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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 25.00 | ACUITE BBB | Reaffirmed & Withdrawn | - |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 25.00 | - | - |
| Rating Rationale |
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Acuite has reaffirmed and withdrawn the long term rating of ACUITE BBB (read as ACUITE triple B) on Rs. 25 Cr bank facilities of Man Cott Private Limited (MCPL). The rating withdrawal is in accordance with Acuité's policy on withdrawal of rating. The rating is being withdrawn on account of request received from the Company and NOC received from the banker. |
| About the Company |
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Maharashtra based Man Cott Private Limited was incorporated in 2003 and is promoted by Mr. Bhupendra Singh Rajpal and Shri Rajendra Singh Rajpal. The company is primarily engaged in ginning and pressing of cotton. The company has one manufacturing unit located in Beed (Maharashtra) with an installed capacity of processing 6,01,000 Quintals per annum. The company also has an oil extraction unit on lease with an oil extraction capacity of 300000 Quintals per annum.
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| About the Group |
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The Manjeet Group (MG) belongs to the Rajpal family of Sendhwa , Madhya Pradesh promoted by Mr. Bhupendra Rajpal, Mr. Rajendra Rajpal and Mr. Sanchit Rajpal. It is engaged into cotton trading, ginning, pressing and other allied activities. The Manjeet Group of companies includes companies such as Manjeet Fibers Private Limited, Keshav Ginning and Pressing Factory and Man Cott Private Limited. Further, Manjeet Cotton Private Limited (MCPL) is the flagship company of the Manjeet Group which is involved in the cotton trading and ginning business. The companywas incorporated in 2005 as a private limited company for trading and export operations, and to consolidate the operations of other group companies which were operational since 1982. MCPL is involved in the cotton trading business. The company also has interests in varied businesses like cotton ginning and oil extraction and also has wind mills.
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| Analytical Approach |
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Acuité has consolidated the business and financial risk profile of Manjeet Fibers Private Limited, Keshav Ginning and Pressing Factory and Man Cott Private Limited to arrive at the standalone rating. The consolidation is on account of the common management, similarities in the line of business and presence of significant operational and business synergies. Together these companies have been referred to as the Manjeet Group. To arrive at the final rating, Acuité has also notched up the standalone rating by factoring in the strong operational and financial support extended Manjeet Cotton Private Limited and the personal guarantees extended by the promoters of the group towards the bank facilities of all the entities.
Extent of consolidation: Full
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Key Rating Drivers
| Strengths |
The Manjeet Group is engaged in the cotton ginning, pressing and other ancillary activities since 1982. The promoters of the group have been associated with the cotton industry for more than three decades. The promoters of the group are well supported by experienced and qualified second line of management to run the day to day operations of the group. Apart from that, the flagship company of the group i.e. MCPL have been extending support whenever required by group and is expected to continue the same going ahead. The extensive experience of the promoters in the aforementioned industry has helped the group in establishing its presence across the country and also helped the group to established and maintain long term relationship with its customers and suppliers over the years.
Acuité believes that the group will sustain its existing business profile on back of an established presence in the cotton ginning industry and experienced management in the medium term.
The financial risk profile of the group is moderate marked by healthy net worth, moderate gearing and comfortable coverage indicators. The tangible net worth of the group stood at Rs. 94.31 Cr. as on March 31, 2022(Prov.) as against Rs.83.29 Cr. as on March 31, 2021 and Rs. 77.18 Cr as on March 31,2020. The improvement in net-worth is primarily due to accretion of profits to reserves. The total debt of the Group stood at Rs.161.68 Cr as on March 31, 2022 which included Rs.32.64 Cr of long term borrowings and Rs. 129.04 Cr of short term borrowings. The unsecured loan from promoters and relatives which stood at Rs. 17.52 Cr as on March 31, 2022 (Prov.) is considered as quasi equity. The gearing level of the group stood at 1.71 times as on March 31, 2022(Prov.) as against 1.82 times as on March 31,2021 and 1.64 times as on March 31,2020. The TOL/TNW stood at 1.81 times as on March 31, 2022(Prov.) as against 1.91 times as on March 31,2021 and 1.77 times as on March 31,2020. The Interest Coverage Ratio (ICR) improved to 2.54 times in FY22(Prov.) as against 1.68 times in FY21 and 1.63 times in FY20. The NCA/TD improved to 0.10 times in FY22(Prov.) as against 0.05 times in FY21 and 0.06 times in FY20. Acuité expects the financial risk profile to remain moderate over the medium term in absence of any debt-funded capex plan over the medium term.
The group's manufacturing facilities are located in the states of Madhya Pradesh, Maharashtra, Telangana and Rajasthan; which are amongst the major cotton producing regions in the country. Hence, proximity to major raw material required by the group ensured steady supply of the same at competitive rates. Further, the group has location advantage in terms of low logistic costs (both on the transportation and storage) and is eligible for various subsidies and incentives from the government. |
| Weaknesses |
The operations of the group are working capital intensive marked by Gross Current Asset (GCA) days of 125 days as on March 31, 2022(Prov.) as against 155 days as on March 31, 2021 and 134 days as on March 31, 2020. The GCA days are driven by inventory days and debtor days. The inventory days stood at 87 days as on March 31, 2022(Prov.) as against 93 days as on March 31, 2021 and 69 days as on March 31, 2020. The debtor days stood at 30 days as on March 31,2022(Prov.) as against 47 days as on March 31, 2021 and 49 days as on March 31, 2020 The group does not receive major credit period from its suppliers due to mandi regulations which leads to high reliance of external borrowings. The average utilization of the fund based bank limits of the group stood at approx. 80-85 percent for last six months period ended June’ 22. Acuité expects the working capital operations of the group to remain intensive on account of the level of inventory to be maintained and the credit given to its customers.
The group operates in a highly fragmented and regulated cotton industry characterized by the presence of a large number of unorganised players, thereby impacting the group’s bargaining power. The prices of raw cotton are regulated by the government through MSP (Minimum Support Price) mechanism which impact the procurement of raw cotton required by the domestic ginning companies. However, the selling price of the output depends on the prevailing demand-supply situation restricting the bargaining power with customers, thereby impacting margins. Acuité believes that the group will be able to mitigate this risk to some extent on account of its promoters’ experience and well established position in the market. Further, cotton being a seasonal crop and the production of the same being highly dependent upon monsoon, the group is always exposed to agro climatic risk. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position: Adequate |
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The liquidity position of the group remains adequate reflected by adequate net cash accruals against maturing debt obligations. The net cash accruals of the group stood at Rs. 16.10 Cr. in FY22(Prov.) against debt obligations of Rs.1.89 Cr. for the same period. Going forward, the group is expected to generate net cash accruals of Rs. 16-17 Cr. in FY23-24 as against maturing debt obligations of Rs. 5-7 Cr. for the same period. The average utilization of the fund based bank limits of the group ranged between 80-85 percent for six months period ended June’ 22. The unencumbered cash and bank balance stood at Rs. 4.91 crore as on March 31, 2022(Prov.).The current ratio stood at 1.63 times as on March 31, 2022(Prov.).
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| Outlook |
| Not Applicable |
| Particulars | Unit | FY 21 (Actual) | FY 20 (Actual) |
| Operating Income | Rs. Cr. | 500.44 | 514.32 |
| PAT | Rs. Cr. | 4.81 | 4.87 |
| PAT Margin | (%) | 0.96 | 0.95 |
| Total Debt/Tangible Net Worth | Times | 1.82 | 1.64 |
| PBDIT/Interest | Times | 1.68 | 1.63 |
| Status of non-cooperation with previous CRA (if applicable) |
| India Ratings vide its press release dated 27 April, 2018 has migrated the ratings of Man Cott Private Limited (MCPL) to 'IND BB/Stable ‘Issuer not is cooperating' based on best-available information. |
| Applicable Criteria |
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• Default Recognition - https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • 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 |
| Note on complexity levels of the rated instrument |
| https://www.acuite.in/view-rating-criteria-55.htm |
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