Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 25.00 ACUITE BBB- | Stable | Reaffirmed -
Total Outstanding Quantum (Rs. Cr) 25.00 - -
 
Rating Rationale

­Acuité has reaffirmed its long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs.25.00 Crore bank facilities of Olympia Industries Limited (OIL). The outlook is ‘Stable’.

Rationale for rating reaffirmation
The rating reaffirmation takes into account the improvement in the business risk profile of the company. The revenue of the company stood at Rs.377.95 crore in FY2023 as against Rs.325.81 crore in FY2022. The operating income has improved on account of increase in the demand for the products led by the increased preference of the people towards online purchase. The operating margin of the company stood at 1.38 percent in FY2023 as against 1.17 percent in FY2022. The margins are thin due to the trading nature of business. The rating also takes into account the moderate financial risk profile of the company. The ratings are however constrained by the moderate working capital operations along with the stretched liquidity position of the company.

About the Company

­OIL incorporated in the year 1987, was originally engaged into manufacturing of Dyed and Blended yarns in Gujarat and Maharashtra. However, since 2014, the company is engaged in the distribution of Baby care, Home & Kitchen, and Beauty & Personal Care Appliances products through E commerce on Amazon as SOA (Selling on Amazon), PSP (Platinum Seller Program) & FBA (Fulfillment by Amazon). The company has its warehouses in Mumbai, Bengaluru, and Gurgaon.
 
Analytical Approach

­Acuité has considered the standalone business and financial risk profile of OIL to arrive at this rating.
 

Key Rating Drivers

Strengths

­Experienced management established marketing channel and diversified product profile
The operations of OIL are led by Mr. Navin Pansari, who possesses more than three decades of experience in the distribution of electronic peripherals and apparels, among others. OIL sells a diversified range of products which includes FMCG, baby care, electronic appliances among others of reputed companies like Panasonic Appliances India Company Limited, Kent RO Systems Limited, Blue Star Limited, Preethi Kitchen Appliances Private Limited, Ingram Micro India Private Limited, Venus Home Appliance Private Limited, Acer India Private Limited, Supertons Electronics Private Limited, Mondelez India Foods Private Limited among others on various e-commerce marketplaces such as Amazon Seller Services Private Limited, Flipkart India Private Limited, Paytm E-commerce Private Limited and Snapdeal (Jasper Infotech Private Limited). Acuité believes that the company will benefit from its experienced management which will help the company to maintain long standing relations with its clients.

Moderate financial risk profile
The tangible net worth of the company stood at Rs.39.93 crore as on March 31, 2023, as against 38.57 crore as on March 31, 2022. The gearing level of the company stood at 1.05 times as on March 31, 2023. The total debt of the company stood at Rs.41.90 crore as on March 31, 2023. It consists of the long-term debt of Rs.3.18 crore and short-term debt of Rs.35.88 crore as on March 31, 2023. The company has added a supply chain facility of ~Rs.14 crore in FY23 for making advance payments to Bajaj and Bluestar. The company has also added a term loan of ~Rs.2.80 crore in FY2023. The interest coverage ratio stood at 1.73 times for FY2023 as against 2.02 times for FY2022. The DSCR stood at 1.10 times for FY2023. Acuité believes that the financial risk profile is likely to remain moderate in medium term on account of no major debt funded capex.

Weaknesses

­Moderate Working capital operations
The working capital operations of the company are moderate with the GCA days of 110 days as on March 31, 2023, as against 126 days as on March 31, 2022. The inventory days of the company stood at 74 days in FY2023 as against 68 days in FY2022. The company needs to stock up a variety of products in their warehouses to cater to the demand of the customers. The average inventory holding period is around 8-10 weeks. The debtors’ days stood at 28 days in FY2023 as against 53 days in FY2022. The average credit term allowed to the customer is around 4-5 weeks. The creditors days stood at 35 days in FY2023 as against 59 days in FY2022. The average credit period received from the suppliers is around 3-4 weeks. The company makes advance payments to some of the suppliers. The average utilization of the banking limits is high and stood at ~98 percent for six months ended May’2023. Acuité believes that the ability of the company to improve its working capital operations will remain a key sensitivity in medium term.

Highly competitive industry
OIL operates in a highly competitive and fragmented industry. The e-commerce portal faces threat of larger customer acquisition from other portals such as Flipkart, Snapdeal and EBAY, among others. Besides, the company also faces competition from sellers registered with Amazon India. However, the risk of competition is mitigated due to OIL's Gold/ equivalent status in all the platforms/ marketplaces which entitles the company to higher visibility and data analytics regarding the products and customers’ preferences.

Rating Sensitivities

Growth in revenue with improvement in the profitability margins.
Any deterioration of its financial risk profile and liquidity position.
Any elongation of the working capital cycle leading to deterioration in debt protection metrics.
 
All Covenants

­Not Applicable
 
Liquidity position:stretched

The liquidity position of the company is stretched marked by low net cash accruals of Rs. 2.09 crores for FY23 as against the maturing debt obligations of Rs.1.59 crore over the same period. The cash accruals are expected to be in the range of Rs.2.93-4.16 crore for the period 2024-2025 while the maturing debt obligations are expected to be in the range of Rs.0.60-2.36 crore over the same period. The GCA days stood at 110 days as on March 31, 2023 and the bank limit utilization is high at ~98 percent for six months ending May'2023. The cash and bank balance stood at Rs.0.07 crore as on March 31, 2023, and the current ratio is moderate at 1.52 times for FY2023.
 
Outlook: Stable

­Acuité believes that OIL will maintain 'Stable' outlook over the medium term on account of its experienced management, healthy financial risk profile and increase in scale of operations. The outlook may be revised to 'Positive' in case of significant and sustained growth in revenue and profitability while effectively managing its working capital cycle and keeping the debt levels moderate. Conversely, the outlook may be revised to 'Negative' in case of lower-than-expected growth in revenue or deterioration in the financial and liquidity profile most likely because of higher than envisaged working capital requirements.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 23 (Actual) FY 22 (Actual)
Operating Income Rs. Cr. 377.95 325.81
PAT Rs. Cr. 0.98 0.52
PAT Margin (%) 0.26 0.16
Total Debt/Tangible Net Worth Times 1.05 0.70
PBDIT/Interest Times 1.73 2.02
Status of non-cooperation with previous CRA (if applicable)
­None
 
Any other information

­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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
09 Jun 2022 Proposed Bank Facility Long Term 3.00 ACUITE BBB- | Stable (Reaffirmed)
Cash Credit Long Term 22.00 ACUITE BBB- | Stable (Reaffirmed)
11 Mar 2021 Term Loan Long Term 3.57 ACUITE BBB- | Stable (Assigned)
Proposed Bank Facility Long Term 0.65 ACUITE BBB- | Stable (Upgraded from ACUITE BB+)
Cash Credit Long Term 18.00 ACUITE BBB- | Stable (Upgraded from ACUITE BB+)
Working Capital Demand Loan Long Term 1.80 ACUITE BBB- | Stable (Assigned)
Working Capital Demand Loan Long Term 0.98 ACUITE BBB- | Stable (Assigned)
27 May 2020 Cash Credit Long Term 25.00 ACUITE BB+ (Downgraded and Issuer not co-operating*)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
State Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 25.00 Simple ACUITE BBB- | Stable | Reaffirmed

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