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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 12.03 | ACUITE BBB- | Stable | Assigned | - |
| Bank Loan Ratings | 30.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 32.97 | - | ACUITE A3+ | Assigned |
| Bank Loan Ratings | 15.00 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 90.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short-term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs.45 Cr. bank facilities of Patanjali Renewable Energy Private Limited (PREPL). Also, assigning the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short-term rating of ‘ACUITE A3+’(read as ACUITE A three plus) on the Rs.45 Cr. bank facilities of Patanjali Renewable Energy Private Limited (PREPL). The outlook is ‘Stable’.
Rationale for Rating The rating reflects the business risk profile of the company marked by growth in the revenues to Rs. 57.55 cr. in FY2024 (provisional) as against Rs. 44.78 cr. in FY23. Further, given a healthy order book of Rs. 554.18 Cr. as on March 31, 2024, the company is expected to report a healthy revenue growth in FY25. The rating further derives comfort from established brand position of the Patanjali group, strong and timely financial support of promoters, moderate financial risk profile. Going ahead, timely completion of the orders along with growth in scale of operations and profitability will remain critical to the rating. The rating is constrained by elongated working capital cycle and susceptibility of the profits linked to prices of solar modules. |
| About the Company |
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Patanjali Renewable Energy Private Limited (PREPL) was incorporated in 2011, as Advance Navigation and Solar Technologies Private Limited, subsequently renamed to current nomenclature in 2018. The company is managed by Acharya Balakrishna who as on March 31, 2023 holds 88.36% stake in the company. The directors of the company are Mr. Sudhir Kumar Aggarwal, Mr. Rishi Kumar and Mr. Som Suvedi. The company is engaged in the manufacturing of solar PV panel, solar battery, and solar appliances, with its plant located in Greater Noida having an installed capacity of 80 MW. The company operates through its dealer distribution network. During FY22, the company had also initiated manufacturing of solar fan. In addition to this, the company also works as fully integrated EPC solutions provider and undertakes designing, installing, and commissioning of solar projects. The company is also involved into providing operation and maintenance services for the solar plants.
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| About the Group |
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Patanjali Ayurved Limited
Patanjali Ayurved Limited is a Delhi based flagship company of Patanjali Group and is engaged in the manufacturing and trading of FMCG, herbal and Ayurvedic products. Incorporated in 2006, the company is currently managed by Mr. Acharya Balkrishna. Patanjali Foods Limited Incorporated in 1986 Patanjali Foods Limited was initially promoted by Mr. Dinesh Shahra. It was acquired by the Patanjali Group in December 2019 through the IBBI debt resolution process and has been successfully turned around. It is listed on both BSE and NSE. It manufactures edible oils, soya food, premium table spread, vanaspati and bakery fats. It is also the highest exporter of soya meal, lecithin and other food ingredients from India. It is currently managed by Mr. Ram Bharat. The company is based in Mumbai, Maharashtra. |
| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has considered the standalone view of business and financial risk profiles of PREPL. Acuité has also taken into consideration the benefits derived by the company in terms of higher financial flexibility arising out of its association with the Patanjali Group.
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| Key Rating Drivers |
| Strengths |
| Experienced management, long association with Patanjali group and healthy order book position
PREPL is manged by Acharya Balkrishna and is a part of the ‘Patanjali Group’ that has an established its presence in the FMCG sector over the past few years. Acharya Balkrishna has experience of more than a decade in the FMCG and Ayurveda products sector. Mr. Som Suvedi and Mr. Rishi Kumar are the directors of PREPL. Mr. Rishi Kumar and Mr. Som Suvedi are associated with other group companies too and have an extensive experience of over a decade in different lines of businesses. The senior management team is ably supported by a strong line of mid-level managers. Further, the company closely works with state governments and has been undertaking orders from the state government of Jharkhand, Tripura, Bihar etc. PREPL's current unexecuted order value stands at around Rs. 554.18 Cr. to be executed in next two years. Acuité believes that PREPL will continue to benefit from the strong market position of Patanjali brand and experience of its management in rendering new orders from the market players. Moderate financial risk profile Due to strong promoters and their support the capital structure of the company as represented by debt equity ratio continues to remain below unity, albeit with marginal moderation. The debt component of the company majorly comprises of unsecured loans and short term debt. The debt equity ratio remained at 0.88 times as on March 31, 2023 against 0.86 times as on March 31, 2022. Further, in line with moderation in operating profit, the interest coverage ratio stood at 2.0 times in FY23 against 2.68 times in FY22. The DSCR has improved at 1.38 times during FY23 against 0.82 in FY22. The Debt to EBITDA increased to 10.24 times in FY23 from 7.32 times in FY22. |
| Weaknesses |
| Marginal revenue growth albeit a declining trend in profitability
The total operating income of the company grew at a flat rate of 4.54% to Rs.44.78 Cr. in FY23 against Rs.42.83 crore. Further, in FY24 the company reported operating income of Rs. 57.55 Cr. (provisional) thereby reporting y-o-y growth of ~28%. The prices of solar cells contribute to major portion of total cost, and any change in prices of the same is expected to impact profitability level of the company. The operating profit margin has been declining sequentially to 6.99% in FY23 as against 8.59% in FY22 and ~6% in FY24 (provisional). Similarly, the net profit margin also reduced to 0.47% in FY23 against 1.41% in FY22 and 1.5% in FY24 (provisional). Intensive working capital cycle The Gross current asset days of the company has stood at an elevated levels of 596 days in FY23 as against 440 days in FY22. These are majorly dominated by increased debtor days of 240 days against 121 days respectively during the same period. It initially receives 40% advance against material procurement. Further, 30% is received on installation and balance 30% is retained by clients and is received over a period of 5 years with 6% every year. Hence, debtor period of the company is high and is expected to continue so. However, company also undertakes direct retail and EPC solar projects whose debtor days generally range between 60-90 days. Further, with a long duration of the contracts, it keep raw materials and spares in stock as reflected in the higher inventory days of 223 days in FY23 against 208 in FY22. The average working capital utilisation for past 3 months ending March 2023 remained at 29.27%. Susceptibility of the profits linked to risks associated with price volatility and timely completion of the projects The company along with manufacturing solar panels also undertakes EPC contracts majorly for PSUs for installation of solar power projects within India which stipulates timelines for the completion of the project as per the agreed schedule and cost. The operating income of PREPL has been significantly impacted during FY2023 & FY2022 on account of elevated prices of solar cells. Further, timely implementation of the projects depends on the acquisition of land & receipt of various other approvals from government. Additionally, the profitability is susceptible to volatility in module prices. Furthermore, freight charges and aggressive bidding by EPC players is likely to drag the operating profitability on Solar EPC players. Acuité believes that the company’s ability to complete orders in timely manner will remain a key rating sensitivity. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity profile of the company remained at adequate level with net cash accruals of Rs.1.53 Cr. during FY23 as against debt repayment obligation of Rs.0.66 crore. The current ratio remained at 2.23 times as on March 31, 2023. The company had a free cash and bank balance of Rs. 3.42 Cr. as on March 31, 2023. Further, the company receives funding support from groups and associate company at interest free cost.
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| Outlook: Stable |
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Acuité believes that PREPL will maintain a 'Stable' outlook and will continue to derive benefits over the medium term due to its affiliation with Patanjali Group, extensive experience of promoters, healthy financial risk profile and healthy revenue.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 44.78 | 42.83 |
| PAT | Rs. Cr. | 0.21 | 0.60 |
| PAT Margin | (%) | 0.47 | 1.41 |
| Total Debt/Tangible Net Worth | Times | 0.88 | 0.86 |
| PBDIT/Interest | Times | 2.00 | 2.68 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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 |
| 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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