­Experienced management and established track record of operations
OATPL has an operational track record of nearly two decades. It is promoted by its directors Mr. Sunil Hansraj Agarwal, Mr. Mahendra Omkar Agarwal, Mr. Subhash Omkar Agarwal and Mr. Sachin Mahendra Agarwal. The promoters have an extensive experience of over two decades in the vegetable oils and product industry. The directors are being supported by its team of experienced professionals in managing day to day operations of OATPL. The extensive experience of the management has enabled OATPL to establish a healthy relationship with its customers and suppliers.

Acuité believes that OATPL will continue to benefit from its experienced management and established track record of operations.

Moderate financial risk profile
Financial risk profile of OATPL is moderate marked by moderate networth, low gearing and comfortable debt protection metrics. The tangible networth of the company stood at Rs. 119.25 Cr. as on March 31, 2023 as against Rs.99.54 Cr. as on March 31, 2022. The improvement is on account of accretion of profits to reserves. Further, the outstanding debt as on March 31, 2023 decreased to Rs.68.59 Cr. as against Rs.114.51 Cr. in FY2022. The total debt consists of only short term borrowings. The gearing stood improved at 0.58 times as on 31 March, 2023 as against 1.15 times as on 31 March, 2022. The gearing of the company is expected to remain below unity over the near to medium term.

The interest coverage ratio and DSCR stood improved at 6.39 times and 5.04 times respectively for FY2023 as against 20.58 times and 15.60 times respectively for FY2022. The Net Cash Accruals to Total debt stood at 0.30 times for FY2023 as against 0.49 times for FY2022. The Total outside liabilities to Tangible net worth stood improved at 0.64 times for FY2023 as against 1.32 times for FY2022. The Debt-EBITDA ratio stood at 2.10 times for FY2023 as against 1.44 times for FY2022.

Acuité believes that the financial risk profile of OATPL will remain comfortable over the medium term due to its improving operating performance, moderate debt levels vis-à-vis moderate tangible net worth and comfortable debt protection metrics.

Efficient working capital operations
The working capital operations of OATPL are efficient marked by Gross Current Assets (GCA) days of 56 days for FY2023 as against 57 days for FY2022. The debtor days stood at 25 days for FY2023 as against 28 days for FY2022. The inventory cycle of the company stood at 30 days for FY2023 as against 31 days for FY2022 Further, the creditor days stood similar at 2 days in FY2023 as against 4 days in FY2022. The average bank limit utilization for 6 months’ period ended March 2024 stood moderate at ~61 percent.

Acuité believes that ability of OATPL to maintain its efficient working capital cycle over the medium term will remain a key rating sensitivity factor.

Fluctuating profitability margins
OATPL’s profitability margins have fluctuated between 1.42 - 5.68 percent in the last four years ended FY2023. The margins decreased significantly in FY2023 to 2.64 percent from 5.68 percent in FY2022 primarily on account decline in the value of inventory during the year. In 10MFY0224, the company reported operating margin of 1.06% and is estimated to close the year in the range of 1-2 %. Further, the net profit margin of the company also stood low at 1.65 percent in FY2023 as against 3.99 percent in FY2022.

Acuité believes that the ability of OATPL to improve its profitability margins while maintaining its scale of operations will remain a key rating monitorable.

Raw material prices are vulnerable to climatic conditions and agricultural output
The key raw material procured by OATPL is soyabean seed. Being agro-product, Soyabean seed is vulnerable to agro-climatic conditions, which affect their availability and price. As food processing business is raw material intensive, any inability to pass on the price risk has a critical bearing on the profitability metrics.