Acuité has considered the consolidated business and financial risk profiles of Om Shri Shubh Labh Agritech Pvt Ltd (OSSATL), Om Shri Shubh labh Agrifresh Private Limited (OSSAF), Om Shri Shubh Labh Agritech Retailers Pvt Ltd (OSSAR), Shri Paramsukh Edible Foods Pvt Ltd (SPEF) and BP Foods (BPF) to arrive at this rating. The consolidation is in view of the common management, strong operational linkages between the entities and the group is herein referred to as Om Shri Shubh Labh Group (OSSLG)
 

Established track record of operations with experienced management
OSSLG is based out of Madhya Pradesh and was incorporated in the year 2017. The company is promoted by Mr. Girraj Bansaol who have been engaged in the FMCG industry for more than a decade. The extensive experience of the promoters has helped the company to established long and healthy relationships with reputed customers and suppliers over the years. The key customers of the company include names such as Patanjali Agro India Pvt Ltd, Patanjali Ayurved Ltd and Ruchi Soya Industries Ltd.
Acuité believes that the promoter's experience and reputed clientele is expected to support in improvement of its business risk profile over the medium term.

Healthy operating performance
Om Shri Shubh Labh Group (OSSLG) has recorded a stable growth in its performance with a y-o-y growth of 0.95 percent in FY22. Revenue of the company stood at Rs.2382.68 crore in FY22 (Prov.) as against Rs.2360.15 crore in FY21.  Operating profit margin of the group is rangebound between 0.9-1.5 percent. Operating margin improved by 37.01 bps and stood at 1.40 precent in FY22 (Prov.) as against 1.03 percent in FY21. PAT margin of the company in FY21 stood at 5.5%. Such high PAT margins are because of write back of liability in excess of settlement amount as per the resolution plan in BP Foods. The normalised PAT margin for FY2021 excluding the write backs stood at 0.43% in FY2021. PAT margin of the company stood at 0.65 percent in FY22 (Prov.) as against 0.43 percent in FY21. OSSLG has recorded sales of Rs. 726.44 crore till August 2022.
Acuité believes that the business risk profile of the company is likely to continue to improve on the back of reputed clientele and healthy demand expected over the near to medium term.

Healthy financial risk profile
Financial risk profile of OSSALG is healthy with a modest net worth, low gearing and comfortable debt protection metrics. Tangible networth of the company stood at Rs.120.61 Cr. as on 31st March 2022 (Prov.) as against Rs.105.08 Cr as on 31st March, 2021. Networth of the company has strengthened over the years on account of accretion of profits to reserves.Gearing of the company stood at 0.60 times as on 31st March, 2022 (Prov.) as against 0.74 times as on 31st March, 2021. Gearing of the company has increased in FY21 on account of additional debt on account of acquisition of BP foods. TOL/TNW of the company stood at 2.27 times as on 31 March, 2022 (Prov.) as against 2.83 times as on 31st March, 2021. Debt protection metrics remain comfortable with Debt service coverage ratio (DSCR) at 6.59 times in FY2022 (Prov.) as against 23.61 times in FY2021. Interest Coverage ratio (ICR) stood at 8.93 times in FY2022 (Prov.) as against 3.21 times in FY2021.
Acuite believes that the financial risk profile is likely to remain healthy in the absence of any debt-funded capital expenditure.

Efficient working capital operation
Working capital operations of the group is efficient with GCA days of 48 days in FY22 (Prov.) as against 49 days in FY21. GCA days of the company are driven by debtor collection period. Debtor collection period of the group stood at 40 days in FY22 (Prov.) as against 35 days in FY21. Inventory holding period stood at 3 days in FY22 (Prov.) as against 9 days in FY21. The creditor days of the group stood at 30 days in FY2022 (Prov.) as against 33 days in FY2021.
Acuite believes that the working capital operations of the group will remain efficient in the medium term and will continue to remain a key rating sensitivity.
 

Thin profitability margins along with highly fragmented and competitive industry
The industry is marked by presence of large number of organized and unorganized players in the industry. The industry is intensely competitive and fragmented because of low entry barriers and moderate capital requirements. The operating profit margins of the company remained low at 1.20% in FY2021 as against 0.80% in FY2020. The high competitive industry further limits the pricing flexibility and exerts pressures on the margins of all participants.