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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 24.00 | ACUITE BB+ | Stable | Reaffirmed | Positive to Stable | - |
| Bank Loan Ratings | 33.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 57.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long term rating of ‘ACUITE BB+’ (read as ACUITE double ‘B Plus’) and reaffirmed its short term rating of 'ACUITE A4+'( read as ACUITE A four plus) on the Rs.57.00 Cr bank facilities of Gayathri Exports (GE). The outlook is revised to ‘Stable’ from ‘Positive’.
Rationale for rating reaffirmation and outlook revision: The reaffirmation and revision in outlook takes into account the deterioration in financial risk profile and decline in operating margins due to lower realizations, the operating margin of GE for FY 2023 stood at 4.54 percent as against 6.62 percent in FY2022. Gearing rose to 1.85 times in FY2023 from 1.03 times in FY2022 , Debt-EBTIDA rose to 5.82 times in FY2023 from 2.10 times in FY2022 and DSCR deteriorated to 1.05 times in FY2023 from 2.72 times in FY2022. The rating takes into account the stable operating income, the operating income of company has been stable over last two years ended FY2023. The Company's revenue stood at Rs.154.06 Cr in FY2023 as against Rs. 154.67 Cr in FY2022. The rating continues to take cognizance of the established track record, experienced management. The rating, albeit, are constrained by risks of withdrawal of capital by partners and intense competition in the cashew processing industry. |
| About the Company |
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Gayathri Exports (GE), established in the year 1995, is an Udupi (Karnataka) based partnership firm, primarily engaged in the processing of raw cashew nuts into cashew kernels as well as trading of raw cashew nuts and cashew kernels. GE is promoted by Mr. B. Prabhakar Kamath, along with his sons- Mr. Srinivas Kamath and Mr. Prashanth Kamath.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has taken the standalone view of the business and financial risk profile of GE to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
Gayathri Exports(GE) is a Karnataka-based partnership firm established in 1995. The firm engaged in the processing of raw cashew nuts into cashew kernels as well as trades raw cashew nuts and cashew kernels and other cashew allied products. Mr. Bola Prabhakar Kamath, has an extensive experience in the cashew processing industry for more than five decades. The firm is managed by Mr. Bola Prabhakar Kamath and his sons Mr. Bola Srinivas Kamath and Mr. Bola Prashanth Kamath. The extensive expereince of all the partners and its long standing presence of the firm has enabled it in establishing strong ties with its key customers which also includes the Indian Army, which has resulted in repeat orders. The firm majorly imports the raw cashew nuts and also has established ties with its suppliers from Ivory Coast, Benin, Tanzania, etc. It also exports about ~23 percent (in FY2022) of its products to countries like USA, UAE, etc. Acuité believes that the partner's extensive industry experience in cashew industry, established relationships with its customers and suppliers will aid GE's business risk profile in medium term.
The operating income of firm has been stable over last two years ended FY2023. The firm's revenue stood at Rs.154.06 Cr in FY2023 as against Rs. 154.67 Cr in FY2022. The operating margins ranged between 6.62- 4.54 percent for the last two years ended FY2023. Acuite believes that financial performance of the firm is expected to improve going ahead, led by increase in demand.
The financial risk profile of the firm is moderate marked by moderate net worth, below average capital structure and debt protection measures. The net worth of the firm stood at Rs.22.52 Cr and Rs.21.05 Cr as on March 31, 2023 and 2022 respectively. Gearing ratio rose to 1.85 times in FY2023 from 1.03 times in FY2022. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 2.38 times and 1.05 times as on March 31, 2023 respectively as against 3.64 times and 2.72 times as on March 31, 2022 respectively. Tol/ TNW stood at 1.95 times as on March 31, 2023, as against 1.21 times as on march 31, 2022. The debt to EBITDA of the company stood at 5.82 times on as on March 2023 as against 2.10 times in FY2022. Acuité believes that the financial risk profile of the company would improve supported by increase in accruals in the medium term.
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| Weaknesses |
GE’s working capital cycle elongated during the year marked by gross current assets of 111 days in FY2023 as against 68 days in FY2022. The GCA days are impacted mainly on account of increase in inventory days and slightly increase in debtor days. Inventory days stood at 62 days as on March 31, 2023 as against 25 days as on March 31, 2022. The debtor day stood at 42 days as on March 31, 2023 as against 33 days as on March 31, 2022. Creditors days stood at 1 days as on March 31, 2023 as against 2 days as on March 31, 2022.
GE is a partnership firm and is exposed to the likeliness of the partners withdrawing capital from the business. It can be observed that the Net worth of the firm has not witnessed any growth over the last 3 financial years through FY2023 on account of capital withdrawal by the partners. Acuité believes that any substantial withdrawal of capital by the partners is likely to have an adverse impact on the capital structure.
The domestic cashew industry is highly fragmented with the presence of many unorganized players, owing to low entry barriers. Intense price competition, along with low product differentiation, limits the firm’s pricing flexibility. Further the firm’s margins have fluctuated over the years due to variations in RCN and cashew kernel prices. Cashew prices are highly volatile. Kernel prices are determined by buyers and brokers, in line with the prevailing demand-supply scenario.
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| Rating Sensitivities |
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| Liquidity Position: Adequate |
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GE’s Liquidity is adequate with adequate NCAs to its repayment obligations. GE generated cash accruals of Rs.2.71 Cr during FY2023, while it’s maturing debt obligations are Rs.2.43 Cr during the same period.The cash accruals of the company are estimated to remain around Rs.2.77-3.88 Cr during FY2024-25 while their repayment obligations are Rs. 1.67-1.89Cr during the same period. The Company has maintained unencumbered cash and bank balances Rs.0.04 Cr and the current ratio stood at 1.39 times as on March 31, 2023. Acuité expects that the liquidity of the company is likely to be Adequate over the medium term on account of moderate cash accruals.
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| Outlook: Stable |
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Acuité believes that GE will continue to benefit over the medium to long term on account of long track record of operations, experienced management in the industry. The outlook may be revised to 'Positive', in case of sustainable improvement in scale of operations and improvement in per unit realizations of the products offered by the firm leading to higher-than-expected revenues and profitability with improvement in financial risk profile. Conversely, the outlook may be revised to 'Negative' in case GE registers lower-than-expected revenues and profitability or any significant stretch in its working capital management or larger-than-expected debtfunded capital expenditure leading to deterioration of its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 154.06 | 154.67 |
| PAT | Rs. Cr. | 2.31 | 4.48 |
| PAT Margin | (%) | 1.50 | 2.89 |
| Total Debt/Tangible Net Worth | Times | 1.85 | 1.03 |
| PBDIT/Interest | Times | 2.38 | 3.64 |
| 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 • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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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