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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 60.78 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 5.00 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 65.78 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-' (read as ACUITE Triple B minus) and short term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs. 65.78 Cr bank facilities of Karnataka Agro Chemicals (KAC). The outlook is ‘Stable’. Rationale for Rating Reaffirmation The rating action factors in the group’s established position in the fertilisers and micronutrient premixes industry, extensive experience of the promoters, wide product portfolio and distribution network along with geographical presence in the domestic market, longstanding relation with its stake holders, above average financial risk profile, adequate liquidity. The ratings are constrained by Intensive working capital of the business and intense competition in the industry, exposure to risks related to regulated nature of the fertilizer industry in India and to volatility in raw material prices and agro-climatic risks.
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| About Company |
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Karnataka Agro Chemicals (KAC) is based in Bengaluru, was established in 1974 by Dr. G.P Shetty. KAC manufactures various fertilizer products, viz.: Single Micronutrients (Chelated & Non Chelated), Major Nutrients, Secondary nutrients (Chelated & Non Chelated), Multi Micronutrients (Chelated & Non Chelated), Plant Bio-Activators, Plant Growth Regulator and Spray Adjuvants. It has manufacturing units at Nagarbhavi and Tumkur in Karnataka; Ghaziabad in Uttar Pradesh and Bhubaneshwar in Odisha. Its daily operations are managed by Mr. Mahesh Shetty.
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| About the Group |
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Incorporated in 2000, Multiplex Bio-Tech Private Limited (MBPL) is the one of the Group Company of MULTIPLEX group. MBPL is promoted by Mr. Mahesh Gopalakrishna and his family members. It is engaged in manufacturing and marketing of micronutrients fertilizers and various bio Products, viz. Multiplex Organic Manure, Bio-Fertilizers, Bio-Fungicides, Bio Insecticides and Bio Pesticides. The Group has manufacturing unit located at Nelamangala near Bangalore (Karnataka). It is also engaged in manufacturing of agro based bi-products which are used for agriculture crop growth.
Incorporated in 1996, Multiplex Agricare Private Limited (MAPL) was promoted by Mr. Mahesh Gopala Krishna. It is engaged in the manufacturing and marketing of zinc sulphate, copper, magnesium, manganese and marketing of pesticides and insecticides. Its manufacturing unit is located in Peenya, Bangalore (Karnataka). |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| The team has consolidated the business and financial risk profiles of Karnataka Agro Chemicals (KAC), Multiplex Agricare Private Limited (MAPL) and Multiplex Bio-Tech Private Limited (MBPL), together referred to as the ‘Multiplex Group’ (MG). The consolidation is in view of the common management, strong operational & financial linkages between the entities, corporate guarantee of Multiplex Bio-Tech Private Limited for the bank facilities of KAC and unsecured loans by MBPL to KAC and MAPL
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Key Rating Drivers
| Strengths |
| Promoters’ extensive experience and established track record in fertiliser Industry
Multiplex Group’ was set up in 1974 by Dr. G.P Shetty a first -generation entrepreneur. Multiplex Group is closely held by the promoter family. The second generation of the promoter family manages the business, with managing director Mr. Mahesh G Shetty looking after daily operations. The promoters of the Group have extensive experience of over four decades in the fertilizer industry which has led to understanding of the dynamics of the market and enabled them to establish healthy relationships with its suppliers and customers to get repeated business. It is having a strong network in Karnataka and presence in Tamil Nadu, Telangana and Andhra Pradesh as well. Diversified clientele and product portfolio The group supplies its products to various states through a network of 25 branches and 4000+ dealers. Its product portfolio has more than 150 brands. The operations are characterised by a high level of vertical integration across its fertilisers divisions, thereby allowing high value addition and diversification. It manufactures a wide range of products—from micro nutrients to bio fertilisers and water-soluble fertilisers. The Group’s ability to suitably modify its product mix in response to changes in market conditions partially mitigates the risks associated with cyclicality. The group also has a well-entrenched distribution network spanning across the country. Acuité believes that strong diversity in clientele and product profile helps maintain steady growth in revenue and profitability. Financial risk profile-Above Average Group’s financial risk profile is above average marked by comfortable coverage indicators and moderate net worth of Rs.60.63 crore as on 31 March 2022 as against Rs.53.43 crore as on 31 March, 2021. The improvement is majorly on account of accretion of profits. Group has moderate leverage policy. The gearing (debt-equity) improved by 27 bps in last three year and stood at 1.95 times as on 31 March, 2022 as against 1.85 times as on 31 March, 2021.( 2.22 times in FY 20) Coverage indicators stood comfortable as evident from Interest coverage Ratio of 4.97 times for FY2022 as against 4.25 times for FY2021. The DSCR stood at 2.05 times for FY2022 as compared to 3.40 times for FY2021. The Net Cash Accruals to Total debt stood at 0.21 times as on FY2022 and 0.22 times for FY2021. The Total outside liabilities to Tangible net worth (TOL/TNW) stood at 3.69 times in FY2022 as against 3.75 times for FY2021. Augmentation in business risk profile Multiplex Group operations has improved reflected by growth in consolidated revenue from operations by 6.19 % in FY2022 to Rs. 324 crore as against Rs. 305.12 crore for FY2021. There is minuscule improvement in operating profit margin of the group which is improved by 44 bps and stood at 12.12% in FY2022 as against 11.68% in FY2021. Furthermore, the net profit margin of the company improved by 39 bps and stood at 5.46 percent in FY2022 as against 5.07 percent in FY2021. |
| Weaknesses |
| Vulnerability of profitability to agro-climatic conditions, regulatory risks and seasonality of the fertiliser business
The Group’s sales and profitability remain susceptible to agro-climatic conditions, development of pest resistant genetically modified (GM) seeds and regulatory risks inherent in the business. Agriculture sector in India remains vulnerable to the vagaries of monsoon as the area under irrigation remains low which exposes fertiliser sector to volatility as well. The group faces intense competition from small, unorganised players, and has to compete with strong players in markets where it plans to expand its reach necessitates constant marketing and branding expenditure. Intensive working capital management Working capital operations of the group are intensive in nature as reflected by its gross current asset (GCA) days of around 140 days as on March 31, 2022 as against 160 days as on March 31, 2021 which is on the account of higher inventory days. Inventory days improved and stood at 95 days as on March 31 FY2022 as against 102 days as on March 31 FY2021. Debtor days also improved by 37 days over the period of three years. Debtor Days stood at 21 days as on March 31 FY2022 as against 28 days as on March 21 FY2021 (58 days in FY 20). The creditor days stood at 195 days as on March 31, FY2022 as against 191days as on March 31, 2022. Group has availed the banking facilities of fund-based and non-fund based which includes overdraft and letter of credit facilities. Utilization of fund based working capital limits remains high at ~92% in last one year ended January 2023. Non fund based limit utilization stood at ~83% in last one year ended January 23 |
| Rating Sensitivities |
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Significant improvement in scale of operations and improvement in profitability.
significant stretch in working capital. Substantial adverse impact of any regulatory/policy change. Sustained improvement in scale of operation with sustained operating margin |
| Material Covenants |
| None |
| Liquidity Position |
| Adequate |
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Liquidity profile of the group remained adequate marked by adequate net cash accruals against its maturing debt obligations. Group generated cash accruals of Rs. 24.28 Cr in FY2022 as against its maturing debt obligation of 7.59 Cr in the same period.
Utilization of fund based working capital limits remains high at ~92% while non fund based limit utilization stood at ~83% in last one year ended January 23. Group has unencumbered cash and bank balances of Rs. 9.06 crore as on March 31, 2022. In addition to this group has unencumbered Fixed deposits of Rs. 11.45 crore. The current ratio of the group stood at 0.83 times as on March 31, 2022. |
| Outlook: Stable |
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Acuite believes that Group will continue to benefit over the medium term due to its established market position, established relations with its customers and suppliers and diversified geographical reach and product portfolio. The outlook may be revised to “Positive”, if the Group demonstrates substantial and sustained growth in its revenues and operating margins from the current levels while maintaining / improving its capital structure through equity infusion. Conversely, the outlook may be revised to “Negative”, if Group’s generates lower-than-anticipated cash accruals, most likely as a result of sharp decline in operating margins, or further stretch in its working capital cycle, or any significant investments in group entities, or any significant withdrawal of capital there by impacting its financial risk profile, particularly its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 324.00 | 305.12 |
| PAT | Rs. Cr. | 17.70 | 15.46 |
| PAT Margin | (%) | 5.46 | 5.07 |
| Total Debt/Tangible Net Worth | Times | 1.95 | 1.85 |
| PBDIT/Interest | Times | 4.97 | 4.25 |
| Status of non-cooperation with previous CRA (if applicable) |
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CRISIL vide its press release dated 20 September 2022, has mentioned the rating of KAC to ‘[CRISIL]B+/Stable/A4’ Issuer Not Cooperating as on 20 September 2022
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| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.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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