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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 161.00 | ACUITE BBB- | Stable | Downgraded | - |
| Bank Loan Ratings | 39.00 | - | ACUITE A3 | Downgraded |
| Total Outstanding | 200.00 | - | - |
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Rating Rationale |
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Acuité has downgraded its long-term rating to 'ACUITE BBB- (read as ACUITE triple B minus)' from ‘ACUITE BBB’ (read as ACUITE triple B) and short-term rating to 'ACUITE A3 (read as ACUITE A three)' from ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs. 200.00 Cr. bank facilities of Avi Agri Business Limited (AABL). The outlook is ‘Stable’.
Rationale for Rating Downgrade The downgrade in rating takes into consideration the moderation as recorded in AABL's financial risk profile and profitability margins in FY2023. The revenue of the company remained stable at Rs.2006.48 Cr. in FY2023 as against Rs.1954.56 Cr. in FY2022. However, operating profitability declined to 1.88% in FY2023 from 3.41% in FY2022 on account of higher material costs and AABL’s limited ability to effectively pass on the burden of increased costs to the customers. Going ahead, the revenue is estimated to remain around Rs.1800.00 Cr. in FY2024 with marginal improvement in profitability. Further, the financial risk profile also has seen moderation on marked by an increase in gearing levels and deterioration in debt coverage indicators with gearing levels increasing to 1.66 times in FY2023 as against 1.23 times in FY2022, this increase was on account of higher debt levels. Further, the ICR and DSCR both declined to 2.19 times and 1.49 times in FY2023 from 5.16 times and 3.80 times in FY2022 respectively. The rating continues to factor in the promoter’s long-standing experience of more than 3 decades in the agro industry and long track record of business operations. However, the rating remains constrained due to the seasonal nature of its raw material procurement, making it susceptible to price fluctuations, changes in government policies, and changing demand patterns, thereby influencing the company’s operations. |
| About the Company |
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Incorporated in 2009 Avi Agri Business Limited is a public limited company with registered office located in Indore, Madhya Pradesh. The company was initially constituted as a private limited company and was converted to a closely held public limited company. The company is promoted and managed by Mr. Vinod Kumar Jain. The company is a part of AV group. AV group consists of flagship company Suraj Impex India Private Limited and other group company Excel Agri Business private Limited. AABL is engaged in the manufacturing of Soya extraction (Soya Crude Oil & De-Oiled Cake), edible oil, Lecithin Liquid and powder, Soya flour and grits and soya white flakes. The company has an aggregate seed crushing capacity of 1400 MTPD, refining capacity of 300 MTPD, Lecithin plant of 27 MTPD, Soya flour and white flakes plant of 635 MTPD. The products manufactured are used in the manufacture of animal feeds (De-Oiled Cake and Soya Hiprotein meal), Lecithin is used by pharmaceutical companies, in infant food, make-up products etc
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of AABL |
| Key Rating Drivers |
| Strengths |
| Experience of promoters and established track record of operations:
AABL was incorporated in 2009. The company is promoted and managed by Vinod Kumar Jain. Vinod Kumar jain has an experience of 35 years in the agro industry. The company is ISO 9001:2015 certified towards quality management. The company deals in multiple products including Soya De-oiled cake, soya crude oil, Soya hi-protein meal, Lecithin power and liquid etc. Soya De oil cake and Soya refined oil are sold domestically whereas Soya Hi-protein meal is exported substantially to European countries due to non-genetically modified sources. Acuite believes the company shall benefit due to its diverse product portfolio and promoter experience over the medium term. Moderate Financial Risk Profile AABL’s financial risk profile is moderate, marked by a moderate net worth, average gearing level, and debt coverage indicators. The net worth of the company stood at Rs.149.94 Cr. as of March 31, 2023, as against Rs.142.66 Cr. as on March 31, 2022. The total debt of the company increased to Rs.249.23 Cr. in FY2023 as against Rs.175.35 Cr. in FY2022. The increase in debt is due to increased short-term borrowings and an intercorporate loan of Rs.42.70 Cr. crore obtained from a group company to utilize the opportunity to stock up on raw materials available at lower prices. (The intercorporate loan was repaid in April 2023). The total debt as of March 31, 2023, consists of Rs.15.93 Cr. as a long-term loan, Rs. 190.60 crore as a short-term loan, and Rs.42.70 Cr crore as an intercorporate loan. The gearing levels increased to 1.66 times in FY2023 as against 1.23 times in FY2022 on account of increased debt levels. The debt coverage indicators of ICR and DSCR declined to 2.19 times and 1.49 times in FY2023 from 5.16 times and 3.80 times in FY2022 respectively. The decline is due to increased interest costs and reduced operating profitability. The debt-EBITDA levels of the company increased to 6.59 times as of March 31, 2023, as against 2.57 times as of March 31, 2022. Further, the TOL/TNW and NCA/TD moderated to 2.15 times and 0.07 times as of March 31, 2023, against 1.59 times and 0.25 times as of March 31, 2022 respectively. Going ahead, the financial risk profile is expected to improve, but remain moderate over the medium term. |
| Weaknesses |
| Moderate nature of working capital operations
The working capital operations of the company are moderate in nature marked by GCA days of 74 days in FY2023 against 56 days in the previous year. The GCA days are led by inventory days of 64 days in FY2023 against 50 days in FY2022. Due to seasonality, the company maintains an adequate inventory to meet the demand levels. The debtor days stood low at 5 days in FY2023 against 3 days in FY2022. However, the working capital limit utilisation stood high at 93.42% for the last 9 months ending December 2023. The creditor days stood 5 days in FY2023 against 8 days in FY2022. Going ahead, the working capital operations are expected to remain at similar levels over the medium term. Susceptible to volatility in agriculture commodity prices and change in Government policies The commodity market exhibits high degree of volatility. Their prices depend on various parameters such as government policies, climatic conditions, global demand supply dynamics among others. Any sharp deviation in these commodity prices can have a significant impact on the operations of players such as AABL. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity position of the company is adequate, marked by sufficient cash accruals generation to its maturing debt repayment obligations. The company generated cash accruals of Rs.17.38 Cr. against maturing debt repayment obligations of Rs.6.05 Cr. in FY2023. Further, the current ratio stood average at 1.52 times in FY2023 against 1.43 times in FY2022. The unencumbered bank and cash balances stood at Rs.4.38 Cr. as of March 31, 2023. The working capital operations of the company are moderate in nature, marked by GCA days of 74 days in FY2023 against 56 days in FY2022. However, the reliance on working capital limits stood high at 93.42% for the last nine months ending in December 2023. Going ahead, the company is expected to generate sufficient cash accruals in the range of Rs.18.40 Cr. -Rs.34.96 Cr. in FY2024 and FY2025 against repayment obligations of Rs.6.05 Cr. during the same period.
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| Outlook: Stable |
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Acuité believes that AABL will maintain a 'Stable' outlook over the medium term supported by experienced promoters, geographical diversification and moderate financial risk profile. The outlook may be revised to ‘Positive’ in case the company registers healthy growth in revenues while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of lower-than-expected revenues and profit margins, leading to deterioration in financial risk profile and liquidity position.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 2006.48 | 1954.56 |
| PAT | Rs. Cr. | 7.27 | 33.12 |
| PAT Margin | (%) | 0.36 | 1.69 |
| Total Debt/Tangible Net Worth | Times | 1.66 | 1.23 |
| PBDIT/Interest | Times | 2.19 | 5.16 |
| 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 • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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 |
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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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