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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 66.00 | ACUITE A- | Stable | Upgraded | - |
| Total Outstanding Quantum (Rs. Cr) | 66.00 | - | - |
| Rating Rationale |
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Acuite has upgraded the long-term rating from ‘ACUITE BBB’ (read as ACUITE triple B) to 'ACUITE A-' (read as ACUITE A minus) on Rs.66.0 crore of bank facilities of Rivulis Irrigation India Private Limited (RIIPL). The outlook is ‘Stable’.
Rationale for upgrade The rating factors the improvement in operations of the company wherein the revenue of the company stood at Rs. 225.07 Cr. in FY23(prov.) as against Rs.157.49 Cr. in FY22. The profitability of the company has also improved from loss of (11.69)% in FY22 to profit of 5.26% in FY23(prov.). However, the rating is constrained by extensive working capital management as apparent from GCA of 321 Days in FY23 (prov)and highly leveraged capital structure of the company as reflected by debt equity of 4.27 times and TOL/TNW of 13.10 times in FY23 (prov.) Earlier the company faced procedural issues in getting refinance on time, which temporarily caused impairment in liquidity profile of the company further there was few days lag in support from parent as well which was factored in the last rating however the concern stays resolved as the liquidity is adequate and the company is getting strong support from its parent Rivulis Irrigation Limited, Israel (which is further a 100% subsidiary of Temasek Holdings Private Limited, Singapore) in the form of 100% equity share holding, time to time support through equity and USL and shared brand name. Acuite further notes that there is existence of SBLC through the sanction letters issued by the lender's of the company which implies a written committment from parent. |
| About the Company |
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Rivulis Irrigation India Private Limited (RIIPL) was incorporated in 2014 at Pune as a wholly owned subsidiary of Rivulis Irrigation Limited, Israel and 100% step down subsidiary of Temasek Holdings Private Limited. The company is involved in manufacturing of irrigation products such as micro sprinklers, plastic import sprinkler, T tape Drip tape, Hydrodrip, drip line etc. The company has manufacturing facility in Vadodara, Gujarat. The company is a wholly owned subsidiary of an Israel based company Rivulis Irrigation Limited. The Current directors of the company are Mr Kaushal Kumar Jaiswal, Mr Manoj Kumar Bhatia, Mr Eran Ossmy and Mr Ram Weingarten.
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| About the Group |
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RIIPL is Pune based company which was incorporated in the year 2014. The company is a wholly owned subsidiary of Rivulis Irrigation Limited, Israel (RIL), which is the second largest player, globally in micro drip irrigation solutions products. The company has been able to access large market in India across various states. During May 2022, Temasek , a Singapore based global investment company owned by Government of Singapore has acquired 100% stake in RIL, hence making RIIPL a wholly owned step down subsidiary.
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| Standalone (Unsupported) Rating |
| ACUITE BB/ Stable |
| Analytical Approach |
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ACUITE has considered the standalone business and financial risk profiles of Rivulis Irrigation India Private Limited to arrive at the standalone rating. To arrive at the final rating, Acuité has notched up the standalone rating by factoring in the parent support extended by Rivulis Irrigation Limited, Israel.
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Key Rating Drivers
| Strengths |
| Strong Parent Support
RIIPL is Pune based company which was incorporated in the year 2014. The company is a wholly owned subsidiary of Rivulis Irrigation Limited, Israel (RIL), which is the second largest player, globally in micro drip irrigation solutions products. The company has been able to access large market in India across various states. During May 2022, Temasec, a Singapore based company has acquired 100% stake in RIL, hence making RIIPL a wholly owned step down subsidiary. RIIPL has been receiving support from RIL in the form of SBLCs extended in its favor by RIL issued by Rabo Bank. Further, RIL has also extended unsecured loans in the past to support operations of the company. Improvement in Revenue and Profitability The revenue of the company stood at Rs. 225.07 Cr. in FY2023(prov.) as against Rs.157.49 Cr. in FY2022. The profitability of the company has also improved to 5.26% in FY2023(prov.) as against (11.69)% in FY2022. The operations of the company were impacted significantly during the COVID and also the company was facing issues in executing orders in Andhra Pradesh as the government of Andhra Pradesh was not releasing their payments. The company has now started diversifying its customer base and has started taking orders from Telangana and Bihar. In the current year FY2024, the company has also started taking orders from Punjab. |
| Weaknesses |
| Highly leveraged capital structure and moderate financial risk profile
The financial risk profile of the company is moderate marked by moderate networth, moderate debt protection metrics and gearing level. The tangible networth of the company stood at Rs.15.32 Cr. as on March 31, 2023(prov.) as against Rs.13.12 Cr. as on March 31, 2022. The gearing level of the company stood high at 4.27 times as on March 31, 2023 (prov.) as against 4.23 times as on March 31, 2022. Further the TOL/TNW of the company stood high at 13.10 times as on 31 March 2023 (prov) as compared to 12.77 times as on 31 March 2022. The debt protection metrics of the company are moderate marked by interest coverage ratio of 1.68 times as on March 31, 2023(prov.) as against (2.65) times as on March 31, 2022. The debt service coverage ratio(DSCR) stood at 1.67 times as on March 31, 2023(prov.) as against (3.17) times as on March 31, 2022. Intensive Working Capital Operations The operations of the company are of working capital intensive nature marked by moderate bank limit utilisation and high GCA days. The GCA days of the company stood at 321 in FY2023(prov.) as against 379 in FY2022. The high GCA days are marked by high debtors of 238 days in FY2023(prov.) as against 266 days in FY2022. The creditor days of the company stood at 261 days in FY2023(prov.) as against 229 days in FY2022. The average bank limit utilisation of the company stood at 82.38% over the fourteen months ended on June 2023. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Adequate |
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The liquidity profile of the company is adequate marked by adequate net cash accrual against no maturing debt obligations. The company generated net cash accrual of Rs. 4.71 Cr. in FY2023(prov.) against no maturing debt obligations. Going ahead, the company is expected to generate net cash accrual in the range of Rs. 8.05 Cr. to Rs.10.94 Cr. against no debt obligations. The average bank limit utilisation of the company stood at 82.38% or the fourteen months ended on June 2023. The current ratio of the company stood comfortable at 1.04 times in FY23 (Prov).
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| Outlook: Stable |
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Acuité believes that the outlook on RIIPL will remain 'Stable' over the medium term on account of its strong promoter entity and long track record of operations. The outlook may be revised to 'Positive' in case of significant improvement in revenue and profitability of the company, thereby improving liquidity. Conversely, the outlook may be revised to 'Negative' in case of any stretch in its working capital management or reduction in operating income of the company resulting in stretch in liquidity profile of the company and higher dependence on borrwed funds.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 225.07 | 157.49 |
| PAT | Rs. Cr. | 0.06 | (32.79) |
| PAT Margin | (%) | 0.03 | (20.82) |
| Total Debt/Tangible Net Worth | Times | 4.27 | 4.23 |
| PBDIT/Interest | Times | 1.68 | (2.65) |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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 • 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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