle will continue to remain a key rating sensitivity. Susceptibility of profit margins to volatile chemical prices and foreign exchange fluctuations The profit margins and the profitability position of CG are highly exposed to volatile chemical prices, which have witnessed sharp fluctuations in the past and even during current year. The average price of all the chemicals under the chemical trading sales basket decreased from Rs.38.03 per kg in FY2020 to Rs.26.71 per kg in FY2021 and again witnessed a sharp increase to Rs. 44.42 per kg in FY2022 (Prov.). in case of COPL, and from Rs.55.21 per kg in FY2020 to Rs.41.78 per kg in FY2021 and at Rs. 141.33 per kg during FY2022(Prov.) in case of ASPL. CG is also highly exposed to foreign exchange fluctuation risk, since the imports comprise more than 70% of the total purchases in case of COPL and more than 60% in case of ASPL. Moreover, the group reported a foreign exchange loss of Rs.10.51 Cr. in FY2020 owing to sharp fluctuations in the USD rates over January 2020 to March 2020. It also reported a foreign exchange loss of Rs.15.26 Cr. in FY2019. However, given the RBI’s relaxations on the repayment of the ECBs in the form of extension from 180 days to 360 days coupled with rationalization in the USD rates, the group posted a foreign exchange gain worth Rs.2.82 Cr. in FY2021 and Rs. 2.92 Cr. in FY2022(Prov.). CG’s profitability remains susceptible to volatility in chemical prices and foreign exchange fluctuations and its ability to maintain its profitability is a key rating sensitivity. |
| Rating Sensitivities |
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Slower than expected scale up of operations or decline in the same Significant deterioration in the profitability Significant elongation in the working capital cycle |
| Material Covenants |
| None |
| Liquidity Position |
| Adequate |
| The liquidity position of CG stood adequate marked by healthy net cash accruals, healthy free cash & bank balance, and moderate current ratio. CG generated net cash accruals worth Rs. 37.51 Cr. in FY2022(Prov.) as against Rs.26.57 Cr. in FY2021 against the repayment obligations in the range of Rs.1.89-2.03 Cr. in the same period. Going forward, CG’s net cash accruals are expected to be in the range of Rs.40-43 Cr. in FY23-24, against the repayment obligations at around Rs.1.21Cr. The operations of the group are working capital intensive in nature with GCA days and WC cycle of 138 days and 43 days respectively in FY2022(Prov.) as against 166 days and 41 days respectively in FY2021. Furter, the free cash & bank balance stood healthy at Rs.41.91 Cr. as on March 31, 2022 as against Rs.39.30 Cr. as on March 31, 2021. On the other hand, the current ratio stood moderate at 1.26 times as on March 31, 2022 (Prov.) as against 1.20 times as on March 31, 2021. The liquidity position of CG stood adequate marked by working capital intensive nature of operations, healthy free cash & bank balance, and moderate current ratio. |
| Outlook: Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Provisional) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 1247.51 | 808.99 |
| PAT | Rs. Cr. | 33.08 | 22.12 |
| PAT Margin | (%) | 2.65 | 2.73 |
| Total Debt/Tangible Net Worth | Times | 0.87 | 0.94 |
| PBDIT/Interest | Times | 7.03 | 6.25 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.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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