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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 10065.00 | ACUITE A | Stable | Assigned | - |
| Bank Loan Ratings | 19860.00 | ACUITE A | Stable | Reaffirmed | - |
| Bank Loan Ratings | 6000.00 | - | ACUITE A1 | Reaffirmed |
| Total Outstanding | 35925.00 | - | - |
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Rating Rationale |
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Acuité has assigned and reaffirmed the long- term rating of ‘ACUITE A’ (read as ACUITE A) and the short-term rating of ‘ACUITE A1’ (read as ACUITE A one) to the Rs.35925.00 Cr bank facilities of Odisha State Civil Supplies Corporation Limited (OSCSCL). The outlook remains ‘Stable’.
Rationale for Rating Reaffirmation and Assignment The rating reaffirmation considers the support from the Central Government/GoO for OSCSCL by compensating for the entire losses of the company after taking into account all the revenue generated and expenses incurred in the form of subsidies and grants. Further, the rating continues to reflect the strong financial and operational linkage of OSCSCL with the State Government of Odisha (GoO), as the company is strategically important to the state and acts as a nodal agency for the distribution of rice and food grains to weaker sections of society. However, these strengths are partly offset by OSCSCL’s weak financial profile and high working capital requirement. Further, as learned from the management, there has been a delay in the receipt of subsidies since July 2023, which earlier used to be received at frequent intervals. The delays have caused the corporation to incur additional debt to manage its operations. However, the management expects to receive the same by the end of the financial year FY2024. Going ahead, any significant delays in the receipt of subsidies leading to further weakening of the financial risk profile of the corporation will remain key rating monitorable. |
| About the Company |
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Odisha State Civil Supplies Corporation Limited (OSCSCL) was set up in 1980 as a wholly owned undertaking of the Government of Odisha (GoO) to procure paddy and supply rice under the Public Distribution System (PDS) in Odisha. OSCSCL acts as an agent of the Government of Odisha and handles the responsibilities of purchase, procurement, storage and delivery of the stock to the retail dealers.
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| Unsupported Rating |
| Acuite B+/ Stable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of OSCSCL and notched up the standalone rating by factoring in the strong operational and financial support extended by GoO. This is because GoO holds the 100 percent stake in OSCSCL and board comprises representatives from GoO. |
| Key Rating Drivers |
| Strengths |
| 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 Selfhelp groups (WSHGS) and Pani Panchayats (PPs). Total number commission agents associated with the company is 2579. The paddy directly goes to custom millers for processing (Number of rice millers registered with the company is 1558). The revenue of the company (including subsidy) stood at Rs 16835.06 Cr in FY2023 (Provisional) as compared Rs.14322.82 Cr in FY2022. |
| Weaknesses |
| Weak financial risk profile
The weak financial risk profile of the company is marked by its moderate net worth, high gearing level and weak debt protection metrics. The net worth stood at Rs.31.50 Cr as on 31st March 2023 (Provisional). Gearing of the company improved, though remained at high levels at 509.66 times as on 31st March 2023(Provisional) as against 611.02 times as on 31st March 2022 on account of decrease in short-term debt. Total debt of the company stood at Rs.16056.18 Cr as of 31st March 2023 (Prov) against Rs.19101.70 Cr as of 31st March 2022. The interest coverage ratio stood weak at 1.00 times as on 31st March 2023(Provisional). Acuite believes that the financial risk profile will continue to remain weak over the medium term on account of additional debt being undertaken in the short term due to delays in receiving the subsidy from the government reflecting high dependence on external debt. Working capital intensive nature of operations The working capital intensive nature of operations of the corporation are marked by high Gross Current Asset (GCA) days of 624 days as on March 31, 2023 (Provisional) as against 588 days as on March 31, 2022. 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 high at 543 days as on March 31, 2023 (Provisional) as compared to 133 days as on March 31, 2022. The inventory days stood high at 252 days as on March 31, 2023 (Provisional) as compared to 333 days as on March 31, 2022. Going ahead, Acuite believes that the working capital operations of the company will remain at similar levels as evident from stretched collection mechanism and high inventory levels over the medium term. |
| ESG Factors Relevant for Rating |
| Not Applicable |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Adequate |
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OSCSCL has adequate liquidity profile as reflected by net cash accruals of Rs 2.71 Cr in FY2023(Provisional) against no debt repayment obligation. The company has cash & bank balance of Rs.95.00 Cr as on March 31, 2023 (Provisional). The current ratio stood at 1.00 times as on March 31, 2023 (Provisional) as against 1.05 times as on March 31, 2022. However, the company has high working capital requirement as reflected from its GCA days of 624 days as on March 31, 2023 (Provisional) as against 588 days as on March 31, 2022.
Acuite believes that the liquidity of the company is likely to remain adequate over the medium term backed by timely inflow of subsidy from Central government. |
| Outlook:Stable |
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Acuité believes that OSCSCL will maintain a 'stable' outlook on account of the continued financial and operational support from the GoO. The outlook may be revised to ‘Positive’ in case of improvement in the fiscal deficit indicators coupled with decline in overall debt levels of GoO. The outlook may be revised to ‘Negative’ in case of significant delays in receiving support from GoO or adverse changes in its financial risk profile.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 16835.06 | 14322.83 |
| PAT | Rs. Cr. | 0.00 | 0.00 |
| PAT Margin | (%) | 0.00 | 0.00 |
| Total Debt/Tangible Net Worth | Times | 509.66 | 611.02 |
| PBDIT/Interest | Times | 1.00 | 1.00 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• 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 • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm • Public Finance - State Government Ratings: https://www.acuite.in/view-rating-criteria-26.htm |
| Note on complexity levels of the rated instrument |
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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.
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