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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 12.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 188.00 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding | 200.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and short-term rating of ‘ACUITE A3' (read as ACUITE A three) to the Rs.200.00 Cr. bank facilities of Purti Vanaspati Private Limited. The outlook is ‘Stable’.
Rationale for Rating Reaffirmation The rating reaffirmation is on account of the stable operating and financial performance of the company. The operating income of the company stood at Rs. 399.58 crore in FY2023 against Rs. 397.11 crore in FY2022. However, the PAT margin declined, standing at 1.26% in FY2023 as compared to 1.58% in FY2022. In 09MFY2024 revenues stood at Rs. 262.63 crore and is expected to close the year in the range of Rs. 340–360 crore in FY2024, with a marginal improvement in margin. Furthermore, the ratings also takes into account the company's conservative capital structure, and coverage indicators that are expected to remain at comfortable levels in the medium term. However, the ratings are constrained by the stiff competitiveness prevalent in the edible oil refining industry, which restricts the pricing flexibility and affects PVPL's profit levels. The ratings account for fluctuations in foreign exchange rates in the absence of formal hedging mechanisms, and the susceptibility to volatility in raw material prices. |
| About the Company |
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Purti Vanaspati Private Limited (PVPL) was incorporated in August 2008 by Purti-Pansari group of Kolkata. The company is engaged in refining and marketing of edible oil (palm, soybean, sunflower, rice bran, etc.), vanaspati and its by products.The company’s plant is located in the Hooghly district of West Bengal, near Dankuni with an effective installed capacity of 45,000 MTPA. The company is promoted by Mr. Amit Agarwal and Mr. Kishore Kumar Agarwal The company sells its product under the brand name of Purti, Pansari, etc. Prior to incorporation of PVPL, the group traded edible oils for over 30 years through group entities, and from 2002, it began refining edible oils through a group entity called Paceman Sales Promotion Pvt Ltd. (PSPL). The promoter opted to demerge the edible oil segment in August 2008 and move it to a new entity, i.e. PVPL, as PSPL was an NBFC firm.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of PVPL while arriving at the rating.
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| Key Rating Drivers |
| Strengths |
| Long standing experience of the promoters in the industry
Mr. Kishore Kumar Agarwal, CMD, looks after the day-to-day operation of the company along with a support from his family. Mr. Sajjan Kumar Agarwal (brother of Mr. Kishore Kumar Agarwal) handles the finance operation and Mr. Amit Agarwal (son of Mr. Kishore Kumar Agarwal) heads the marketing division and brand promotion. Prior to incorporation of PVPL, the group was engaged in trading of edible oil for more than three decades through various group entities and edible oil refining operation from 2002. The long standing experience of the promoters and long track record of operations has helped them to establish strong relationships with suppliers and customers; and has aided in the establishment of a widespread dealer network. Acuité derives comfort from the long experience of the management and believes this will benefit the company going forward, resulting in steady growth in the scale of operations. Healthy financial risk profile The financial risk profile of the company is marked by moderate networth, very low gearing level and strong debt protection metrics. The tangible networth stood at Rs 76.80 crore as on 31st March, 2023 as compared to Rs 71.76 crore as on 31st March, 2022. Negligible debt levels have led to strong debt protection measures. The coverage indicators stood comfortable marked by Interest coverage ratio (ICR) which stood at 4.80 times for FY 2023 as compared to 14.80 times in FY 2022. Debt service coverage ratio (DSCR) stood at 4.15 times in FY2023 as compared to 11.90 times in FY2022. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.48 times as on March 31, 2023 as against 1.45 times as on March 31, 2022. Acuité believes that going forward the financial risk profile of the company will improve backed by steady accruals and no major debt funded capex plans. |
| Weaknesses |
| Moderate working capital management
PVPL's as moderately working capital intensive nature of operations marked by Gross Current Assets (GCA) days of 98 days in FY2023 . This is majorly due to high inventory days . The company’s inventory days stood at 51 days in FY2023 as against 20 days in FY2022. The debtor days stood at 25 days in FY2023 as against 07 days in FY2022. Acuité believes that the working capital operations of the group will remain at same level over the medium term given the nature of the industry. Dependence on imported raw material & its price fluctuation PVPL’s business depends on the availability of reasonably priced and high quality raw materials. It sources certain raw materials from global suppliers. Predominantly, unrefined soybean oil is imported from Argentina and Brazil, unrefined sunflower oil from Ukraine and Russia, and palm oil from Indonesia and Malaysia. The price and availability of such raw materials depend on several factors beyond the company’s control like production levels, market demand, trade restrictions as well as seasonal variations. PVPL also does not have long term supply contracts with any of its raw material suppliers and typically places orders with them in advance based on its anticipated requirements. Thus, the company is always at risk to procure raw materials and that too at reasonable prices. |
| Rating Sensitivities |
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Exposure to group companies
Significant improvement in scale of operations, while maintaining its profitability margins. Elongation of working capital cycle |
| Liquidity Position |
| Adequate |
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The company’s liquidity is adequate marked by net cash accruals stood at Rs 9.23 Cr. as on March 31, 2023, as against no long-term debt repayment over the same period. The cash and bank balances of the company stood at Rs. 15.12 Cr. as on March 31, 2023, as compared to Rs. 23.82 Cr. as on March 31, 2022. The current ratio stood at 1.33 times as on March 31, 2023. The average fund-based working capital utilisation remained 5.29 % during the last 12 months till April 2024. The company has generated positive fund flow from operations over the past few years. In view of adequate cash flow from operations, absence of long-term debt service obligations and cushion available in the fund-based limits. The company has FD of ~ Rs. 43.47 crore as on March 31, 2023, which provides comfort to the liquidity position. PVPL's operations are moderately working capital intensive marked by Gross Current Assets (GCA) of 98 days as on March 31, 2023, as compared to 100 days as on March 31, 2022. Acuité believes that going forward the company will maintain adequate liquidity position due to steady accruals.
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| Outlook:Stable |
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Acuité believes that PVPL will maintain a ‘Stable’ outlook over the medium term on account of its strong financial risk profile and sound business profile. The outlook may be revised to ‘Positive’ in case of significant improvement in scale of operation along with maintenance of strong financial risk profile. Conversely, the outlook may be revised to ‘Negative’ in case of deterioration in the liquidity or financial risk profile due to stretched receivables or in case of any significant support to group companies.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 399.58 | 397.11 |
| PAT | Rs. Cr. | 5.04 | 6.26 |
| PAT Margin | (%) | 1.26 | 1.58 |
| Total Debt/Tangible Net Worth | Times | 0.00 | 0.01 |
| PBDIT/Interest | Times | 4.84 | 14.80 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| 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 • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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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