­Support from the government of Odisha
OSCSCL is responsible for procurement of paddy and supply of rice to Odisha under public distribution system. OSCSCL acts as an agent of the Government of Odisha (GoO) and handles the responsibilities of purchase, procurement, storage and delivery of the stock to the retail dealers in the state. OSCSCL is also the nodal agency for several schemes of GoO (Annapurna, APL Rice and APL wheat scheme). OSCSCL distributes rice and other grains at a concessional rate and free of cost to weaker sections of society. The Central and state Government extends financial support to the company at regular interval in order to meet the losses. OSCSCL is spread across 30 districts in Odisha and accounts for nearly 60 percent of the paddy procured in Odisha. OSCSCL is a systemically important entity and caters to over 80 percent of the population in the state. Hence, in the absence of the company’s operations, procurement from farmers will get impacted. As a result, OSCSCL continues to receive operational, managerial and financial support from GoO from time to time. The Board of Directors of OSCSCL comprises appointees by the state government. The operations are supervised by the Food Supplies and Consumer Welfare Department of the GoO. Hence, the rating derives comfort from the ongoing support in the form of subsidy from GoO to OSCSCL over the medium term.

Healthy scale of operations
OSCSCL has operations in all 30 districts of Orissa. Paddy is procured through commission agents like Primary Agriculture Co-operative Societies (PACS), Women Self help Groups (WSHGS) and Pani Panchayats (PPs). Total number of commission agents associated with the company is 3242. The paddy directly goes to custom millers for processing (Number of rice millers registered with the company is 1360). The revenue of the company (including subsidy) stood at Rs 18,834.21 Cr. in FY2024 as compared to Rs.17,742.13 Cr. in FY2023.

­Weak financial risk profile
OSCSCL’s financial risk profile is weak marked by its moderate net worth, high gearing level and weak debt protection metrics. The net worth stood at Rs.30.69 Cr. as on 31st March 2024. Gearing level stood high at 706.66 times as on 31st March 2024 as against 785.05 times as on 31st March 2023 on account of decrease in short-term debt. Total debt of the company stood at Rs.21685.83 Cr. as of 31st March 2024 against Rs.24316.82 Cr. as of 31st March 2023. The interest coverage ratio stood weak at 1.00 times as on 31st March 2024. Acuite believes that the financial risk profile will continue to remain weak over the medium term on account of high reliance on short term limits due to delays in receiving subsidy from the government.

­Working capital intensive nature of operations
The working capital intensive nature of operations of the company is marked by the high Gross Current Asset (GCA) days of 495 days as on March 31, 2024 as against 572 days as on March 31, 2023. The GCA days is high primarily on account of a high proportion of Other Current Assets consisting of amount receivables from Government and Government agencies and advances to suppliers. Further, the debtor days stood at 104 days as on March 31, 2024, as compared to 152 days in as on March 31, 2023. The inventory days stood high at 324 days as on March 31, 2024, as compared to 311 days as on March 31, 2023. Going ahead, Acuite believes that the working capital operations of the company will remain at same level as evident from stretched collection mechanism and inventory levels over the medium term.