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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 17.00 | ACUITE BB | Stable | Upgraded | - |
| Total Outstanding | 17.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term rating of 'ACUITE BB' (read as ACUITE Double B) from ‘ACUITE BB-' (read as ACUITE double B minus) to the Rs.17.00 Cr. bank facilities of Sairam Stone Crusher (SSC). The outlook is ‘Stable’.
Rationale for Rating upgrade The rating upgrade is on account of improvement in the business and financial risk profile marked by increase in the revenue and operating margins. The revenue recorded an improvement in FY2023 of Rs.59.63 Cr as against Rs.33.74 Cr in FY2022. Furthermore, the EBITDA margin of the firm also improved to 16.72 percent in FY2023 as against 14.79 percent in FY2022. This is majorly on account of reduction in power cost and due to the cost savings generated on usage of its own transport for supply of the material. Further, the rating also takes into consideration the long-standing relationship with customers, the moderate financial risk profile of the firm along with adequate liquidity position. However, the rating is constrained from intensive working capital operations. |
| About the Company |
| Pune based Sairam Stone Crusher was established as a partnership firm in 2011. The firm is managed by partners Mr. Sagar Zurunge, Mr. Kiran Sakore, Mr. Dattatray Zurunge, Mr. Moreshwar Sakore, Mr. Sampat Sakore, and Ms. Sulochana Zurunge. The firm is engaged in crushing of stones which are sold to infra developers, government departments and dealers for use in various construction works of road building, setting up of railway tracks and other construction works. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone financial and business risk profiles of SSC to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
SSC was established as a partnership firm in the year 2011. The firm is managed by partners Mr. Sagar Zurunge, Mr. Kiran Sakore, Mr. Dattatray Zurunge, Mr. Moreshwar Sakore, Mr. Sampat Sakore, and Ms. Sulochana Zurunge, who have been engaged in this industry for more than a decade. The management’s experience has helped SSC to maintain healthy relationship with customers like J Kumar Infra Projects Limited, Godrej & Boyce and among others. Majority of the top ten cusomters have been associated with the firm for almost a decade. Acuité believes that the partners’ experience will support in improvement of SSC’s business risk profile over the medium term. Improvement in operating perfomance The firm witnessed a significant improvement in its scale of operations marked by operating income of Rs.59.63 Cr in FY2023 as against Rs. 33.74 Cr in FY2022, registering a y-o-y growth of ~77% mainly due to increase in demand. The firm generates 30% revenue from builders and infra developers, 30% through dealers and 40% through government departments. Further, the EBITDA margins also improved to 16.72 percent in FY2023 as against 14.79 percent in FY2022 majorly on account of reduction in power cost and due to the cost savings generated on usage of its own transport for supply of the material.. Also, the PAT margin improved to 5.63 percent in FY2023 vis-à-vis 5.43 percent in FY2022. Further, the firm has achieved Rs.40 Cr till October 2024 and is expected to achieve around Rs.80 Cr for FY2024. Moderate Financial Risk Profile SSC has moderate financial risk profile marked by moderate net worth, moderate gearing and debt protection metrics. The tangible net worth of Rs.15 crore as on 31 March, 2023 as against Rs.12 crore as on 31 March, 2022. The gearing level of the company stood at 1.91 times as on 31 March, 2023 as against 2.35 times as on 31 March, 2022. The total debt outstanding of Rs.28.28 crore consists of working capital borrowings of Rs.7.52 crore, unsecured loan from promoters of Rs.2.26 crore, term loan obligations of Rs.15.50 crore and CPLTD of Rs.3.00 Cr as on 31 March, 2023. The coverage ratios of the company are moderate with Interest Coverage Ratio (ICR) of 4.01 times for FY2023 as against 2.71 times for FY2022. Also, the Debt Service Coverage Ratio (DSCR) stood at 1.43 times for FY2023 as against 0.83 times for FY2022. The total outside liabilities to tangible net worth (TOL/TNW) of the company stood at 3.05 times as on March 31, 2023 as against 3.30 times as on March 31, 2022. Further, Net Cash Accruals to Total Debt (NCA/TD) stood at 0.27 times for FY2023 as against 0.11 times for FY2022. Acuite believes further improvement in SSC’s financial risk profile over the medium term will remain a key rating monitorable. |
| Weaknesses |
| Working capital intensive operations
Company has improved yet remain intensive working capital operations as evident from high GCA days of 170 days for FY2023 as against 211 days in FY2022. The high GCA days are high majorly on account of high debtor days of 150 days for FY2023 as against 177 days for FY2022. The inventory days are low at 05 days for FY2023 as against 03 days for FY2022. The creditor days of the company stood at 279 days for FY2023 as against 360 days for FY2022. Credit period offered to infra developers is around 30 to 60 days, however payment gets delayed sometimes. Payment from dealers is received immediately and credit period for government department is around 45 days. Further, the average utilization of the working capital limits of the company remained at ~80 percent for the last 10 months ended October 2023. Acuité believes that the working capital requirement is likely to remain at similar levels in the near to medium term. |
| Rating Sensitivities |
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| All Covenants |
| Not Available |
| Liquidity Position |
| Adequate |
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The firm’s liquidity position is adequate marked by sufficient net cash accruals against its maturing debt obligations. The firm has net cash accruals in the range of Rs.2.78-7.51 Crore from FY 2021- 2023 against its maturing debt obligations in the range of Rs.3.00-4.50 crore in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.10.80-14.31 crores against the maturing repayment obligations of around Rs.2.43-2.70 crore over the medium term. The working capital management of the firm is intensive marked by GCA days of 170 days in FY2023 as against 211 days in FY2022. The firm maintains unencumbered cash and bank balances of Rs.0.06 crore as on March 31, 2023. The current ratio stands at 1.01 times as on March 31, 2023 as against 0.85 times as on March 31, 2022. Average bank limit utilization for fund-based limits stood at ~80 percent for the last 10 months ended October 2023.
Acuité believes that going forward the firm will maintain adequate liquidity position due to steady accruals. |
| Outlook: Stable |
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Acuite believes that SSC will maintain a “Stable” outlook over the medium term on account of its experienced management and established track record of operations. The outlook may be revised to “Positive”, if the firm demonstrates substantial and sustained growth in its revenues while maintaining its capital structure. Conversely, the outlook may be revised to “Negative”, if firm generates lower-than anticipated cash accruals thereby impacting its financial risk profile, particularly its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 59.63 | 33.74 |
| PAT | Rs. Cr. | 3.36 | 1.83 |
| PAT Margin | (%) | 5.63 | 5.43 |
| Total Debt/Tangible Net Worth | Times | 1.91 | 2.35 |
| PBDIT/Interest | Times | 4.01 | 2.71 |
| 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 |
| 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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