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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 61.77 | ACUITE BBB | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 18.00 | - | ACUITE A3+ | Reaffirmed & Withdrawn |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 79.77 | - | - |
| Rating Rationale |
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Acuité has reaffirmed and withdrawn the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and the short-term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs.79.77 Cr bank facilities of Bhagwati Industries (BI).
The rating has been withdrawn on Acuite's policy of withdrawal of ratings. The rating has been withdrawn on account of the request received from the company, and the NOC received from the banker. Rationale for the reaffirmation The rating reaffirmation takes into account the improvement in the operating income of the company, The rating also draws comfort from the experienced promoter and the company’s long track record in the industry. These strengths are, however, offset by the working capital intensive in nature of operations along with the average financial risk profile. |
| About Company |
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Established in 1990, Bhagwati Industries (BI) is a partnership firm, engaged in rice milling. Its manufacturing facilities are situated in Raipur with installed capacities of 24 MT per hour. The operations are managed by Mr. Rajesh Kumar Agrawal, Mr. Rohit Agrawal and Mr. Anand Kumar Agarwal and other family members. Recently, the firm has forward integrated and set up a 200 TPD rice bran solvent extraction plant to manufacture crude bran rice oil, which will commence operations from Apr’22. In addition, in FY21, 1 MW solar power plant was installed in-house to meet the power requirement of the unit.
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| About the Group |
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Sainath group is a Raipur based group engaged in rice milling and trading. The group consists of Bhagwati Industries (BI) and Sri Sainath Industry Private Limited (SSIPL). The group was started by Mr. Rameshwar Das Agarwal and currently the overall operations of the group are managed by the second and third generation of the Agarwal family along with a set of experienced professionals. Incorporated in 2007, Sri Sainath Industry Private Limited (SSIPL), is a well-established exporter of Indian non-basmati rice. The company is a three star export house recognized by the Ministry of Commerce and Industry. The company procures rice from the local players and Bhagwati Industries (BI) and exports to different countries of Asia and Africa
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Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profiles of BI and SSIPL, together known as Sainath Group, to arrive at this rating. The consolidation is on account of common promoters, similar line of business and significant operational linkages between them.
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Key Rating Drivers
| Strengths |
| Experience of the management and established track record of operations. The promoters of the group, Mr. Rohit Agrawal and Mr. Anand Kumar Agarwal have more than three decades of experience in rice milling and trading. The group has forward integrated and installed a solvent plant which will improve the business risk position of the group further. Acuité believes the long track record of operations and experience of management has helped the company to develop a healthy relationship with its customers and suppliers and will continue to support the business over the medium term. Increase in revenues along with profitability margins. The company’s operating income stood at Rs. 762.17 Cr. as on 31st March 2022 as compared to Rs. 591.52 Cr. as on 31st March 2021. Further, the operating margin of the company stood at 4.64 per cent as on 31st March 2022 as compared to 3.88 as on 31st March 2021. The PAT margin rose to 2.70 per cent on 31st March 2022 as compared to 1.72 per cent 2021. The RoCE of the company stood at 21.17 per cent as on 31st March 2022 as compared to 17.71 per cent as on 31st March 2021. Strategic location of the plant The key raw material is the paddy, which is mostly procured from the wholesale grain markets in Chhattisgarh during the paddy buying season. The group also procures paddy from Odisha, West Bengal and Bihar based on market dynamics. The units are located at Raipur which is in close proximity to the paddy growing districts of Chhattisgarh giving the firm location and logistical advantage. Favourable location of the plant ensures timely availability of raw material saving on logistics costs. |
| Weaknesses |
| Vulnerability in agro climate risk, regulatory risk and forex fluctuation risk Vulnerability of ecosystems and people to climate change is driven by certain unsustainable development patterns such as "unsustainable ocean and land use, inequity, marginalization, historical and ongoing patterns of inequity such as colonialism, and governance" The group derives 80-85 percent of its revenue from exports to Middle East countries such as Saudi Arabia and Dubai along with African countries. As a result the group’s revenue profile is exposed to regulatory risk arising from changes in other countries' procurement policies. Further, profitability is susceptible to government policies such as minimum support prices in the domestic market. Increase in minimum support price coupled with any adverse movement in forex rates can impact the price competitiveness vis-a-vis other rice exporting countries. Thus, the volatility in prices is an inherent risk for the company that can affect its revenue and profitability profile.. Since paddy is an agro commodity, the group is also exposed to agro climatic risks. |
| Rating Sensitivities |
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None |
| Material Covenants |
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None |
| Liquidity position: Adequate |
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The company’s liquidity position is adequate marked by net cash accruals of Rs.23.53 Cr as on 31st March 2022 as against Rs. 13.52 Cr. long-term debt repayment during the same period. The current ratio stood at 1.64 times as on 31st March 2022, as compared to 1.55 times as on 31st March 2021. The cash and bank balances stood at Rs. 4.53 Cr. 31st March 2022. However, the working capital-intensive nature of operations of the company is marked by Gross Current Assets (GCA) of 108 days as on 31st March 2022 as compared to 92 days as on 31st March 2021, due to high other current asset. Acuité believes that going forward the liquidity position of the company will remain adequate due to the improving net cash accruals.
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| Outlook: |
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Not Applicable |
| Other Factors affecting Rating |
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None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 762.17 | 591.52 |
| PAT | Rs. Cr. | 20.57 | 10.17 |
| PAT Margin | (%) | 2.70 | 1.72 |
| Total Debt/Tangible Net Worth | Times | 1.27 | 1.01 |
| PBDIT/Interest | Times | 5.16 | 3.95 |
| 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 • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.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 |
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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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