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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 18.25 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 41.75 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 60.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed 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) on the Rs.60.00 Cr bank facilities of Phoenix Overseas Limited. The outlook remains ‘Stable’.
The rating takes into account the steady business risk profile of the company buoyed by stability in revenues, segmental diversity and geographic exposure. The rating also factors the experienced management, the above average financial risk profile characterized by low gearing and healthy debt coverage indicators and the efficient working capital management of the company. These strengths are, however, offset by the thin profitability margins, competitive nature of industry and exposure to foreign exchange rate fluctuations. |
| About the Company |
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Incorporated in 2002, Phoenix Overseas Limited (POL) is a Kolkata-based company engaged in trading of food products, majorly soya de-oiled cake and mustard oil cake which are primarily sold to the poultry feed manufacturers. The company is promoted by Mr. Aparesh Nandi, Mr. Jayanta Kumar Ghosh and Mr. Uday Narayan Singh. The company also trades in other food products such as maize, wheat, to name a few. Apart from the trading business, POL manufactures jute, leather and cotton bags and provides cold-storage facilities. The warehouse of the company having a capacity of 17,000 MT and the cold storage facility is located at Malda, West Bengal. POL exports the food products to Bangladesh, while the bags are primarily exported to Europe. It is a trading house recognised by the Ministry of Commerce, Government of India.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of Phoenix Overseas Limited (POL) while arriving at the rating.
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Key Rating Drivers
| Strengths |
POL is promoted by Mr. Aparesh Nandi, Mr. Jayanta Kumar Ghosh and Mr. Uday Narayan Singh, having an expertise of over a decade in the trading of raw materials for poultry feed manufacturing industry. The experienced management along with the company’s long standing operations of over two decades has aided in achieving business divergence. POL has geographic exposure across countries, Bangladesh, France, UAE, U.S.A., to name a few. Out of which, it primarily exports the products to Bangladesh. The company has also achieved segmental bifurcation and trades through various commodities out of which it acquires major share of revenues from Maize, Rapeseed Oil Cake and Soyabean Extraction.
Further, POL has achieved revenues of Rs.377.17 Cr as on 31st March, 2022 (provisional) as compared to Rs.381.14 Cr as on 31st March, 2021. Further, the company has achieved revenues of Rs.141.60 Cr till August, 2022 (provisional). Acuité believes that, the promoters’ extensive understanding and expertise will support the company’s growth plans going forward.
The above average financial risk profile of the company is on account of improving net worth, low gearing and healthy debt protection measures. The tangible net worth of the company increased to Rs.40.63 Cr as on March 31, 2022 (provisional) from Rs.37.02 Cr as on March 31, 2022 due to accretion of profits. Gearing of the company is low at 0.73 times as on March 31, 2022 (provisional) against 0.84 times as on March 31, 2021, whereas, Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood moderate at 1.29 times (provisional) as on March 31, 2022 as against 1.74 times as on March 31, 2021. Further, the healthy debt protection metrics is marked by Interest Coverage Ratio (ICR) at 2.50 times as on March 31, 2022 (provisional) and Debt Service Coverage Ratio at 1.76 times as on March 31, 2022 (provisional). The Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.14 times as on March 31, 2022 (provisional). Acuité believes that the financial risk profile of company will continue to remain above average over the medium term, in absence of any major debt funded capex plans.
The efficient working capital management of the company is marked by gross current asset (GCA) days of 72 days in FY2022 (provisional) as against 82 days in FY2021. The low GCA days are primarily on account of the inventory period of 22 days in FY2022 (provisional) as compared to 27 days in FY2021. Further, the debtor days stood comfortable at 42 days in FY2022 (provisional) as compared to 28 days in FY2021. Acuité believes that going forward, the working capital management of the company will remain at similar levels as evident from the efficient collection mechanism and comfortable inventory levels over the medium term.
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| Weaknesses |
The operating margin of POL marginally increased to 2.39 per cent in FY2022 (provisional) as compared to 2.23 per cent in FY2021 on account of trading nature of business. The PAT margin stood at 0.96 per cent per cent in FY2022 (provisional) as against 0.82 in FY2021. Going forward, the margins are expected to remain range bound given the nature of the business in which the company operates. Profitability also remains exposed to any unfavourable fluctuation in forex rates.
Intense competition exists in the agro-based commodities business which exerts pressure on the performance of the company. Moreover, the operations of POL continue to remain exposed to agro-climatic conditions for the production of crops and the risk of disease outbreaks in the poultry-feed industry.
The company remains exposed to geographical concentration risk as Bangladesh accounts for a major portion of the total revenues. During FY2022, around 70 to 78 per cent of the total operating income from sale of products were derived from exports to customers based out of Bangladesh. Acuité believes that, diversification of the customer base will remain a key rating sensitivity. Any changes in the trade policy of Bangladesh can impact the operations of POL. |
| Rating Sensitivities |
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| Material covenants |
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None
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| Liquidity Position: Adequate |
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The liquidity position of the company is adequate marked by steady net cash accruals of Rs.4.24 Cr in March 31, 2022 (provisional) against long term debt repayment of Rs.0.80 Cr over the same period. The current ratio stood comfortable at 1.70 times as on March 31, 2022 (provisional) as compared to 1.54 times in March 31, 2021. The unencumbered cash and bank balance stood at Rs.2.79 Cr as on March 31, 2022 (provisional). The fund based limit utilization is at 55 per cent for the six months ended July, 2022. Further, the efficient working capital management of the company is marked by low gross current asset (GCA) days of 72 days in March 31, 2022 (provisional) as against 82 days in the previous year. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of steady cash accruals.
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| Outlook: Stable |
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Acuité believes that the outlook on POL will remain 'Stable' over the medium term on account of the experienced management, steady business risk profile and the above average financial risk profile of the company. The outlook may be revised to 'Positive' in case of significant growth in revenue or operating margins from the current levels. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or operating margins, deterioration in financial risk profile or elongation in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 377.17 | 381.14 |
| PAT | Rs. Cr. | 3.61 | 3.13 |
| PAT Margin | (%) | 0.96 | 0.82 |
| Total Debt/Tangible Net Worth | Times | 0.73 | 0.84 |
| PBDIT/Interest | Times | 2.50 | 2.60 |
| Status of non-cooperation with previous CRA (if applicable) |
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None
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| Any other information |
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None
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| Applicable Criteria |
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• 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 |
| https://www.acuite.in/view-rating-criteria-55.htm |
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