|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 99.41 | ACUITE BBB | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 99.41 | - | - |
| Rating Rationale |
|
Acuité has reaffirmed its long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on Rs. 99.41 Cr. bank facilities of PBI India Private Limited (PIPL). The outlook remains ‘Stable’.
Rationale for rating re-affirmation The reaffirmation of rating takes into consideration PIPL’s stable operating and financial performance as reflected by its growing revenue and moderate financial risk profile. PIPL’s revenue grew to Rs.377 Cr. in FY2023(Prov) from Rs.333 Cr. in FY2022 which was led by higher price realisations and ~4% decline in sale volumes. The profitability margins marked a moderating trend since FY2021 and declined from 7.12% in FY2021 to 4.36% in FY2023(Prov) on account of high inflation in wheat prices and PIPL’s limited ability to effectively pass on the burden of price increase to end customers. The gearing levels of the company stood healthy at 1.28 times in FY2023(Prov) against 1.01 times in the previous fiscal. PIPL is in advance stages of completion of ongoing capex for capacity addition of (15,60,000 Qtl/annum) towards set-up of new flour mill. The benefits from the same are expected to flow in over the medium term. The rating also draws comfort from the adequate liquidity position of the company and efficient working capital management. These strengths are however, partly offset by the vulnerability of the margins to the volatility in commodity (wheat) prices and geographical concentration. The ratings are further impacted by the intensely competitive industry structure, which restricts the pricing and exerts pressure on the margins. Also, being in the food industry, quality and reputation risks remain high. Going ahead, PIPL’s ability to augment the scale of operations in commensurate to the recent capacity addition while improving profitability along with efficient working capital operations and healthy financial risk profile, will remain key monitorable. |
| About the Company |
|
Incorporated in 1980, PBI India Private Limited (PIPL) runs a flour mill at Jammu and sells wheat and wheat products in Jammu & Kashmir and Punjab. The company, promoted by Mr. Sanjay Puri, Mrs. Anjali Puri, Mr. Archit Puri and Mr. Shubham Puri has an installed capacity of ~1422166 Quintals per annum. The company manufactures flour and flour products such as atta, bran, maida, sooji, besan and dalia and sells the same under the ‘P-Mark’ brand name in Jammu & Kashmir and Punjab. It also provides tanker transportation services for Indian Oil Limited, carrying the petroleum products.
|
| Unsupported Rating |
| None |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of PIPL to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Long track record of operations and experienced management
PIPL was incorporated in 1980 by Mr. A. K. Puri, Mr. Sanjay Puri and Mrs. Anjali Puri. Presently managed by Mr. Sanjay Puri, Mrs. Anjali Puri , Mr.Archit Puri and Mr.Shubham Puri who collectively possess experience of over three decades in the aforementioned business. This has helped establish long term relations with customers and suppliers. PIPL purchases its raw materials like wheat from Food Corporation of India (FCI) and other raw materials like split chickpeas (chana dal) for besan from local farmers in Punjab. The company sells its products mainly to local wholesalers. Acuité believes that PIPL will continue to leverage the experience of its management in order to continue developing healthy relationships with its customers and suppliers. Moderate financial risk profile The company’s financial risk profile is marked by moderate net worth, healthy gearing, and debt protection metrics. The tangible net worth of the company increased to Rs.55.11 Cr as on March 31, 2023 (Prov) from Rs. 47.89 Cr as on March 31, 2022, on account of accretion of profits to reserves. Gearing of the company stood at 1.28 times as on March 31, 2023 (Prov) as compared to 1.01 times as on March 31, 2022. The company benefits from the financial support extended by the promoters through unsecured loans. Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.42 times as on March 31, 2023 (Prov) as against 1.17 times as on March 31, 2022. The debt indicators remained in similar range as in previous fiscal. Interest Coverage Ratio (ICR) stood at 4.58 times in FY 2023 (Prov) as against 4.52 times in FY 2022 and Debt Service Coverage Ratio (DSCR) at 2.32 times in FY 2023(Prov) as against 1.91 times in FY 2022. Further, company has undertaken debt funded capex for a new flour mill unit, which was to be completed by April 2023, however, got delayed by ~6 months. The commercial operations are expected to commence by end of November 2023. The total cost of the project is ~Rs.84.84 Cr, of which Rs.50.75 Cr is to be funded through term loan and balance forty percent from promoter’s sources. As on September, 2023 the total cost incurred stood at Rs. 82.65 Cr out of which Rs. 48.44 Cr is funded via term loan and balance form internal accruals.The commercial operations are expected to begin towards the end of November 2023. Acuite believes that the ability of the company to maintain its moderate financial risk profile in view of higher repayment obligations and augment its business risk profile post completion of ongoing capex will be a key monitorable. Efficient working capital management The working capital management of the company is efficient marked by Gross Current Assets (GCA) days of 53 days for both FY2023 and FY2022. The inventory holding stood 24 days in FY2023(Prov) against 31 days in FY2022. Further, the receivables cycle has remained efficient as the debtor days continue to remain low at 19 days as on March 31, 2023 (Prov) against 21 days in FY2022. Acuite believes that the working capital operations of the company will remain almost at the same levels as evident from efficient collection mechanism and low inventory levels over the medium term. |
| Weaknesses |
| Declining profit margins.
The profitability margins of the company have decreased significantly in FY2022 owing to increase in the raw material prices and the company’s inability to effectively pass on the same to the customers or do so with a lag. PIPL’s margins are exposed to price volatility in wheat, as the Ukraine-Russia conflict has led to an increase in wheat (and flour) prices. The operating profit margin of the company has declined consistently since FY2021. It declined from 7.12% in FY2021 to 6.01% in FY202 and 4.36% in FY2023(Prov). The PAT margin in turn declined to 1.91 per cent in FY2023 (Prov) from 2.22 per cent in FY2022. It is expected that the persistent high price levels of wheat are likely to keep the margins in similar range over the near term. Since raw material cost (Wheat) account for ~87% of total production cost, even a slight variation in rates of raw materials can drastically impact the profitability. Moreover, the company operates in a commoditised market and its operating margin will remain range bound on account of its low value-adding nature of operations and the fragmented and unorganised market. Fragmented and competitive industry buoyed by increased geographical concentration risk Jammu & Kashmir continues to be the company’s key market, which is expected to continue in the future also exposing it to geographical concentration risk. Moreover, the Indian flour milling industry is highly fragmented with organized players and a number of small regional players. Recently, with increased awareness for hygiene and convenience, the local mills are now facing competition from branded packaged atta manufacturers. The Indian packaged wheat flour market comprises few national players, large number of regional players and private label brands who have pan India presence or restricted geographical presence based on their size and capacity. As numerous players operate in the segment selling a commoditised product, the pricing capability of the company is limited. |
| Rating Sensitivities |
|
| All Covenants |
| Not Applicable |
| Liquidity Position |
| Adequate |
|
Liquidity of the company is adequate with sufficient cash accruals generation to its maturing debt repayment obligations. The company generated cash accruals of Rs.10.98 Cr in FY2023(Prov) against debt repayment obligation of Rs.2.59 Cr. Going ahead, the company is expected to generate cash accruals in the range of Rs.13.51Cr & Rs.18.07Cr in FY2024 & FY2025 against repayment obligation of Rs.3.27 and Rs.10.95 Cr respectively. The increase in repayment obligation is on account of commencement of repayment of the term loan taken towards capex. The fund-based working capital limit remains moderately utilised at ~65 per cent over the last six months ended September 2023. The current ratio stood at 1.66 times as on March 31, 2023 (Prov) against 1.16 times in the previous year. The working capital management of the company is efficient as reflected by Gross Current Assets (GCA) of 53 days as on March 31, 2023 (Prov).
Acuité believes that going forward the company will continue to maintain adequate liquidity position owing to steady accruals. |
| Outlook:Stable |
|
Acuité believes that PIPL will maintain a 'Stable' outlook and continue to benefit over the medium term from the extensive experience of its promoters, expected benefits from the recent capex towards stable operating performance. The outlook may be revised to 'Positive' in case of higher-than-expected increase in revenue and profitability. Conversely, the outlook may be revised to 'Negative' in case of decline in revenue and profitability or stretch in working capital cycle, weakening of the overall financial risk profile.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 377.07 | 333.02 |
| PAT | Rs. Cr. | 7.22 | 7.41 |
| PAT Margin | (%) | 1.91 | 2.22 |
| Total Debt/Tangible Net Worth | Times | 1.28 | 1.01 |
| PBDIT/Interest | Times | 4.58 | 4.52 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
|
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.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 categorisa"on of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow pa&erns, number of counterpar"es 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 Ra"ng Criteria “Complexity Level Of Financial Instruments” on www.acuite.in. |
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
|
|
|
About Acuité Ratings & Research |
