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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 135.00 | ACUITE A | Stable | Reaffirmed | - |
| Bank Loan Ratings | 365.00 | - | ACUITE A1 | Reaffirmed |
| Total Outstanding | 500.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A’ (read as ACUITE A) and also reaffirmed the short-term rating of ACUITE A1’ (read as ACUITE A one) to the Rs.500.00 crore bank facilities of Godavari Commodities Limited (GCL). The outlook is ‘Stable’. Rationale for Rating The rating factors in the stable operating and financial performance of GCL. The operating income of the company stood at Rs.2054.12 Crore in FY2023 as compared to Rs. 1244.54 Crore in FY2022, the improvement is mainly on account of higher sale of services and increase in average coal prices during the period. In current year, coal prices have normalized leading to moderation in total turnover of the company albeit improvement in volumes traded year on year. The company has generated revenue of ~Rs.1574 Cr. in 11MFY2024 and is expected to close year in the range of Rs. 1700-1800 Cr. The company has shown improvement in operating margin in FY2023 as it stood at 11.05% as against 9.97% in FY2022.However in 9MFY2024, the operating margin stood at 8.17%, the moderation is on account of normalisation of coal prices in FY2024. The company’s financial risk profile is marked by healthy net worth, low gearing and moderate debt protection metrics. The overall gearing of the company stood at 0.10x times on March 31, 2023 as compare to 0.11 times in last year. The interest coverage ratio and total debt/ EBITDA ratio of 27.68 times and 0.31 times respectively in FY2023 as against 7.85 times and 0.43 times in FY2022. The rating however remains constrained by working capital intensive nature of operations of GCL. Going forward, the company ability to maintain its scale of operations and profitability while maintaining its capital structure and restricting elongation of its working capital cycle will remain as key rating monitorable. |
| About the Company |
| Incorporated in 1992, GCL is a Kolkata based company engaged in trading of non-coking coal. The company also provides coal handling, supervision, and transportation services. GCL was promoted by the Bhutoria family associated with coal trading since last three decades. Currently the business is managed by Mr. Padam Chand Bhutoria and his sons Mr. Indraj Mal Bhutoria and Mr. Kamal Bhutoria. Till fiscal 2012, it was only trading in domestic coal. However, from FY 2013, it also commenced trading in imported coal. Recently, the company has bagged two contracts from West Bengal Mineral Development and Trading Corporation Ltd for excavation and loading of Sand from the river beds in West Bengal and transporting thereof to customers |
| Unsupported Rating |
| Not applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of GCL to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and established relationship with customers Established in 1992, the company has been operational for around two decades. The promoter, Mr. Padam Chand Bhutoria has more than three decades of experience in the coal trading business. Currently the business is managed by Mr. Padam Chand Bhutoria and his sons Mr. Indraj Mal Bhutoria and Mr. Kamal Singh Bhutoria. The Bhutoria family has been associated with the coal trading business since the past three decades. The long standing experience of the promoters and long track record of operations has helped them to establish comfortable relationships with key suppliers and reputed customers across the country. The clientele majorly consists of client having high credit worthiness and reputations in the market. Some of the key customers of the company are Saroj Commodities Private Limited, Ankit Metal and Power Ltd, West Bengal Minerals Development & Trading Corporation Limited, Lalitpur Power Generation Company Ltd. to name a few. Acuité derives comfort from the long experience of the management and believes this will benefit the company going forward, resulting in steady growth in the scale of operations. Healthy financial risk profile The company’s financial risk profile is marked by healthy net worth, low gearing and moderate debt protection metrics. The tangible net-worth stood at Rs. 755.79 Crores as on March 31, 2023 as compared to previous year of Rs. 582.07 Crores as on March 31, 2022, increase in net-worth mainly on account of accumulation of profit to reserves. The total debt stood at Rs. 76.32 Cr. and includes long term debt of Rs. 5.20 Crores and working capital borrowing of Rs. 71.12 Crores. The overall gearing stood at 0.10x times on March 31, 2023 as compare to 0.11 times in last year. TOL/TNW stood at 0.69 times as on March 31, 2023 as compared to previous year at 0.60 times as on March 31, 2022. The company’s debt protection metrics is marked by an interest coverage ratio and total debt/ EBITDA ratio of 27.68 times and 0.31 times respectively in FY2022 as against 7.85 times and 0.43 times in FY2022. Acuité believes that GCL’s financial profile will continue to remain healthy in absence of any major debt funded capex plans over the medium term. Fluctuating operating income and profitability, albeit improvement in traded volumes The operating income of the company stood at Rs.2054.12 Crores in FY2023 as compared to Rs. 1244.54 Crores in FY2022, the improvement is mainly on account of higher sale of services and increase in average coal prices during the period. In current year, coal prices have normalized leading to moderation in total turnover of the company albeit improvement in volumes traded year on year. The company has generated revenue of ~Rs.1574 Cr. in 11MFY2024 and is expected to close year in the range of Rs. 1700-1800 Cr. In terms of quantity, till December 2023, the company has traded 11.18 Lakh tonnes of coal and is expected to trade ~14 Lakh tonnes by year end. In FY2023 the trade coal volume stood at 13.23 lakh tonnes. The company has shown improvement in operating margin in FY2023 as it stood at 11.05% as against 9.97% in FY2022.However in 9MFY2024, the operating margin stood at 8.17%, the moderation is on account of normalisation of coal prices in FY2024. Acuite believes the company's ability to improves its scale of operations and profitability shall remain as key rating monitorable. |
| Weaknesses |
| Working capital intensive nature of operation The working capital management of the company has improved in FY23 as reflected from gross current assets (GCA) of 178 days in 31st March 2023 as compared to 217 days on 31st March 2022. GCA has improved on account of implementation of strict debtor collection policy and capping its exposure to individual customers and control inventory level. There is a slight improvement in Debtors and inventory level to 76 days and 42 days respectively in FY2023 as compare to 80 days and 45 days respectively in previous year. Acuité believes the company's ability to sustain the above improvement in working capital operations of the company will remain a key rating monitorable. |
| Rating Sensitivities |
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| Liquidity Position |
| Strong |
| The company's liquidity position is marked strong with healthy cash accruals and adequate cash and liquid investments. The net cash accruals stood high at Rs 175.18 Cr. as on March 31, 2023 as against negligible debt repayment obligation. The company maintained cash and bank balance of Rs. 35.25 Cr. as on March 31, 2023 and also holds unencumbered FD/Mutal fund of Rs. 32.97 Cr. as on December 31, 2023. The company is estimated to generate net cash accruals in the range of Rs. 100 Cr – Rs. 120 Cr. in the period FY2024-25 as against negligible repayment obligations. However, working capital management of the company is high marked by Gross Current Assets (GCA) of 178 days in 31st March 2023 as compared to 217 days in 31st March 2022. Acuité believes that going forward the company will maintain strong liquidity position due to steady accruals. |
| Outlook: Stable |
| Acuité believes that the outlook of the company will remain ‘Stable’ over the medium term on account of sustainable growth in the financial performance of the company marked by satisfactory scale of operations and sustenance of profitability margins coupled with comfortable capital structure and strong debt coverage indicators on the back of consistent increase in the networth and healthy cash accruals over the years. Conversely, the outlook may be revised in case of weakening of its business risk profile, lower coal offtake and deterioration in profitability margins thereby impacting the liquidity and debt protection indicators of the company. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 2054.12 | 1244.54 |
| PAT | Rs. Cr. | 173.40 | 92.48 |
| PAT Margin | (%) | 8.44 | 7.43 |
| Total Debt/Tangible Net Worth | Times | 0.10 | 0.11 |
| PBDIT/Interest | Times | 27.68 | 7.85 |
| 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 • 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 |
| 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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