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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 886.50 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 313.50 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding | 1200.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed its long-term rating of 'ACUITE A-' (read as ACUITE A minus) and short-term rating of ‘ACUITE A2+' (read as ACUITE A Two plus) on the Rs.1200 Cr. bank facilities of SAEL Agri Commodities Limited (SACL). The outlook is 'Stable'.
Rationale for reaffirmation: The rating reaffirms the extensive experience of the promoters in the agrobusiness, along with a long track record of operations, healthy operating income with stable operating margins since the last two years ending FY2024, and a moderate financial risk profile supported by a sizeable net worth. SACL recorded revenue of Rs.3575.45 Cr. in FY2024, registering a YOY growth rate of 9.30 percent as compared to FY2023. EBIDTA margins are in the range of 6.65–6.95 percent over the last two years ended FY 2024. The rating, however, remains constrained by the working capital-intensive nature of operations, primarily due to higher inventory days, which is a general standard in this industry, and volatility in prices on account of the seasonality of the crop. |
| About the Company |
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SAEL Agri Commodities limited was incorporated in 2021 in Firozpur, Punjab. It is an agro-based industry with manufacturing facilities for integrated rice shelling units, solvent extraction plants, power generation, biomass, and solar. The company deals in various varieties of basmati and non-basmati rice under the brand names Ekam, Adina, Nyce, and Sukhbir through their state-of-the-art manufacturing facilities located at Powayan, district Shahjahanpur; Ghazipur, district Fatehullapur; and Guruharsahai, district Firozepur, Punjab. The byproducts, namely rice bran, are directly used in the solvent extraction plant for the production of rice bran oil, and husk is used as fuel in the biomass power plant for the generation of electricity, which is sold to UPPCL. Solar power generated is used for capacity consumption. The directors are Mr. Jasbir Singh, Mr. Sukhbir Singh, and Mr. Satinder Kaur.
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| Unsupported Rating |
| Not applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of SAEL Agri Commodities Limited to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
The company is promoted by Jasbir Singh, Mr. Sukhbir Singh, and Mr.Satinder Kaur. The management of the company has vast experience spanning more than two decades in agro-based business. The agro-based business was transferred through a slump sale in FY 2022 to SACL. The rice milling units are strategically located in the states of Uttar Pradesh and Punjab, which are in the top three rice-producing states in India. The capacity utilization for the rice plants across all five units stood at 75 percent in FY 2024. Further, the experience of the management will help the company maintain a long-standing relationship with its clientele. Acuité believes that the company will continue to benefit from its experienced management, strategic location advantage, and longstanding relationship with reputed clients.
The company has reported moderate growth, with YOY growth of 9.30 percent in FY2024 as compared to FY2023. Revenues stood at Rs.3,575.45 Cr. in FY2024 against Rs.3271.24 Cr. in FY2023. The improvement in revenue is on account of improved realization. Out of total revenue, 4.19 percent is from exports, and the remaining 96 percent is from domestic sales. The top line comprises revenue from the milling of rice, biomass-based power generation that is sold to UPPCL, solvent extraction, and exports segments. However, the majority of revenue is from rice milling (i.e., around 95–98%). Further, the EBIDTA margin of the company are range-bound and is between 6.65 percent and 6.95 percent for the last two years ended FY 2024, in line with other industry players in similar businesses. Acuité believes the revenue of the company will be stable going forward based on the general standard in this industry.
The company’s financial risk profile is moderate, marked by a healthy net worth and gearing, along with moderate debt protection metrics. The net worth of the company stood at Rs.1290.51 Cr. and Rs.1176.04 Cr. as on March 31, 2024, and 2023, respectively. The improvement is on account of the healthy accumulation of net profit in the reserves. The gearing of the company stood at 0.77 times as on March 31, 2024, as against 0.78 times as on March 31, 2023. The group’s debt protection metrics are moderate, marked by: Interest coverage ratio and debt service coverage ratio stood at 2.40 times and 1.50 times as on March 31, 2024, respectively, as against 2.46 times and 2.01 times as on March 31, 2023, respectively. TOL/TNW stood at 1.48 times and 1.16 times as on March 31, 2024, and 2023, respectively. The debt to EBITDA of the company stood at 4.10 times as of March 2024, as against 3.95 times in FY2023. Acuité expects the leverage and coverage indicators to remain healthy in the near to medium term on the back of a surge in earnings, improving the accruals of the company.
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| Weaknesses |
The operations of the company are working capital intensive in nature, marked by high GCA (gross current assets) days of 296 days in FY2024 as against 250 days in FY2023. The increase in GCA days is on account of the increase in inventory days, and it also emanates from the high other current asset of Rs.120.03 cr. in FY 2024. Inventory days stood at 261 in FY2024 as against 222 days in FY2023. The inventory days are on the higher side, primarily on account of the fact that the fact that procurement for rice paddy is seasonal-based (i.e., October to February), which results in high inventory days as on March end. Inventory days will remain in a similar range going forward. The company follows the rice aging technique (wherein the company stores the rice for a longer period, which results in a firmer texture and less stickiness compared with the cooked counterparts from freshly harvested paddy). The debtor day stood at 40 days in FY2024 as against 36 days in FY2023. The fund-based bank limit utilization of the company stood at 92 percent for fund-based limits, respectively, for the past 12 months ending May 2024. Acuité believes that the working capital operation of the SACL may continue to remain intensive considering the nature of the industry, where maintaining a higher inventory is an inherent requirement.
Paddy, the main raw material required for rice, is a seasonal crop, and production of the same is highly dependent upon the monsoon season. Environmental factors, sound soil fertility, and seasonal monsoons control the output of paddy cultivation, affecting the demand-supply dynamics of basmati and non-basmati rice year-on-year and resulting in price flux. Furthermore, paddy prices are largely dependent on several external factors, like domestic demand outlook, international trade regulations, and domestic production. This exposes the company to the risk associated with fluctuations in raw material prices.
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| Rating Sensitivities |
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| Liquidity Position: Adequate |
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The company’s liquidity is adequate, with adequate NCAs for its repayment obligations. The company generated cash accruals of Rs.113.75 Cr during FY2024, while its maturing debt obligations were Rs.41.98 Cr. during the same period. The cash accruals of the company are estimated to remain around Rs.132-151 Cr. during FY2025-26 while their repayment obligations are Rs. 41-42Cr. during the same period. The company has maintained unencumbered cash and bank balances Rs.4.63 Cr. and the current ratio stood at 1.65 times as on March 31, 2024. Further, the average bank limit utilization in the last 12 months ended May 24 remained at ~92 percent for fund-based. Acuité expects that the liquidity of the company is likely to be adequate over the medium term on account of healthy cash accruals.
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| Outlook: Stable |
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Acuité believes that a company's business risk profile is expected to remain 'stable' on the back of extensive promoter’s experience in the rice milling industry and a healthy financial risk profile. The outlook may be revised to 'Positive' in cases of higher than expected improvement in accruals while sustaining their liquidity position. Further, the outlook may be revised to 'Negative' in case of a sharp decline in accruals, a decline in profitability margin, or further elongation in the working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 3575.45 | 3271.24 |
| PAT | Rs. Cr. | 92.49 | 91.59 |
| PAT Margin | (%) | 2.59 | 2.80 |
| Total Debt/Tangible Net Worth | Times | 0.77 | 0.78 |
| PBDIT/Interest | Times | 2.40 | 2.46 |
| 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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