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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 50.00 | ACUITE BBB- | Negative | Reaffirmed | Stable to Negative | - |
| Total Outstanding | 50.00 | - | - |
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Rating Rationale |
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ACUITE has reaffirmed the long-term rating at 'ACUITE BBB-' (read as ACUITE triple B minus) on the bank facilities of Dollex Agrotech Limited (DAL) of Rs.50.00 Crore. The outlook is revised from 'Stable to Negative'.
Rationale for Outlook Change The rating reaffirmation considers the established presence of company supported by the extensively experienced promoters. It also takes into consideration the increase in the revenues of the company. The revenue of the group has improved by ~23 percent to Rs.135.49 crore in FY24 as against Rs.110.53 crore in FY23. However, the outlook change from stable to negative factors in the deteriorated financial risk profile of the company due to delay in capital infusion. Further the outlook factors in the continued elongation in working capital operations. The timely completion of capital expenditure and capital infusion will remain key rating monitorables. |
| About the Company |
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Dollex Agrotech Limited is based in Indore, Madhya Pradesh. The company was incorporated in 2013 and it is currently promoted by Mr. Vijai Singh Bharaktiya, Mrs. Munni Bee, Mr. Mehmood Khan, Mrs. Khusro Nisar, Mrs. Ruchi Sogani and Mr. Manish Joshi. The company is engaged into trading and manufacturing of sugar and jaggery from its manufacturing plant.
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| Unsupported Rating |
| Not applicable. |
| Analytical Approach |
| Acuite has considered the standalone financial and business risk profiles of Dollex Agrotech Limited (DAL) to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management
DAL incorporated in 2013, is Indore based company originally promoted by Mr. Vijai Singh Bharaktiya, Mrs. Munni Bee, Mr. Mehmood Khan, Mrs. Khusro Nisar, Mrs. Ruchi Sogani and Mr. Manish Joshi who possess over a decade of experience in the sugar industry. The experience of the promoters, has aided the company in forming healthy relations with its customers and farmers. Acuité believes that the company may continue to benefit through the promoter’s industry experience and established track record over the medium term. Improving operating performance The company witnessed increase in the top-line of the company by 23% in FY24 which stood at Rs.135.49 Crore as compared to Rs.110.53 Crore in previous year FY23. The revenue of the company is improving on y-o-y basis due to increase in the production. The margins of the company on the contrary showed marginal decline in FY24 which stood at 10.32% against 11.68% in FY23. The PAT margins of the company stood at 5.18% in FY24 against 5.52% in FY23. In previous financial year, the company was running at 98% capacity as the plant was operational for 125 days with an installed capacity of 2500 TCD. Acuite believes that the timely commissioning of ethanol plant and ramp up in production resulting into improved operational profile is a key rating sensitivity. |
| Weaknesses |
| Moderated Financial Risk Profile
The financial risk profile of the company is moderate marked by moderate net-worth, gearing and debt protection metrics. The net worth of the company stood at Rs.57.48 Crore as on 31st March 2024 against Rs.49.49 Crore as on 31st March 2023. The increase in the net worth is due to accumulation of profits in reserves. The total debt of the company stood at Rs.100.86 Crore as on 31st March 2024 against Rs.42.92 Crore as on 31st March 2023. Further, the gearing of the company is slightly deteriorated which stood at 1.75 times as on 31st March 2024 against 0.87 times as on 31st March 2023. The TOL/TNW ratio stood at 3.70 times as on 31st March 2024 against 2.39 times as on 31st March 2023. The interest coverage and debt service coverage ratio of the company saw moderation however stood moderate at 4.41 times and 1.68 times respectively as on 31st March 2024 against 5.28 times and 1.65 times respectively as on 31st March 2023. Acuite believes that financial risk profile of the company is likely to see moderation on an account of debt funded capex of Rs.99.29 Crore out of which Rs.86.68 Crore is debt funded and remaining Rs.12.61 Crore is funded through unsecured loans. Working Capital Intensive Operations The working capital operations of the company is highly intensive marked by high GCA days which stood at 509 days as on 31st March 2024 against 413 days as on 31st March 2023. The GCA are higher on an account of the increase in the inventory days which stood at 487 days as on 31st March 2024 against 379 days as on 31st March 2023. The inventory days of the company are on higher side on an account of insufficient release of quota. Further, the debtor days of the company stood at 37 days as on 31st March 2024 against 63 days as on 31st March 2023. On the other hand, the creditor days of the company stood at 333 days as on 31st March 2024 against 271 days as on 31st March 2023. Acuite believes that intensive working capital operations of the company is a key rating sensitivity. Cyclicality associated with sugar industry and susceptibility of profitability to volatility in raw material prices The operations of DAL are dependent on sugarcane production, which is highly dependent on the monsoon and prices prevailing in the alternative crops such as rice and wheat. The sector is also marked by the presence of several other players which lead to intense competition from the other players. Sugarcane and the other by-products manufactured by the company remain extremely sensitive to fluctuations in commodity prices, thereby impacting the overall revenue and profitability profile of the company. Sugarcane production is highly dependent on the monsoon and fluctuation in FRP (Fair Remunerative Price) will have a bearing on the overall revenue and profitability. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity position of the company is adequate. The company have generated net cash accruals of Rs.9.85 Crore as on 31 st March 2024 against the debt repayment obligation of Rs.Rs.4.55 Crore in the same period. Further, the company is expected to generate sufficient net cash accruals against its debt repayment obligation in the near to medium term. The current ratio of the company stood at 1.55 times as on 31st March 2024 as compared to 1.52 times as on 31st March 2023. The average bank limit utilization of the company stood low at 40.98% in last nine months ending May 2024. The unencumbered cash and bank balance of the company stood at Rs.9.96 Crore as on 31st March 2024.
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| Outlook: Negative |
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Acuité has revised the outlook to ‘Negative’ on account of deterioration in financial risk profile and believes that the same will continue in medium term. The rating may be ‘downgraded’ in case of further decline in the operating revenues, deterioration in the financial risk profile or delay in commissioning of ethanol plant. The outlook may be revised to 'Stable' in case DAL registers significant growth in its scale of operations while maintaining its profitability and financial risk profile.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 135.49 | 110.53 |
| PAT | Rs. Cr. | 7.02 | 6.10 |
| PAT Margin | (%) | 5.18 | 5.52 |
| Total Debt/Tangible Net Worth | Times | 1.75 | 0.87 |
| PBDIT/Interest | Times | 4.41 | 5.28 |
| 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 • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.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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