|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 24.00 | ACUITE BB+ | Stable | Downgraded | - |
| Total Outstanding | 24.00 | - | - |
|
Rating Rationale |
|
Acuité has downgraded its long-term rating to ‘ACUITE BB+' (read as Acuite Double B Plus) from ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs. 24.00 Crore bank facilities of Ruhatiya Spinners Pirvate Limited (RSPL). The outlook is ‘Stable’.
Rationale for rating downgrade. The downward revision in the rating considers the deterioration recorded in the operating performance of the group in FY2023 and FY2024E. The operating income declined to Rs.351.71 Cr. in FY2023 against Rs.581.87 Cr. in FY2022. Further, the revenue is estimated to decline in FY2024 to ~ Rs.257 Cr. The decline is primarily due to export restrictions imposed by the government on wheat and rice during most part of these financial years. The operating profit margin also declined in FY2023 to 1.36 % against 2.08% in FY2022. Going ahead, improvement in operating profit margin is estimated in the near term. Further, due to reclassification of quasi equity quantum and partial withdrawal of capital from one of the group companies, the financial risk profile has also moderated. The gearing levels stood at 1.33 times as of March 31, 2023, against 0.74 times as of March 31,2022. Also, due to reduction in operating profits, the debt coverage indicators also moderated in FY2023. Further, the rating remains constrained due to susceptibility of its revenues and profitability margins to government regulations and climatic conditions and presence in a competitive industry with low entry barriers. Going ahead, the ability of the group to increase its scale of operations and profitability while maintaining its moderate financial risk profile and adequate liquidity position will remain key monitorable. |
| About the Company |
|
RSPL, incorporated in 1996, is engaged in manufacturing of yarn and trading of cotton bales and rice. The company derives ~30-40 per cent of its income through sale of manufactured yarn while rest of its income is derived from trading in cotton bales, yarn and other agro based foods. The manufacturing facility is located at Akola (Maharashtra) with installed capacity of 18000 spindles P.A.
|
| About the Group |
|
Ruhatiya Group comprising of Narmada Solvex Private Limited, Kaluram Food Products Private Limited, Ruhatiya Cotton & Metal Private Limited, Ruhatiya Spinners Private Limited, Ruhatiya Hospitals Private Limited, Kaluram Laminates Private Limited, Vidarbha Textile Mill Owners Association, Omprakash Shivprakash and Ruhatiya Agro Private Limited was established in 1995 by Mr. Shivprakash Ruhatiya, Mr. Ajayprakash Ruhatiya and Mr. Shriprakash K Agarwal. The group has presence in the oil industry, textile industry and agro industry, among others. The manufacturing facility of the group is located at Akola (Maharashtra).
|
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered consolidated business and financial risk profiles of Ruhatiya Cotton and Metal Private Limited (RCM), Ruhatiya Spinners Private Limited (RSPL) and Omprakash Shivprakash (OPSP), hereafter referred to as ‘Ruhatiya Group’. The consolidation is mainly on account of similarity in the line of business, strong operational and financial synergies and common management.
|
| Key Rating Drivers |
| Strengths |
| Experienced management and long track record of operation
The group, promoted by Mr. Shivprakash Ruhatiya, Mr. Ajayprakash Ruhatiya and Mr. Shriprakash K Agarwal, have experience of over three decades in various agro-based industries. Ruhatiya Group has an established track record of over three decades in trading of cotton and agro-based industry. The promoters’ extensive industry experience has enabled the group to establish long-term relations with the customers and suppliers. Acuité believes that the promoters’ entrepreneurial experience and healthy relationship with customers and suppliers will support its business risk profile over the medium term. Moderate Nature of Working Capital Operation The working capital operations of the group are moderate in nature marked by GCA days of 68 days in FY2023 against 70 days in FY2022. The inventory days stood at 10 days in FY2023 against 05 days in FY2022 and the debtor days stood at 50 days in FY2023 against 42 days in FY2022. Creditor days stood at 13 days in FY2023 against 19 days in FY2022. The reliance on working capital limits stood at moderate levels of ~54% over the past 6 months ending April 2024.The group hedges 100% of its foreign exchange transactions. Going ahead, working capital operations of the group are expected to remain in similar range over the medium term. |
| Weaknesses |
| Moderate Financial Risk Profile
Ruhatiya Group has a moderate financial risk profile marked by moderate net worth, average coverage indicators and moderate gearing ratio. The tangible net worth stood at Rs. 30.51 crore as of March 31, 2023, as against Rs. 56.45 crore as of March 31, 2022. There has been a withdrawal of capital of ~Rs.5.98 Cr in FY2023 from the partnership firm – Omprakash Shivaprakash. The net-worth includes Rs.12.75 crore of unsecured loans(USL) which has been considered as quasi-equity. As a result, the debt-to-equity ratio moderated to 1.33 times as of March 31, 2023 against 0.74 times as of March 31, 2022. Further, it is estimated to increase in FY2024 on account of higher USL infusion. (USL is interest free). The debt of the group stood at Rs.40.50 crore as of March 31, 2023 against Rs.41.52 crore as of March 31, 2022. The debt includes, short term borrowings of Rs.23.25 crore, USL of Rs.11.86 crore and Rs.5.38 crore of long term debt. The interest coverage ratio (ICR) deteriorated to 1.39 times for FY2023 against 1.93 times in FY2022. The DSCR stood at 1.05 times as of March 31, 2023, against 1.78 times in the previous year. Total outside liabilities/tangible net worth (TOL/TNW) stood at 1.59 times as of March 31, 2023, as against 1.22 times as of March 31, 2022. The financial risk profile of the group is expected to remain moderate over the medium term on account of steady accrual generation and absence of any major debt funded capex. Susceptibility of revenues and profitability margins to government regulations and climatic conditions Ruhatiya Group majorly deals in agro commodities like rice, soyabean, dals, sugar and cotton. All these being seasonal crops, production and availability is highly dependent on monsoon and other climatic conditions. Further, prices of these commodities are also regulated by the government through MSP (Minimum Support Price) and imposition of various duties from time to time. In FY2023 and FY2024E the revenue and profitability of the group has been impacted primarily due to government-imposed restrictions on the exports of wheat and certain varieties of rice to cater to domestic needs. Going ahead, the operations of the group continue to remain susceptible to such regulatory and policy level changes by the government. Presence in a competitive industry with low entry barriers The wholesale trading industry of agro-commodities is a fragmented industry with low entry barriers. The industry is characterized by a large number of organized and unorganized players which leads to intense competition. Moreover, due to low value additive nature of trading business, the profitability margins are thin. |
| Rating Sensitivities |
|
| Liquidity Position |
| Adequate |
|
The group has adequate liquidity, marked by sufficient net cash accruals against its maturing debt obligations. The net cash accruals in FY2023 stood at Rs.2.46 crore against maturing debt obligation of Rs.2.02 crore. RG’s cash accruals are estimated to be in the range of Rs. 4.70-5.59 crore during FY2024 and FY2025 against the maturing debt obligations of Rs. 2.01-2.61 respectively. Further, the reliance on working capital limits stood at moderate levels of 54% over the last 6 months ending April 2024. The group had an unencumbered cash and bank balances of Rs.0.30 crore as of March 31, 2023. The current ratio stood average at 1.84 times as of March 31, 2023. Acuite believes that the liquidity position of the group would remain adequate over the medium term marked by expected sufficient cash accrual generation and buffer available in the form of unutilised working capital limits.
|
| Outlook:Stable |
|
Acuité believes that Ruhatiya Group will maintain a ‘Stable’ business risk profile over the medium term. The group will continue to benefit from its experienced management. The outlook may be revised to ‘Positive’ in case the group registers healthy growth in revenues, while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of further decline in the group’s revenues or profit margins, or in case of deterioration in the group’s financial risk profile and liquidity position. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 351.71 | 581.87 |
| PAT | Rs. Cr. | 0.52 | 4.57 |
| PAT Margin | (%) | 0.15 | 0.79 |
| Total Debt/Tangible Net Worth | Times | 1.33 | 0.74 |
| PBDIT/Interest | Times | 1.39 | 1.93 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| None |
| Applicable Criteria |
|
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm |
| Note on Complexity Levels of the Rated Instrument |
|
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.
|
|
| |
|
|
||||||||||||||||||
|
| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||
|
||||||||
|
Contacts |
|
|
|
About Acuité Ratings & Research |
