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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 51.25 | ACUITE B+ | Stable | Upgraded | - |
| Total Outstanding | 51.25 | - | - |
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Rating Rationale |
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Acuité has upgraded its long-term rating from ‘ACUITE B’ (read as ACUITE B) to 'ACUITE B+(read as ACUITE B plus) on the Rs.51.25 Cr. bank facilities of Green Gold Seeds Private Limited (GGSPL). The outlook is ‘Stable’.
Rationale for rating upgrade The rating upgrade takes into account the improvement recorded in the operating revenues by ~89 percent in FY2023 against the previous year. The operating revenue stood at Rs.202.39 Cr in FY2023 against Rs.107.28 Cr in FY2022, the increase being led by higher oil seed sales. In 8MFY2024, company has recorded sales of ~ Rs.240 Cr. The rating upgrade also considers the company’s long track record of operations and long-standing experience of the promotors, which is expected to help the company to augment its revenue further. The rating, however, is constrained on account of average financial risk profile and stretched working capital operations. Also, the susceptibility of profitability to volatility in raw material prices and also presence in a highly fragmented and competitive industry. |
| About the Company |
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Established in 2001, Green Gold Seeds Private Limited, is an Aurangabad based Mulay Group Company. Mr. Ajeet Madhukar Mulay and Mr. Madhukar Haribhau Mulay are the directors of the company. The company is engaged in the business of production, processing and marketing of notified agricultural seeds. The company also carries out In House Research, Hybridization Activities and incidental agricultural operations.The company has set up a separate In-house Research and development division for its seed research. This inhouse R&D unit have been accorded recognition by the department of Scientific and Industrial Research, Government of India.
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| Unsupported Rating |
| None |
| Analytical Approach |
| Acuité has considered the standalone financial and business risk profiles of GGSPL to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations with experienced management
GGSPL is based out of Maharashtra and was incorporated in the year 2001. Over its two decades of operations the Company has expanded its business to states of Gujarat, Rajasthan, Karnataka, Telangana, West Bengal, Jharkhand, Madhya Pradesh, Uttar Pradesh, Chattisgarh, Andra Pradesh and Odissa. However, around 80 percent of the total revenue is generated from Maharashtra. The operating revenue stood at Rs.202.39 Cr in FY2023 against Rs.107.28 Cr in FY2022. The company has active dealer distributors of around 800 to 1000 through which it sells its products of its own brand. The Company is managed by Mr. Madhukar Haribhau Mulay and Mr. Ajeet Madhukar Mulay along with a team of experienced senior management who are ably supported by a strong line of mid-level managers. The extensive experience of the promoters and the senior management team has helped the company to established long and healthy relationships with customers and suppliers over the years. Acuite believes that the company will sustain its existing business profile over the medium term on the back of an established track record of operations with an experienced management. |
| Weaknesses |
| Average Financial Risk Profile
GGSPL has average financial risk profile marked by average net-worth, moderate debt protection metrics and high gearing levels. The net worth stood at Rs. 15.15 crore as on 31 March 2023 as against Rs.7.24 crore as on 31 March, 2022. The increase in net-worth is on account of accretion of profits to reserves and equity infusion of Rs.57 lakhs. The gearing level of the company stood at 5.15 times as on 31 March 2023 as against 4.37 times as on 31 March, 2022. The total debt outstanding of Rs.78.01 crore consists of working capital borrowings of Rs.63.57 crore, unsecured loan from promoters of Rs.0.47 crore and term loan obligations of Rs.13.98 crore as on 31 March, 2023. The coverage ratios of the company remained moderate with Interest Coverage Ratio (ICR) of 3.74 times for FY2023 against 3.02 times for FY2022. Also, the Debt Service Coverage Ratio (DSCR) stood at 2.10 times for FY2023 against 2.02 times for FY2022. The total outside liabilities to tangible net worth (TOL/TNW) of the company improved though stood high at 14.72 times for FY2023 as against 20.88 times for FY2022. Further, Net Cash Accruals to Total Debt (NCA/TD) stood at 0.12 times for FY2023. Working Capital Intensive Nature of Operations The operations of the company are working capital intensive marked by high GCA days 301 days for FY2023 as against 432 days for FY2022. The high GCA days are majorly on account of high inventory holding period of 293 days for FY2023 as against 446 days for FY2022. The debtor days remained low at 11 days for FY2023 as against 10 days for FY2022. The creditor days of the company stood at 47 days for FY2023 as against 104 days for FY2022. The average utilization of the working capital limits remained on the lower side of ~39 percent for the last 11 months ending November 2023. Exposed to the industry risk of agro-climatic conditions GGSPL business is seasonal and exposed to agro climatic risks and the production is highly dependent on rainfall and other climatic conditions required for the cultivation of various crops. Any adverse agro-climatic conditions can affect the overall demand for seeds from farmers which may result into inventory pile-up. Also, the company is exposed to uncertainty relating to production on account of agro-climatic risks, which may hamper crop output and quality. However, the risk is mitigated to some extend as the company deals with various segments of seeds such as Oilseed, Cotton, Cerales, Pulses, Vegetable, Paddy and Wheat. Acuité believes that company’s ability to scale up its operations considering the challenging operating environment along with managing working capital cycle will remain a key rating sensitivity factor. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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Company has adequate liquidity position marked by sufficient net cash accruals generation against its maturing debt repayment obligation in FY2023. The company generated cash accruals of Rs.9.09 crore in FY2023 against its maturing debt repayment obligation of Rs.2.24. The cash accruals of the company are estimated to remain around Rs.10.81-13.07 crore during 2023-25 period while its matured debt obligations are estimated to be in the range of Rs.1.06-2.49 crore during the same period. The average utilization of the working capital limits remained on the lower side of ~39 percent for the last 11 months ending November 2023. The GCA days stood at 301 days for FY023 as against 432 days for FY2022. Furthermore, the company maintains unencumbered cash and bank balances of Rs.0.33 crore as on March 31, 2023 and the current ratio stood moderate at 0.98 times as on March 31, 2023.
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| Outlook:Stable |
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Acuite believes that GGSPL will maintain a 'stable' outlook in the medium term and will continue to benefit over the medium term due to its experience management and healthy demand of its products in the market. The outlook may be revised to 'Positive’, if the company demonstrates substantial and sustained growth in its revenues and/or operating margins from the current levels while maintaining its capital structure through equity infusion. Conversely, the outlook may be revised to 'Negative', if company generates lower-than-anticipated cash accruals thereby impacting its financial risk profile, particularly its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 202.39 | 107.28 |
| PAT | Rs. Cr. | 7.30 | 4.06 |
| PAT Margin | (%) | 3.61 | 3.78 |
| Total Debt/Tangible Net Worth | Times | 5.15 | 4.37 |
| PBDIT/Interest | Times | 3.74 | 3.02 |
| 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 • 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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