­Established track record of operations with experienced management
RSL is based out of Maharashtra and was incorporated in the year 2008 reflecting an established track record of operations for more than a decade. The company is promoted by Mr. Pashant Kisanlal Bhaiya who have been engaged in the edible oil industry for more than three decades through other entity of MKB Foods Private Limited. The operations of the company are managed by the promoters as well as by experienced senior management team who are ably supported by a strong line of mid-level managers. 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 Marico Limited, Mother Dairy Fruit and Vegetable Pvt. Ltd.

Acuité believes that the company will sustain its existing business profile over the medium term on the back of an established track record of operations with an experienced management.

Moderate Financial Risk Profile

The company has a moderate financial risk profile marked by increasing networth of Rs. 72.76 crore on March 31, 2024 as against Rs. 47.83 crore on March 31, 2023. The gearing level of the company improved to 1.52 times on March 31, 2024 as against 2.07 times on March 31, 2023. The total debt of the company stood at Rs. 110.87 crore as on March 31, 2024. Total Outside Liabilities to Tangible Networth stood at 2.15 times on March 31, 2024 as against 2.99 times on March 31, 2023. Debt/EBITDA stood at 3.50 times on March 31, 2024 as against 3.65 times on March 31, 2023. Improvement in the above factors is on account of equity infusion in the company.

The coverage ratios of the company remain moderated with Interest Coverage Ratio (ICR) of 3.27 times for FY2024 as against 4.81 times in FY2023. The Debt Service Coverage Ratio (DSCR) stood at 1.27 times for FY2024 as against 4.00 times for FY2023. The moderation in the coverage ratios is on account of increased debt levels and finance cost of the company in FY2024.

RSL has raised capital worth Rs. 62.68 crore in 2 years. Rs. 12.45 crore were raised in FY2023-24 and Rs. 50.23 crore were raised in April 2024. Some of the IPO proceeds will be utilised to repay the outstanding debt of the company. Acuite believes that the financial risk profile of the company will improve in the near term on the back of the recent IPO. 

Efficient Working Capital Management

The operations of the company are managed efficiently marked by GCA days of 63 days for FY2024 as against 50 days for FY2023. The GCA days are driven by inventory days and debtor days. Inventory days stood at 34 days in FY2024 as against 25 days in FY2023 while debtor debtors days stood at 22 days in FY2024 as against 20 days in FY2023. The creditors days stood at 20 days in FY2024 as against 19 days in FY2023. Current ratio stood at 1.11 times as on March 31, 2024 as against 1.16 times as on March 31, 2023.

Acuité believes that the working capital management of the company will continue to remain efficient in the near to medium term.

­Thin profitability margins along with fragmented and competitive oil industry
The company is engaged into manufacturing of edible oil and the market for edible oil is characterized by thin margin due to value additive nature, high raw material costs and intense competition. The operating profit margin remained in the range of 3.22% to 3.66% for the last three years ended FY2024 majorly on account of increase in raw material costs. The Indian edible oil industry is highly fragmented with large number of companies in the organised and unorganised sector due to low entry barriers (low capital and technical requirements of business and liberal policy regime). The same has resulted in severe competition and inherently thin profitability margins.

Susceptible to fluctuations in raw material prices
RSL’s operations are exposed to inherent risks associated with the agriculture-based commodity business such as availability of raw materials, fluctuations in prices, and changes in government regulations. The company is engaged in the extracting and refining of edible oil. The prices of crude edible oil are volatile in nature; hence, the profitability is highly susceptible to the ability of the company to pass on the same to its customers. The low margin nature of the industry, dependence on climatic factors for good harvest results in vulnerability of profitability in a volatile pricing scenario.