­Experienced Management with established track record of operations
The Borkar Group was established in the year 1910 by late Mr. Shripad Borkar, thus having an established brand position for over a century. Later in 1990, the third generation of the Borkar family established BTCPL which is currently operating in the retail trading industry with a track record of operations of more than three decades. The operations of the company are currently managed by Mr.Rahul Borkar,  Mr. Nihaal Borkar and Mr. Nikhil Borkar. The promoters of the company have an experience of over three decades in the aforementioned line of business. The promoters are supported by experienced and qualified second line of management. The long track record of operations of the Group coupled with experience of management have helped the company to forge healthy relationships with reputed clients and local customers for their retail trading business. Acuité believes that the company is likely to sustain its existing business profile on the back of established track record of operations and experienced management.

Stable operating performance
The company deals in both retail and trading business of which the trading business generates around 70 percent of the revenues of the company. The Company’s revenue stood at Rs.123.23 crore in FY2022 compared to revenue of Rs.130.68 crore in FY2021. Till January 2023, the company’s revenue stood at Rs.124.57 crore. The operating profit margin of the company improved and stood at 6.43 percent in FY2022 compared against 6.39 percent in FY2021. The operating margin of the company improved due to the decline in the raw material costs. The PAT margin of the company stood at 0.66 percent in FY2022 compared to 1.00 percent in FY2021. Acuité believes that the company is likely to sustain its existing business risk profile on account of established management and long track record of operations.

­Below Average  financial risk profile
The financial risk profile of the company is below average  marked by modest  tangible net worth, high gearing and below average debt protection metrics. The tangible net worth of the company stood at Rs.35.99 crore as on 31 March 2022 as against Rs.34.90 crore as on 31 March 2021. The management follows a moderately aggressive leverage   policy reflected by its peak gearing levels at 1.83 times as on 31 March 2022 as against 1.39 times as on 31 March 2021. The high gearing levels in FY2022 are on account of addition of working capital loans. The total debt of the company stood at Rs.65.94 crore as on 31 March 2022. It comprised of long-term debt of Rs.21.88 crore, unsecured loans of Rs.16.11 crore and short-term debt of Rs.24.77 crore as on 31 March 2022. The coverage ratios of the company stood modest  with Interest Coverage Ratio (ICR) of 1.66 times for FY2022 against 1.67 times for FY2021. The Debt Service Coverage Ratio (DSCR) stood below unity at 0.95 times for FY2022 against 1.19 times for FY2021. The total outside liabilities to tangible net worth (TOL/TNW) of the company stood at 2.33 times for FY2022 as against 1.38 times in FY2021. Acuité believes that the ability of the company to improve  its financial risk profile will remain a key sensitivity in the near to medium term.

­Working capital intensive operations
The company’s operations are working capital intensive as evident from Gross Current Asset (GCA) of 258 days as on March 31, 2022, as against 193 days as on March 31, 2021. The high GCA days are majorly on account of high inventory levels as well as high debtor levels. The inventory levels stood at 135 days for FY2022 compared against 122 days for FY2021. Average inventory holding period is around 120 days. The debtor days stood at 105 days for FY2022 against 67 days for FY2021. The average credit period allowed to the customers is around 90-120 days. The creditor days of the company stood at 53 days for FY2022 as against 47 days for FY2021. The average credit period received from the customers is around 40-50 days. The working capital intensive nature of operations has led to higher reliance over external borrowings marked by average bank limit utilization of ~98 percent for the last six months ended December 2022. Acuité believes that the company's ability to maintain its working capital efficiently will remain a key rating sensitivity.

Highly fragmented and competitive industry
The Indian retail industry is fragmented with presence of large number of unorganized players, e-retailers and funding from foreign players has boosted entry of new players. BTCPL would face high competition from the existing retailers and new entrants, both organized and unorganized, thereby impacting pricing power.