Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 3.00 - ACUITE A4+ | Reaffirmed
Total Outstanding Quantum (Rs. Cr) 3.00 - -
 
Rating Rationale
Acuité has reaffirmed the short term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs. 3.00 Cr. bank facilities of Newby Teas Overseas Private Limited (NTOPL). 

Rating Rationale
The rating factors in the above average financial risk profile of the company characterized by its deleveraged capital structure and the established track record of the promoters. However, these strengths are offset by small scale of operations, working capital intensive nature of operations and customer concentration risk.

About the Company
Incorporated in 2003, Newby Teas Overseas Private Limited (NTOPL) is engaged in blending and marketing of premium tea since 2005 and also involved in the production of tea gift packs. The products are sold under the brand 'Newby', both in India and abroad. Currently, the company is headed by Mr. Nirmal Kumar Sethia, Mr. Satish Chander Girotra, Mr. Chhatar Singh Jain, Ms. Richa Sethia and Mr. Amrao Jain. NTOPL imports raw materials from countries like Germany, Japan, China and Sri Lanka and also buys raw materials from other domestic tea plantations. NTOPL has a  state-of-the-art storage facility located in West Bengal where the finished goods are stored and their products have a shelf life of 3 years after packing.
 
Analytical Approach
­Acuité has taken a standalone view of the business and financial risk profile of NTOPL to arrive at the rating. 
 

Key Rating Drivers

Strengths
  • Long track record of operations
Established in 2003, Newby teas overseas Private Limited (NTOPL) has a long operational track record of almost two decades in the tea processing industry. The key directors of the company, Mr. Nirmal Kumar Sethia, Mr. Satish Chander Girotra, Mr. Chhatar Singh Jain, Ms. Richa Sethia and Mr. Amrao Jain have more than four decades of experiences in the industry. Acuité believes that the long track record of operations and experience of the management will benefit the company going forward resulting in steady growth in the scale of operations.
  • Above average financial risk profile
The company’s above average financial risk profile is marked by modest but improving networth, nil gearing and robust debt protection metrics. The net worth of the company stood at Rs.33.57 crore as on 31 March 2022 as against Rs.30.29 crore as on 31 March 2021 due to accretion of reserves. The company has no external debt in its books as on March 31, 2022. The strong debt protection metrics of the company is marked by robust Interest coverage ratio (ICR) stood at 107.21 times in FY2022 and DSCR stood at 94.14 times in FY2022. Acuité believes that going forward the financial risk profile of the company will remain at same level in the absence of any major debt funded capex plans in the medium term.
Weaknesses
  • Modest Scale of operations
The scale of operations of the company has achieved revenues of Rs. 19.24 Cr in FY2022 as compared to revenues of Rs. 14.95 Cr in FY2021. Further, the company reported revenue of Rs.11.01 crore till October, 2022 (Provisional). The ability of the firm to improve its scale going forward will remain a key rating sensitivity.
  • Working capital intensive nature of operations
The working capital management of the company is intensive marked by moderate Gross Current Assets (GCA) of 217 days in FY2022 as compared to 259 days in FY2021. The high GCA days emerge from the high inventory holding which stood at 166 days as on March 31, FY2022 as compared to 143 days as on March 31, FY2021. However, the debtor period stood comfortable, which stood at 14 days as at March 31, 2022 compared to 31 days as at March 31, 2021. Going forward, Acuité believes that the working capital management of the company will remain at similar levels as evident from efficient collection mechanism and high level of inventory period over the medium term.
  • Customer concentrated risk
The company is dependent entirely on its group companies for sales. Sales to Newby Teas (UK) Limited account for 95 percent of the total sales. Any slowdown in the business of Newby Teas (UK) Limited will directly impact the financial risk profile of NTOPL.
 
Rating Sensitivities
  • Significant growth in revenue and improvement in profitability margin
  • Elongation of working capital cycle.
 
Material covenants
­None
 
Liquidity Position
Adequate
NTOPL has adequate liquidity position marked by consistent unutilized fund-based limits, net cash accruals of Rs.4.29 crore as on March 31, 2022 as against no such debt obligations over the same period. Further, the current ratio stood strong at 3.61 times as on March 31, 2022 compared to 4.90 times as on March 31, 2021. The company has unencumbered cash and bank balances of Rs.0.61 crore as on March 31, 2022. However, the working capital operations of the company are intensive marked by GCA (Gross Current Assets) Days of 217 days in FY2022 as compared to 259 days in FY2021. Acuité believes that the liquidity of the company is likely to remain at similar levels over the medium term due to no such maturing debt obligations.
 
Outlook
Not Applicable
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 19.24 14.95
PAT Rs. Cr. 3.23 1.41
PAT Margin (%) 16.78 9.42
Total Debt/Tangible Net Worth Times 0.00 0.00
PBDIT/Interest Times 107.21 71.30
Status of non-cooperation with previous CRA (if applicable)
­Crirsil vide its press release dated 12.09.2022, had reaffirmed the company to CRISIL B+/A4; INC
 
Any other information
­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
15 Feb 2022 Packing Credit Short Term 2.00 ACUITE A4+ (Reaffirmed)
Packing Credit Short Term 7.00 ACUITE A4+ (Withdrawn)
Bank Guarantee Short Term 1.00 ACUITE A4+ (Reaffirmed)
02 Sep 2021 Packing Credit Short Term 9.00 ACUITE A4+ (Reaffirmed)
Bank Guarantee Short Term 1.00 ACUITE A4+ (Reaffirmed)
10 Jun 2020 Bank Guarantee Short Term 1.00 ACUITE A4+ (Reaffirmed)
Packing Credit Short Term 9.00 ACUITE A4+ (Reaffirmed)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Punjab National Bank Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 1.00 Simple ACUITE A4+ | Reaffirmed
Punjab National Bank Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 2.00 Simple ACUITE A4+ | Reaffirmed
­

Contacts
Analytical Rating Desk
About Acuité Ratings & Research
Acuité Ratings & Research Limitedwww.acuite.in