Press Release

Press Release

June 06, 2024

NARAYANI RESOURCES PRIVATE LIMITED
Rating Assigned and Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	10.00	ACUITE BBB- \| Stable \| Assigned	-
Bank Loan Ratings	52.00	ACUITE BBB- \| Stable \| Reaffirmed	-
Bank Loan Ratings	30.00	-	ACUITE A3 \| Assigned
Bank Loan Ratings	108.00	-	ACUITE A3 \| Reaffirmed
Total Outstanding	200.00	-	-

Rating Rationale

Acuite has reaffirmed its long-term rating of 'ACUITE BBB-' (read as ACUITE triple B minus) and its short-term rating of 'ACUITE A3' (read as ACUITE A three) on the Rs. 160.00 Cr. bank facilities of Narayani Resources Private Limited (NRPL) . The outlook remains 'Stable'.
Further, Acuite has assigned the long-term rating of 'ACUITE BBB-' (read as ACUITE triple B minus) and the short-term rating of 'ACUITE A3' (read as ACUITE A three) on the Rs. 40.00 Cr. bank facilities of Narayani Resources Private Limited (NRPL) . The outlook is 'Stable'.

Rationale for Reaffirmation
The reaffirmation takes into account the improvement in the operating performance of Narayani Resources Private Limited along with its moderate financial risk profile of the company. The company generated a revenue of Rs. 938.18 crore (Prov) in FY2024 as against Rs. 1050.24 crore in FY2023. The decline in operating income is due to the decline in the prices of coal, in which the company trades. The coal prices had increased significantly in FY2022-23 due to the Russia-Ukraine war, As many European countries moved to restricting gas imports from Russia, coal had become the alternative choice to fulfil the power supply gap, up swinging the prices. The EBITDA margin stood at 3.21 (Prov) percent in FY2024 as against 2.09 percent in FY2023. The financial risk profile is moderate with gearing ratio below unity and adequate debt protection indicators. The revenue is expected to improve on account of high demand from end user industries like iron and steel, power, cement, etc.

The rating further reflects the extensive experience of the promoters in the coal trading business which helped them to build a healthy relationship with reputed the clients namely Trafigura India Private Limited, Essar Power Gujarat Limited to name a few.

These strengths are however, partially offset by exposure to counterparty risk, volatility in coal prices, and changes in regulatory policies.

About the Company

Incorporated in 2011, Kolkata based Narayani Resources Private Limited (NRPL) is engaged in trading of coal, iron ore, coke and limestone. NRPL started its operations in FY2019 and is promoted by Mr. Ankur Agarwal, and Mr. Ashish Karnani who have extensive experience in the coal trading industry. The company caters to the coal requirements of power, metal, paper, steel and cement industries and it procures coal from domestic market, as well as from the regions of South Africa, Australia and Indonesia as per requirement.

Unsupported Rating

Not Applicable

Analytical Approach

Acuite has considered the standalone business and financial risk profile of NRPL to arrive at the rating.

Key Rating Drivers

Strengths

Experienced management and established relationship with customers
The promoter, Mr. Ankur Agarwal has more than a decade of experience that helped them to establish comfortable relationships with the key suppliers and reputed clients with high credit worthiness in the domestic market. Some of the key customers of the company are Trafigura India Private Limited, Essar Power Gujrat Limited, Shyam Steel Industries Limited to name a few. Acuité derives comfort from the long experience of the management and believes this will benefit the company going forward, resulting in steady growth in the scale of operations.

Moderate Financial Risk Profile
The company’s financial risk profile is marked by moderate but increasing networth, comfortable gearing and adequate debt protection metrics. The tangible net worth of the company improved to Rs. 85.77 crore as on March 31, 2024 (Prov) from Rs. 66.47 crore as on March 31, 2023 aided by equity infusion by promoters and accretion of profit to reserves. Acuite has considered unsecured loans worth Rs. 24.00 crore as quasi equity as these are subordinated to bank debt. The gearing stood at 0.55 times on March 31, 2024 (Prov) as against 0.47 times as on March 31, 2023. The Total outside Liabilities to Tangible Networth stood at 2.89 times on March 31, 2024(Prov) as against 4.26 times on March 31, 2023. Net Cash Accruals to Total Debt stood at 0.32 times as on March 31, 2024(Prov). Debt/EBITDA stood at 1.44 times as on March 31, 2024 (Prov).

The coverage indicators have moderated with Interest Coverage Ratio at 2.54 times and Debt Service Coverage Ratio at 2.10 times on March 31, 2024 (Prov)as against 4.21 times and 3.20 times on March 31, 2023. This is due to significant rise in the finance cost.

Acuite believes that financial risk profile of the company may continue to remain moderate with no major debt funded capex plan and steady accruals.

Moderate Working Capital Management
The working capital management of the company is moderate marked by GCA days of 104 days as on March 31, 2024 (Prov) as against 109 days on March 31, 2023. The GCA days are driven by inventory days and debtor days. The inventory days stood at 5 days on March 31, 2024 (Prov) against 20 days on March 31, 2023. Debtor days stood at 60 days on March 31, 2024 (Prov) as against 53 days on March 31, 2023.
However, despite decline in operating income in FY2024, the cash conversion (cash flow from operations / EBITDA) has been moderate, and cash flow from operations has been positive in FY2024, as compared to negative cash flow from operations generated in the previous years.

Acuite believes that working capital operations of the company may continue to remain moderate considering the trading nature of business.

Weaknesses

Competitive and regulated industry
Coal being a commodity has demonstrated significant volatility in its prices in the past. Imported coal prices are also governed by global demand-supply factors. The coal trading and transport industry is highly fragmented, with a large number of players, due to the low entry barriers. Also, the industry is highly regulated, with the ministry of coal governing its operations in the country. Any adverse regulations would impact the operations of the company. The company may face challenges if receivables exceed usance of letters of credit. Furthermore, the business risk profile remains exposed to fluctuations in coal prices and the regulatory policies of the government.
Acuité believes that any change in regulations and policies could have an adverse impact on the business risk profile of NRPL and expects the profitability position of the company to remain modest over the medium term.

High customer concentration risks
NRPL is exposed to high customer concentration, as majority of its revenue is concentrated towards Essar Power Gujarat Limited, Varrsana Ispat Limited, etc. Also, the company has added new customers such as Sambhv Sponge Power Private Limited, KHP Resources Private Limited, SMC Power Generation Limited, etc. The company is engaged in the trading of coal, iron ore, coke and limestone . Any decline in offtake from its customers will have a huge impact on the company’s sales volume.
Acuité believes that, however, the customer concentration is mitigated to some extent by the established relationship of the company with its customers since its inception.

Rating Sensitivities

Sustained growth in revenue and profitability, while maintaining positive cash flow from operations.
Efficient working capital management

Liquidity Position

Adequate

The company’s liquidity is adequate marked by net cash accruals of Rs. 15.05 crore in FY2024(Prov) against repayment of maturing debt obligations of Rs. 0.42 (Prov) crore for the same period. The current ratio of the company stood at 1.34 times on March 31, 2024 (Prov). The fund based utilization stood moderate at ~81.25 percent for six months ended April 2024 and non fund based limits stood at ~85.00 percent on April 2024.

Acuite believes that liquidity position of the company may continue to remain adequate with steady cash accruals and moderate dependence on bank borrowings.

Outlook: Stable

Acuité believes that the outlook of the company will remain ‘Stable’ over the medium term on account of sustainable growth in the financial performance of the company marked by satisfactory scale of operations and sustenance of profitability margins coupled with comfortable capital structure and ]]debt coverage indicators on the back of consistent increase in the networth and healthy cash accruals over the years. Conversely, the outlook may be revised in case of weakening of its business risk profile, lower coal offtake and deterioration in profitability margins thereby impacting the liquidity and debt protection indicators of the company.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	938.18	1050.24
PAT	Rs. Cr.	14.32	13.71
PAT Margin	(%)	1.53	1.31
Total Debt/Tangible Net Worth	Times	0.55	0.47
PBDIT/Interest	Times	2.54	4.21

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

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

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
09 Aug 2023	Cash Credit	Long Term	17.50	ACUITE BBB- \| Stable (Reaffirmed)
	Cash Credit	Long Term	5.00	ACUITE BBB- \| Stable (Reaffirmed)
	Cash Credit	Long Term	5.00	ACUITE BBB- \| Stable (Assigned)
	Letter of Credit	Short Term	20.00	ACUITE A3 (Assigned)
	Letter of Credit	Short Term	30.00	ACUITE A3 (Reaffirmed)
	Letter of Credit	Short Term	47.00	ACUITE A3 (Reaffirmed)
	Packing Credit	Long Term	7.50	ACUITE BBB- \| Stable (Reaffirmed)
	Proposed Cash Credit	Long Term	8.00	ACUITE BBB- \| Stable (Assigned)
	Proposed Short Term Bank Facility	Short Term	3.00	ACUITE A3 (Reaffirmed)
	Proposed Short Term Bank Facility	Short Term	17.00	ACUITE A3 (Assigned)
11 May 2023	Cash Credit	Long Term	25.00	ACUITE BBB- \| Stable (Assigned)
	Cash Credit	Long Term	5.00	ACUITE BBB- \| Stable (Assigned)
	Letter of Credit	Short Term	30.00	ACUITE A3 (Assigned)
	Letter of Credit	Short Term	47.00	ACUITE A3 (Assigned)
	Proposed Short Term Bank Facility	Short Term	3.00	ACUITE A3 (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
ICICI Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	17.50	Simple	ACUITE BBB- \| Stable \| Reaffirmed
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BBB- \| Stable \| Reaffirmed
Kotak Mahindra Bank	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BBB- \| Stable \| Reaffirmed
South Indian Bank	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BBB- \| Stable \| Reaffirmed
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BBB- \| Stable \| Assigned
Indusind Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE BBB- \| Stable \| Assigned
South Indian Bank	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	11.00	Simple	ACUITE A3 \| Reaffirmed
Union Bank of India	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	47.00	Simple	ACUITE A3 \| Reaffirmed
Kotak Mahindra Bank	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	20.00	Simple	ACUITE A3 \| Reaffirmed
HDFC Bank Ltd	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	30.00	Simple	ACUITE A3 \| Reaffirmed
HDFC Bank Ltd	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.00	Simple	ACUITE A3 \| Assigned
Indusind Bank Ltd	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	25.00	Simple	ACUITE A3 \| Assigned
ICICI Bank Ltd	Not avl. / Not appl.	Packing Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	7.50	Simple	ACUITE BBB- \| Stable \| Reaffirmed
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	12.00	Simple	ACUITE BBB- \| Stable \| Reaffirmed

Contacts

Analytical Details	Contact Details
Mohit Jain Senior Vice President - Rating Operations Tel: 022–49294017 mohit.jain@acuite.in Kruti Patel Associate Analyst - Rating Operations Tel: 022-49294065 kruti.patel@acuite.in	Contact details exclusively for investors and lenders Mob: +91 8591310146 Associate Vice President - Rating Operations Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.