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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 48.52 | ACUITE BB | Stable | Assigned | - |
| Bank Loan Ratings | 11.50 | - | ACUITE A4+ | Assigned |
| Total Outstanding | 60.02 | - | - |
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Rating Rationale |
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Acuité has assigned its long-term rating of ‘ACUITE BB’ (read as ACUITE double B) and short-term of 'Acuite A4+' (read as ACUITE A four plus) on the Rs. 60.02 crore bank facilities of Eco Organics (EO). The outlook is 'Stable'.
Rationale for the Rating Assigned The rating assigned reflects the extensive experience of the management along with established track record of operations for nearly 20 years in the manufacturing of essential oils. The rating factors in the geographic and product diversification along with moderate financial risk profile. However, the above mentioned strengths are partly offset by working capital intensive nature of operations and stretched liquidity. |
| About the Company |
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Established in 2003, Eco Organics (EO) a partnership firm based Rampur, Uttar Pradesh, engaged in manufacturing and sale of essential oils, menthol & allied products, organic and inorganic chemicals & flavours. The products are mainly used in oral care products, chewing gum, cosmetics, pharma etc. The firm is an ISO certified and undertakes to produce 100% natural products free from adulterants. Mr. Vipin Kum, Mr. Rupam Gupta and Mr. Vyom Varhsney are the Partner of the Firm.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered the standalone business and financial risk profile of Eco Organics to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced Management
Established in 2003, Eco Organics (EO) a partnership firm based Rampur, Uttar Pradesh, engaged in manufacturing and sale of essential oils, menthol & allied products, organic and inorganic chemicals & flavours. The products are mainly used in oral care products, chewing gum, cosmetics, pharma etc. Mr. Vipin Kum, Mr. Rupam Gupta and Mr. Vyom Varhsney are the Partner of the firm.The partners of the firm are well qualified and have more than 2 decades of industry experience. Their experience and knowledge of the industry has helped them in maintaining long term relationships with their clients. Acuité believes that EO will continue to benefit from its experienced management and established relationships with customers. Augmentation in bussines risk profile EO reported revenues of Rs. 148.36 Cr. in FY2023 against Rs 148.90 Cr. in FY2022. In 11MFY24, the firm reported operating income of Rs.191 crore and is expected to close the year with revenues of Rs. 200 Cr. The profitability of the firm has improved with EBDITA margin of 3.58 % in FY23 as compared against 2.69 % in FY22. The PAT margins of the firm stood at 1.22 % in FY2023 as against 0.76 % in FY2022. |
| Weaknesses |
| ???Moderate financial Risk Profile
The financial Risk profile of the firm remains moderate marked by networth of Rs. 16.14 Cr. in FY2023 against Rs.14.54 Cr. in FY2022. The total debt of the firm stood at Rs.41.79 Cr. in FY2023 increased from Rs.37.67 Cr. in FY2022. With the moderation in the profitability, the firm’s credit metrics moderated as reflected by interest coverage ratio of the firm stood at 1.58 times in FY2023 against 1.50 times in FY2022, Debt service coverage ratio stood at 1.58 times in FY2023 against 1.50 times in FY2022.The firm’ gearing remained unchanged at 2.59 times for both years FY23 and FY22. Further, the TOL/TNW slightly deteriorated to 2.69 times as on March 31, 2023, as against 2.67 times as on March 31, 2022. Acuite’ believes that financial risk profile of EO may continue to remain moderate with no major debt-funded capex plan in near term Working Capital Intensive Operations The working capital operations of the firm are intensive marked by GCA days at 134 days in FY2023 against 123 days in FY2022. However, the inventory days of the firm stood at 106 days in FY2023 against 102 days in FY2022 mainly on account of an order delayed in March 2023 resulting in higher inventory. Further, the debtor days of the firm stood at 28 days in FY2023 against 21 days in FY2022. On the other hand, the creditor days of the firm stood at 4 days in FY2023 against 3 days in FY2022. Acuite’ believes that working capital operations of firm may continue to remain intensive considering the nature of business. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The liquidity position of the company is stretched due to high reliance on the short-term financing with an average utilization of around 97 percent. Further the working capital management of the company is intensive marked by GCA days of 134 days in FY2023 as against 123 days in FY2022. However, the company has generated sufficient net cash accruals against the maturing debt obligations. The company has generated net cash accruals in of Rs 1.98 crore in FY2023 against its maturing repayment obligations of Rs. 0.85 crore in the same tenure. Further, the company is expected to generate sufficient cash accruals to repay its debt obligation in near to medium term. The current ratio stands at 1.41 times as on March 31, 2023, as against 4.38 times as on March 31, 2022.
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| Outlook: Stable |
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Acuite believes the outlook on EO will continue to remain ‘Stable’ over the medium term backed by its long track record of operations and experienced management. The outlook may be revised to ‘Positive’ if the company is able to successfully acquire higher orders which will lead to significant improvement in scale of operations and the profitability margins while also improving its working capital operations. Conversely, the outlook may be revised to ‘Negative’ in case of any operating inefficiency by EO leading to deterioration in revenue and profitability along with financial risk profile and liquidity position of the company.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 148.36 | 149.90 |
| PAT | Rs. Cr. | 1.81 | 1.15 |
| PAT Margin | (%) | 1.22 | 0.76 |
| Total Debt/Tangible Net Worth | Times | 2.59 | 2.59 |
| PBDIT/Interest | Times | 1.58 | 1.50 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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 • 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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| Rating History : |
| Not Applicable |
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