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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 28.00 | ACUITE C | Downgraded | - |
| Total Outstanding | 28.00 | - | - |
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Rating Rationale |
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Acuité has downgraded its long-term rating to ‘ACUITE C’ (read as ACUITE C) from ‘ACUITE BB’ (read as ACUITE double B) on the Rs.28.00 Cr. bank facilities of RMP Farms (RMP).
Rationale for Downgrade The firm has delayed in making repayment of GECL loans (not being rated) by Acuite from IDBI bank. The latest delays of the debt obligations is evident in the month of July 2024 (due date being 10th of every month), where the payments were made in tranches within 1 to 16 days from due date. The banker has verbally stated that there is auto debit mechanism for recovery of debt obligations from Cash Credit account but due to paucity of funds they are unable to service the same timely. The cash credit account is not continuously overdrawn for more than 30 days. |
| About the Company |
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Palladam-Tamil Nadu based RMP farms (RMP) was established in 1987, as a partnership concern by the partners Mr. R. P. Gnanasundravadivel, Mr. R. P. Gunasekar, Ms. R. P. Saroja, Mr. G. Bhuvaneshwari, Mr. V. Vishnubalaji and Mr. V. Hari Hara Sudhan. The firm is engaged in diversified operations such as commercial bird farming (both layer and broiler), operation of hatcheries and production of feed among others. It has a cumulative capacity to manage and place as much as 12 lac broiler chicks per month and cumulative poultry feed mill capacity of 10000 tons per annum for captive consumption.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has taken a standalone view of the business and financial risk profile of RMP to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and long track record of operations
RMP Farms is promoted by Mr. R. P. Gnanasundravadivel and Mr. R. P. Gunasekar along with his family members as partners since 1987. It has been in the poultry business for over three decades and it has established a brand name in Assam, West Bengal, Bihar and Tamil Nadu. The integrated operations of the firm provide competitive advantage being the main raw material required in poultry farm is feed, which accounts for the major cost and it is produced in-house ensuring quality and availability leading to better operating margins. Acuité believes that promoter’s established presence in the poultry industry will sustain and support the firm business profile over the medium term. |
| Weaknesses |
| Intensive Working capital operations:
The working capital management of the company remained intensive marked by high Gross Current Assets (GCA) of 169 days for FY2024(Prov.) as compared to 192 days as on FY2023. The debtor period stood at 27 days for FY2024(Prov.). Further, the inventory holding stood at 133 days for FY2024(Prov.) as against 137 days for FY2023. Acuité expects the working capital operations to remain intensive due to nature of business over the medium term. Profitability vulnerable to movement in raw material prices The profitability remains vulnerable to fluctuations in feed prices with maize/soya/rice bran and others are forming ~80% of raw material cost. The prices of the raw materials remain volatile at the back of fluctuation in domestic production due to dependence on agroclimatic condition, international prices, and government regulations. Acuité believes that improvement from the current profit margins and achieving optimum sales volumes will be the key rating sensitivities. Delays in servicing term debt obligations The firm has delayed in making repayment of GECL loans (not being rated) by Acuite from IDBI bank. The latest delays of the debt obligations is evident was in the month of July 2024 (due date being 10th of every month), where the payments were made in tranches within 116 days from due date. The banker has verbally stated that there is auto debit mechanism for recovery of debt obligations from CC account but due to paucity of funds they are unable to service the same timely. |
| Rating Sensitivities |
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| Liquidity Position |
| Poor |
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The firm has delayed in making repayment of GECL loans (not being rated) by Acuite from IDBI bank. The latest delays of the debt obligations as is evident was in the month of July 2024 (due date being 10th of every month), where the payments were made in tranches within 1 to 16 days from due date. The banker has verbally stated that there is auto debit mechanism for recovery of debt obligations from Cash credit account but due to paucity of funds and they are unable to service the same timely. The cash credit account is not continuously overdrawn for more than 30 days.
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| Outlook: Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 200.92 | 196.10 |
| PAT | Rs. Cr. | 1.38 | 0.68 |
| PAT Margin | (%) | 0.68 | 0.34 |
| Total Debt/Tangible Net Worth | Times | 0.68 | 1.54 |
| PBDIT/Interest | Times | 1.60 | 1.57 |
| 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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