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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 40.00 | ACUITE BBB+ | Stable | Reaffirmed | Positive to Stable | - |
| Total Outstanding | 40.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long term rating of ‘ACUITÉ BBB+’ (read as ACUITE triple B Plus) on the Rs 40.00 Cr. bank facilities of Kay Kay Trading Company (KKTC). The outlook is revised to ‘Stable’ from 'Positive'. Rationale For Rating The rating is reaffirmed and outlook revised to stable in view of the improvement in operating performance marked by improved operating income and profitability margins albeit moderation noted in the overall financial risk profile marked by surge in gearing and debt protection metrics. The revenue of the group improved and stood at Rs. 1017.85 Cr in FY2023 as against Rs. 982.48 Cr in FY2022. The operating profitability improved and stood at 3.14 percent in FY2023 as against 2.96 percent in FY2022. The PAT margins registered a slight decline as it stood at 1.73 percent in FY2023 as against 1.86 percent in FY2022 primarily driven by increase in interest costs. The overall gearing rose to 1.70 times as on March 31, 2023 as against 0.78 times as on March 31, 2022. The surge is primarily in working capital borrowings, used to make advance payment to procure raw materials at discounted prices. The interest coverage and debt service coverage ratio though recorded decline remained comfortable at 5.95 times and 4.37 times respectively for FY2023 as against 15.47 times and 10.93 times for FY2022. Going forward, the group’s ability to improve its scale of operations and profitability margins while maintaining its capital structure will remain a key rating monitorable. The group in H1FY2024 has already recorded sale of Rs.537 Cr and is estimated to close the year in the range of Rs. 1100-1200 Cr while maintaining its profitability margins. |
| About Company |
| Mumbai based Kay Kay Trading Company (KKTC) is a partnership firm set up in 1988 by Mr. Manoj Khetan, Mrs. Sunita Khetan and Mr. Nishit Khetan. The firm is currently engaged in trading of mineral gypsum and clinker to various top cement companies in the country. Prior to trading of gypsum and clinker, the firm was engaged in trading of bearings which has now been discontinued. Further, the firm started trading of gypsum from FY17 and clinker from FY20 and it imports all traded goods from the Middle East countries. The firm currently operates from 14 ports across the country. |
| About the Group |
| Oceanic Trade Minerals Private Limited incorporated in the year 2019. The Registered Office is in Mumbai. Oceanic Trade Minerals Private Limited currently engaged in Import and trading of Natural Gypsum, Cement Clinker and Laterite. The Current Directors of the company are Mrs. Sunita Manoj Khetan and Mr. Manoj Shyam Sunder Khetan |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the business and financial risk profiles of Oceanic Trade Minerals Private Limited and Kay Kay Trading Company and hereinafter referred to as Oceanic Group on account of their common line of business, common management, and significant operational and financial linkages. |
| Key Rating Drivers |
| Strengths |
| >Experienced management and established track record of operations with reputed clientele The Mumbai-based Oceanic Group incorporated by Mr. Manoj Khetan and family. The promoters possess over three decades of experience in the trading business. The extensive experience of the promoters has helped the group to established strong ties with its suppliers and customers. The group caters to renowned cement manufacturing companies, including Ultratech Cement Ltd., Dalmia Cement Ltd., JK Cement Ltd., Ramco Cement Ltd., amongst others. The extensive experience of promoters is reflected through the improvement is the revenue of the group at Rs.1017.85 crore in FY2023 as against Rs. 982.48 crore in FY2022. The group in H1FY2024 has already recorded sale of Rs.537 Cr and is estimated to close the year in the range of Rs. 1100-1200 Cr while maintaining its profitability margins. The operating profitability improved and stood at 3.14 percent in FY2023 as against 2.96 percent in FY2022. The PAT margins registered a slight decline as it stood at 1.73 percent in FY2023 as against 1.86 percent in FY2022 primarily driven by increase in interest costs. Acuité believes that the group will continue to benefit from its experienced management and established relationships with both customers as well as suppliers in the medium term. > Moderate financial risk profile The financial risk profile of the group is moderate marked by modest net-worth, moderate gearing and comfortable debt protection metrics. The net-worth of the group stood at Rs.56.97 Cr as on March 31, 2023 as against Rs.46.01 Cr as on March 31, 2022. The overall gearing rose to 1.70 times as on March 31, 2023 from 0.78 times as on March 31, 2022. The surge in gearing levels is primarily on account of higher utilisation of working capital limits as on year end. The company primarily avails only working capital limits. The total debt stood at Rs. 96.95 Cr as on March 31, 2023 out of which Rs.0.07 Cr was unsecured loan from promoters and related parties and balance Rs. 96.95 Cr constituted short term borrowings from banks. The debt protection metrics marked by interest coverage ratio and debt service coverage ratio though declined, stood comfortable at 5.95 times and 4.37 times respectively in Fy2023 as against 15.47 times and 10.93 times respectively in last year. The TOL/TNW stood at 2.66 times as on March 31, 2023 as against 2.80 times as on March 31, 2022. The Debt to EBITDA surged to 3.02 times in FY2023 as against 1.23 times in last year.
Acuite believes the group's financial risk profile will continue to remain moderate in absence of any major debt-funded capex plan over the near to medium term. > Efficient working capital management The working capital cycle of the group is efficient marked by gross current asset days of 68 days in Fy2023 as against 61 days last year. The GCA days are primarily driven by debtor and inventory days which stood at 33 days and 24 days respectively as against 24 days each last year. The company generally receives 90% of its payment within 7 days of loading material on transport and balance 10 percent of the order value is received with 30 days of the dispatch. The company largely makes advance payments to its suppliers to get better prices on its purchases, however, due to long standing relationships with some of its suppliers, the company can avail a week long credit period with a select few incase required. The average utilisation of the fund based facilities of the group for the ten month ended October, 2023 was ~69%. |
| Weaknesses |
| >Vulnerability of profitability owing to volatility in cement prices The profitability margins of the group are susceptible to volatility in gypsum and clinker prices in the international market as the group imports 100 percent of its traded goods from Middle Eastern countries. Significant changes in prices of gypsum and clinkers impact the margins of the group. Acuité believes that profitability of the group will remain susceptible to volatility in gypsum and clinker prices in the near to medium term. >Susceptibility to cyclicality nature of industry and competitive nature of industry The group engaged in trading business of gypsum, clinker and laterite to the top cement manufacturers of the country. The cement consumption is majorly dependent upon the economic activities taking place in and around the country. The end user industry being infrastructure and real state, any significant slowdown in these industries will impact the demand of cement and will impact the revenues of the group. Further, the firm competes with various players in the organized and unorganized segments in the gypsum trading industry, thus limiting the pricing power. |
| Rating Sensitivities |
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| All Covenants |
| Not Applicable |
| Liquidity Position |
| Adequate |
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The group has adequate liquidity position as reflected by adequate net cash accruals. The group generated cash accruals in the range of Rs.18.20 crore – Rs.18.73 crore during the last two years through FY2022-23. It is expected to generate cash accruals in the range of Rs.21 crore – Rs.30 crore over the medium term. Unencumbered cash and bank balances stood at Rs.8.37 crore as on March 31, 2023 with a current ratio of 1.29 times in the same period. Liquid investments stood at Rs.4.34 crore as on March 31, 2023. Group’s working capital operations are efficient marked by moderate Gross Current Asset days (GCA) of 68 days in FY2023 against 61 days in FY2022. This is majorly on account of efficient inventory and receivable management. The working capital limits remained utilized at ~69 percent for last trailing 10 months ended October, 2023. Acuité believes that liquidity profile is expected to remain adequate on account of adequate cash accruals agaisnt repayment obligations.
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| Outlook: Stable |
| Acuité believes that the group will maintain a ‘Stable’ outlook over the medium term owing to its experienced management & long track record of operations, moderate financial risk profile and efficient working capital management. The outlook may be revised to 'Postive' if the group demonstrates higher than expected grwoth in revenues and profitability margins while maintaining its liquidity profile. Conversely, the outlook may be revised to 'Negative' in case the group registers elongation in its working capital cycle leading to deterioration in liquidity position or further deterioration in its financial risk profile. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 1017.85 | 982.48 |
| PAT | Rs. Cr. | 17.61 | 18.30 |
| PAT Margin | (%) | 1.73 | 1.86 |
| Total Debt/Tangible Net Worth | Times | 1.70 | 0.78 |
| PBDIT/Interest | Times | 5.95 | 15.47 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| 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 • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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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