Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 30.00 ACUITE BB+ | Stable | Downgraded | Negative to Stable -
Bank Loan Ratings 28.00 - ACUITE A4+ | Downgraded
Total Outstanding 58.00 - -
Total Withdrawn 0.00 - -
 
Rating Rationale

Acuité has downgraded its long-term rating to ‘ACUITE BB+’ (read as ACUITE double B plus) from ‘ACUITE BBB-’ (read as ACUITE triple B minus) and its short-term rating to ‘ACUITE A4+’ (read as ACUITE A four plus) from ‘ACUITE A3’ (read as ACUITE A three) on the Rs.58.00 Cr. bank facilities of Krishna Traders (KT). The outlook is revised from 'Negative' to ‘Stable’.

Rationale for rating downgrade
The downgrade is majorly on account of the substantial deterioration in the scale of operations of the firm in last three years. The revenue of the firm declined to Rs.271.27 Cr. in FY2024 as compared to Rs. 355.29 Cr. in FY2023 and Rs. 387.12 Cr. in FY2022 respectively. The decline is primarily due to geopolitical and economic issues in Bangladesh along with the Government of India’s prohibition on exporting agricultural commodities like rice, jute, and wheat and imposition of duty charges on these goods. Furthermore, the firm’s operating margin remained thin at 1.60 percent in FY2024 as opposed to 1.68 percent in FY2023 and 1.48 percent in FY2022. Additionally, the firm’s Profit After Tax (PAT) margin decreased to 0.53 percent in FY2024 from 0.66 percent in FY2023 and 0.61 percent in FY2022. Acuité believes that any further deterioration in the business risk profile of the firm will remain a key rating sensitivity going ahead.
The rating also takes into account the firm’s well-established operations for more than six decades under in the trading industry supported by well experienced management. The rating also draws comfort from firm’s efficient working capital management towards its operations. Although there has been an increase in GCA days, the firm maintains low inventory and debtor levels, mitigating any perceived risk. The rating also factors in the average financial risk profile of the firm with modest networth, moderate gearing levels and moderate debt protection matrices with nil matured long term debt obligations. Additionally, the liquidity position of the firm remains adequate with declining yet sufficient cash accruals against nil mature debt obligations.

 

About the Company
­Krishna Traders, established in 1953 by Mr. Late Netai Mohan Saha as a proprietorship concern, underwent a transformation into a partnership firm in 1996. Based in Kolkata, the firm specializes in trading various commodities such as food grains, paper products, raw cotton, onions, chili, chemicals, and spices. Achieving export house status in 1979, the firm attained a 3-star export house rating since 1986, conducting exports to Bangladesh, China, Sri Lanka, Myanmar, and Nigeria. The day-to-day operations are currently overseen by the existing partners: Mr. Debashish Sah, Mr. Shekhar Saha, and Mr. Tapan Mohan Saha.
 
Unsupported Rating
­Not Applicable
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profiles of KT to arrive at this rating.
 
Key Rating Drivers

Strengths
Established track record of operation and experienced management
With a well-established history of operation and a seasoned management team, KT has a notable trading legacy dating back over six decades. Throughout this extensive timeframe, the firm has forged a strong market presence in 
Eastern India, handling a diverse portfolio of nearly 50 products. The primary revenue sources include food grains, paper products, raw cotton, onions, chili, chemicals, and spices. This long-lasting enterprise has enabled the firm to cultivate enduring partnerships with clients and suppliers, encompassing traders, distributors, and government entities. The projection indicates a sustained favourable business risk profile, attributed to the adept management, well-established customer connections, and robust nationwide procurement channels.

Efficient Working Capital Management
The working capital management of the firm is efficient marked by GCA days of 57 days in FY2024 as compared to 33 days in FY2023. Moreover, the collection period of the firm also stood comfortable at 31 days in FY2024 as compared to 11 days in FY2023. Further, the inventory days of the firm stood high at 15 days in FY2024 as compared to 16 days in FY2023. Acuité believes that the working capital operations of the firm will remain at the similar levels over the medium term.

 

Weaknesses
Deterioration in business risk profile
During the past three years, the firm’s operational performance has witnessed a consistent decline in earnings. In FY2024, the revenue stood at Rs. 217.27 Cr, contrasting with Rs. 355.29 Cr. in FY2023 and Rs. 387.12 Cr. in FY2022. The decline is primarily due to geopolitical and economic issues in its biggest market Bangladesh along with the Government of India’s prohibition on exporting agricultural commodities like rice, jute, and wheat, along with the imposition of duty charges on these goods.
Furthermore, with the revenue decline, the firm’s operating margin remained thin at 1.60 percent in FY2024 as opposed to 1.68 percent in FY2023. Additionally, the firm’s Profit After Tax (PAT) margin declined to 0.53 percent in FY2024 from 0.66 percent in FY2023.
Going forward, Acuité believes the firm’s revenue remains susceptible to the Indian government’s decisions concerning the export of agricultural commodities, representing a pivotal rating sensitivity over the medium term.

Average financial risk profile
The financial risk profile of the firm is average marked by modest net worth, moderate gearing, and comfortable debt protection metrics. The net worth of the firm stood at Rs.25.25 Cr. as on 31 March 2024 as against Rs.25.46 Cr. as on 31 March 2023. The gearing of the firm stood moderate at 1.26 times as on March 31, 2024 as against 0.94 times as on March 31, 2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.86 times as on March 31, 2024 as against 1.40 times as on March, 31 2024. The debt protection matrices of the firm remained comfortable with Interest coverage ratio (ICR) and Debt Services Coverage Ratio (DSCR) of 1.57 times and 1.38 times respectively as on March 31, 2024. The net cash accruals to total debt (NCA/TD) stood low at 0.05 times in FY2024 as against 0.10 times in FY2023.
Going forward, Acuité believes the financial risk profile of the firm will remain average over the near term with no major debt funded capex plans.

 
Rating Sensitivities
  • ­Movement of operation and profitability margin.
  • Working capital cycle
 
Liquidity Position
Adequate
The firm has adequate liquidity marked by comfortable net cash accruals of Rs.1.50 Cr. in FY2024 as against nil long term debt obligations over the same period. The current ratio of the firm stood comfortable at 1.18 times in FY2024. Further, the average bank limit of the firm has been moderate at ~56.34 percent utilized during the last six months ended in September 2024. Moreover, the working capital management of the firm is efficient marked by GCA days of 57 days in FY2024 as compared to 33 days in FY2023. Acuité believes that the liquidity of the firm is likely to be stretched over the medium term on account of declining cash accruals against nil long debt repayments over the medium term.
 
 
Outlook: Stable
­
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 24 (Actual) FY 23 (Actual)
Operating Income Rs. Cr. 271.27 355.29
PAT Rs. Cr. 1.45 2.33
PAT Margin (%) 0.53 0.66
Total Debt/Tangible Net Worth Times 1.26 0.94
PBDIT/Interest Times 1.57 2.17
Status of non-cooperation with previous CRA (if applicable)
­Not Applicable
 
Any other information
­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm

Note on complexity levels of the rated instrument

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
08 Aug 2023 PC/PCFC Short Term 15.00 ACUITE A3 (Reaffirmed)
FBN/FBP/FBD/PSFC/FBE Short Term 12.00 ACUITE A3 (Reaffirmed)
PC/PCFC Short Term 12.00 ACUITE A3 (Reaffirmed)
FBN/FBP/FBD/PSFC/FBE Short Term 16.00 ACUITE A3 (Reaffirmed)
Secured Overdraft Long Term 1.00 ACUITE BBB- | Negative (Reaffirmed)
Proposed Long Term Bank Facility Long Term 2.00 ACUITE BBB- | Negative (Reaffirmed)
26 May 2022 Secured Overdraft Long Term 1.00 ACUITE BBB- | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 2.00 ACUITE BBB- | Stable (Reaffirmed)
PC/PCFC Short Term 15.00 ACUITE A3 (Reaffirmed)
FBN/FBP/FBD/PSFC/FBE Short Term 12.00 ACUITE A3 (Reaffirmed)
PC/PCFC Short Term 12.00 ACUITE A3 (Reaffirmed)
FBN/FBP/FBD/PSFC/FBE Short Term 16.00 ACUITE A3 (Reaffirmed)
02 Mar 2021 Cash Credit Long Term 1.00 ACUITE BBB- | Negative (Reaffirmed)
Bank Guarantee (BLR) Short Term 8.00 ACUITE A3 (Reaffirmed)
Bills Discounting Short Term 16.00 ACUITE A3 (Reaffirmed)
Bills Discounting Short Term 7.50 ACUITE A3 (Reaffirmed)
PC/PCFC Short Term 12.00 ACUITE A3 (Reaffirmed)
PC/PCFC Short Term 7.50 ACUITE A3 (Reaffirmed)
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Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)
Complexity Level Rating
Union Bank of India Not avl. / Not appl. FBN/FBP/FBD/PSFC/FBE Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 16.00 Simple ACUITE A4+ | Downgraded ( from ACUITE A3 )
Union Bank of India Not avl. / Not appl. PC/PCFC Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 12.00 Simple ACUITE A4+ | Downgraded ( from ACUITE A3 )
Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 30.00 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable ( from ACUITE BBB- )
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