Press Release

Press Release

October 10, 2024

GANGAMAULI SUGAR AND ALLIED INDUSTRIES PRIVATE LIMITED
Rating Assigned

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	150.00	ACUITE BB- \| Stable \| Assigned	-
Total Outstanding	150.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuité has assigned its long-term rating of ‘ACUITE BB-’ (read as ACUITE double B minus) on the Rs. 150 Cr. of bank loan facilities of Gangamauli Sugar And Allied Industries Private Limited (GSAIPL). The outlook is 'Stable'.

Rationale for rating assigned
The rating assigned considers the promotor's extensive experience in sugar industry, augmentation in business risk profile, healthy profitability margins, net cash accruals and comfortable debt protection metrics. However, the rating constrained by average financial risk profile with high leverage ratios, working capital intensive nature of operations, susceptibility to regulatory changes and inherent volatility in sugar prices and agro climatic risk and cyclicality trends in the industry.

About the Company

Gangamauli Sugar And Allied Industries Private Limited was incorporated on September 06, 2018. Registered office is located at Pune, Maharashtra. The Company is in the business of manufacturing sugar (and by-products) in Beed district of Maharashtra. Mr. Pravin Laxmanrao More and Mr. Laxman Nivruttirao More are the present directors of the company.

Unsupported Rating

Not applicable

Analytical Approach

Acuite has considered the standalone business and financial risk profile of the GSAIPL to arrive at the rating.

Key Rating Drivers

Strengths

Plant taken over under long term lease agreement
GSAIPL operates a sugar factory located in Kailj Taluka, Beed District, Maharashtra. The company took over the plant under the SARFAESI Act from a consortium of banks led by Maharashtra State Cooperative Bank in May 2022, under a long-term lease agreement of 25 years. The plant was previously owned by Padmashri Vitthalrao Vikhe Patil Sahakari Sakhar Karkhana Ltd. The company's product profile includes refined white sugar, brown sugar, organic sugar, and specialty sugar. The company manages a command area of 12,000 hectares of sugar plantation in Beed District, Maharashtra. It is currently managed by Mr. Pravin Laxmanrao More and Mr. Laxman Rao More. The promoters of GAIPL have more than two decades of experience in the sugar and allied products industry. Following the takeover of the unit, GAIPL has incurred capital expenditure amounting to Rs. 35 crore for a complete overhaul of the machinery and increased the capacity from 2,500 TCD to 4,500 TCD. Moving forward, the company plans to install a distillery unit and a solar power plant to support its captive power requirements.

Improved profitability margins albeit decline in revenue
The GSAIPL plant has been in operation since May 2022. In its initial year, the company registered operating revenue of Rs. 148 crore. However, revenue declined to Rs. 118.50 crore in FY24 (Prov) due to regulatory restrictions on sugar exports, as nearly 40 percent of FY23 revenue came from exports. Despite the revenue decline, the company has achieved a significant improvement in operating margins. Operating margins increased to 12.12 percent in FY24 (Provisional), compared to 3.92 percent in FY23. This improvement is mainly due to the stabilization of operations in FY24 (Prov).

Weaknesses

Average financial risk profile
The financial risk profile of the company is average marked by average capital structure, high gearing and comfortable debt protection metrics. The networth of the company stood modest at Rs.10.87 Cr. as on March 31st 2024(Prov) as against Rs.4.10 Cr. as on March 31st 2023 as company is in its initial years of operations. The improvement in networth is due to accretion of profits to reserves. The company follows aggressive financial policy reflected through its gearing(debt-equity) ratio of 13.67 times as on March 31st 2024(Prov) as against 11.94 times as on March 31st 2023. The total debt of Rs.148.57 Cr. as on March 31st 2024 (Prov) consists of short term debt of Rs.111.26 Cr. and unsecured loan infused by promotors and third parties of Rs.37.31 Cr. The debt protection metrics of interest coverage ratio and debt service coverage ratio stood comfortable due to absence of long term debts. Interest coverage ratio (ICR) at 4.66 times as on March 31st 2024 (prov) as against 5.94 times as on March 31st 2023. The Debt service coverage ratio (DSCR) stood at 4.36 times as on March 31st 2024 (Prov) as against 4.96 times as on March 31 st 2023. The total outside liabilities to tangible networth (TOL/TNW) stood high at 16.87 times as on March 31st 2024 (Prov) as against 23.99 times as on March 31st 2023. Acuité believes that the improvement in the financial risk profile of the group going forward will remain a key rating sensitivity.

Working capital intensive nature of operations
The operations of the company are working capital intensive in nature marked by Gross current asset (GCA) days of 366 days in FY2024 (Prov) as against 98 days in FY23. High GCA days are on account of inventory cycle which stood at 405 days in FY24 (prov) and 57 days in FY23. Inventory levels tend to be higher across the industry as sugar productions starts in mid Cctober and ends by mid April, the inventory levels are generally higher by March. On the other hand, company sells its sugar on cash basis, therefore the debtor days stood at zero level in FY24(Prov), whereas creditor days stood at 81 days in FY24 (Prov) as against 55 days in FY23. Working capital intensive nature of operations has led to moderate utilisation of its working capital limits with an average utilisation of 73.5 percent over the past six months ending June 2024.

Susceptibility to regulatory changes and inherent volatility in sugar prices
The sugar industry is susceptible to movements in sugarcane and sugar prices which results in volatile profitability. While the government policy of FRP/SAP for sugarcane has brought some amount of stability and predictability in input price, open market sugar price remains dependent on the demand-supply scenario. Besides, the government regulates domestic demand-supply through restrictions on imports and exports, sugar release orders and buffer stock limits. Government interventions will remain a driver for the profitability of sugar mills and continue as a key rating sensitivity factor.

Agro climatic risks and cyclical trends in the industry
Profitability of sugar mills will remain vulnerable to the agro-climatic risks related to cane production. Being an agricultural product, the sugarcane crop is dependent upon weather conditions and is vulnerable to pests and diseases that may not only impact the yield per hectare but also the recovery rate. These factors can have a significant impact on the company’s revenue and profitability.

Rating Sensitivities

Positive

Sustained improvement in operating income and sustenance of profitability.
Ability to improve and maintain an efficient working capital cycle.
Improvement in overall financial risk profile

Negative

Further elongation working capital cycle
Further deterioration of financial risk profile

Liquidity Position: Adequate

GSAIPL’s cash accruals improved from Rs.5.10 Cr. in FY2023 to Rs.13.24 Cr. in FY2024 (Prov). Its cash accruals are expected to be around Rs.13 Cr. to Rs. 13.7 Cr. against its expected repayment obligation of Rs.4.5 Cr to Rs.5 Cr. GSAIPL’s current ratio stood at 0.87 times as on March FY2024 (prov) and has a cash and bank balance of Rs. 0.31 Cr. as on 31st March 2024 (Prov). Company has been moderately utilizing its working capital limits with an average utilisation of 73.5 percent over the six months ending June 2024. Acuité believes that the liquidity of GSAIPL is likely to remain adequate over the medium term on account of sufficient liquid funds against its maturing debt obligations.

Outlook: Stable

Acuité believes that GSAIPL will maintain ‘Stable’ outlook over the medium term due to extensive experience of its promoters, healthy scale of operations and improved profitability. The outlook may be revised to ‘Positive’ if the company registers expected or higher-than expected growth in revenues and profitability while improving its financial risk profile. Conversely, the outlook may be revised to ‘Negative’ in case of elongation of working capital cycle and decline of profitability margins resulting in further deterioration of overall financial risk profile.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	118.50	148.00
PAT	Rs. Cr.	6.77	3.16
PAT Margin	(%)	5.71	2.14
Total Debt/Tangible Net Worth	Times	13.67	11.94
PBDIT/Interest	Times	4.66	5.94

Status of non-cooperation with previous CRA (if applicable)

None

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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

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.

Rating History :

Not applicable

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
NKGSB Cooperative Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	50.00	Simple	ACUITE BB- \| Stable \| Assigned
Janta Sahakari Bank Ltd.	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	40.00	Simple	ACUITE BB- \| Stable \| Assigned
SVC Co-Op Bank Limited	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	40.00	Simple	ACUITE BB- \| Stable \| Assigned
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	20.00	Simple	ACUITE BB- \| Stable \| Assigned

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Gnanreddy Rakesh Reddy
Senior Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.