| Extensive experience of the promoters
BA is a partnership firm established in 2017 by Mr. Valjibhai Chandulal Bhanushali and his sons. The day-to-day operations are managed by Mr. Kishor Bhanushali and Mr. Vasant Bhanushali, who possess over two decades of experience in the trading of edible and non-edible oil business. The firm is a backward integration to the promoters existing business of oil trading carried on under M/s Odhavram Trading and M/s Tushar Enterprise. BA shares strong operational linkages and common customers and suppliers with other entities controlled by the promoters.
Acuité believes that the promoters established track record in the oil trading industry along with strong operational linkages with other entities controlled by promoters will support the business risk profile of the firm.
Efficient Working Capital Management
The operations of Bhanu Agro are working capital efficient, marked by GCA days of 33 days on March 31, 2024 (Prov.) as against 49 days on March 31, 2023. GCA days are driven by inventory and debtor days. The inventory days stood improved at 20 days on March 31, 2024 (Prov.) as against 34 days on March 31, 2023. Debtor collection period stood improved at 5 days on March 31, 2024 (Prov.) as against 14 days on March 31, 2023. The creditor days stood at 3 days on March 31, 2024 (Prov.) as against 2 days on March 31, 2023.
Acuite believes that the working capital cycle of Bhanu Agro will remain efficient in the near to medium term.
Augmented revenue growth albeit narrow profitability margins.
There has been a significant increase in the revenue of Bhanu Agro in the past three years. The revenue of the firm has increased from Rs. 154.03 crore in FY2022 to Rs. 226.43 crore in FY2023 to Rs. 360.67 crore in FY2024 (Prov.). The sales volume of the firm increased to 29,551 MT in FY2024 (Prov.) as against 16,218 MT in FY2023. The EBITDA margin, however, has declined due to increased raw material prices. EBITDA margin stood at 1.77 percent in FY2024 (Prov.) as against 2.41 percent in FY2023. The PAT margin has declined marginally due to increase in the finance costs. The PAT margin stood at 0.67 percent in FY2024 (Prov.) as against 0.71 percent in FY2023.
Acuité believes that the ability of BA to maintain its scale of operations while improving its operating and profitability margins will remain a key rating sensitivity factor.
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| Average Financial Risk Profile
Bhanu Agro has an average financial risk profile, marked by low networth, improved albeit high gearing and average debt protection metrics. The networth of the firm stood at Rs. 11.93 crore on March 31, 2024 (Prov.) as against Rs. 11.03 crore on March 31, 2023. The partners had withdrawn capital of Rs. 1.52 crore in FY2024 (Prov.). The gearing stood at 2.35 times on March 31, 2024 (Prov.) as against 2.64 times on March 31, 2023. TOL/TNW stood improved at 2.61 times on March 31, 2024 (Prov.) as against 2.81 times on March 31, 2023. Debt-EBITDA stood at 4.13 times on March 31, 2024 (Prov.) as against 5.08 times on March 31, 2023.
The coverage indicators stand marginally improved, with Interest Coverage ratio at 2.43 times on March 31, 2024 (Prov.) as against 2.35 times on March 31, 2023. The Debt Service Coverage Ratio stands at 1.73 times on March 31, 2024 (Prov.) as against 1.59 times on March 31, 2023.
Acuite believes that the financial risk profile of Bhanu Agro will remain average in absence of any major debt funded capex plan.
Susceptibility of profitability margins towards volatility in raw material prices and foreign exchange fluctuation risk
The firm has recently begun to import key raw materials; raw palm oil from Indonesia and Malaysia along with soyabean from Brazil, USA, etc. As a result, the firm's business is exposed to fluctuations in foreign exchange rate. Further, the prices of crude edible oil are volatile in nature hence the profitability is highly susceptible to the ability of the company to pass on the same to its customers.
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