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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 16.95 | ACUITE BB- | Stable | Assigned | - |
| Bank Loan Ratings | 18.05 | - | ACUITE A4 | Assigned |
| Total Outstanding Quantum (Rs. Cr) | 35.00 | - | - |
| Rating Rationale |
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Acuité has assgined its long-term rating of ‘ACUITE BB- (read as ACUITE double B minus) and short term rating of ‘ACUITE A4’ (read as ACUITE A ‘four’) on the Rs.35.00 Cr facilities of Salvi chemical Industries Limited. (SCIL). The outlook is ‘Stable'.
Rating Rationale The ratings assigned takes into account the experienced management and established track record of operations of the company. The rating also factors the business risk profile of the group reflected by improvement in operating performance. The rating draws comfort from the moderate financial risk profile and adequate liquidity position of SCIL. However, the rating is constrained by working capital intensive operations. |
| About the Company |
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Incorporated in 1978, Mumbai based Salvi Chemical Industries Limited (SCIL), is a manufacturer and exporter of chemical and pharmaceutical products including ferrous fumarate, cellulose acetate phathale etc. The directors of the firm are Mr. Kantilal Narandas Salvi, Mr. Nirav Kantilal Salvi, Mr. Kaushal Kantilal Salvi, Mr. Vijay Jayantilal Thaker, Mr. Vipul Amul Desai and Ms. Shweta Kaushal Salvi.
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| Analytical Approach |
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To arrive at the rating, Acuité has considered the standalone business and financial risk profiles of Salvi chemical Industries Limited (SCIL).
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Key Rating Drivers
| Strengths |
| Experienced management and established track record of operations
SCIL manufactures and exports chemical and pharmaceutical products including ferrous fumarate, cellulose acetate phathale etc. It has an established operational track record of around four decades. The present directors of the company are Mr. Kantilal Narandas Salvi, Mr. Nirav Kantilal Salvi, Mr. Kaushal Kantilal Salvi, Mr. Vijay Jayantilal Thaker, Mr. Vipul Amul Desai and Ms. Shweta Kaushal Salvi. SCIL reported turnover of Rs.154.23 in FY2023 (prov) as against Rs.129.54 crore. Acuité believes that the company will continue to benefit from the established track record of operations along with experienced management. Moderate financial risk profile. Financial risk profile of SCIL is moderate marked by moderate gearing (debt to equity) ratio & above average total outside liabilities to total net worth (TOL/TNW), improving net worth and comfortable debt protection metrics. The capital structure stood comfortable with low gearing of 0.75 times as on March 31, 2023 (prov) as against 0.62 times as on March 31, 2022. Tangible net worth of the company stood moderate at Rs.48.37 crore as on March 31, 2023 (prov) against Rs.43.25 crore as on March 31, 2022. Of the total debt of Rs.36.21 crore as on March 31, 2023 (prov), Long term debt stood at Rs.6.15 crore USL from Directors/Promoters stood at Rs.0.93 crore, short term debt stood at Rs.26.24 crore and current year maturing debt stood at Rs.2.90 crore. Along with the comfortable capital structure, the debt coverage indicators also stood comfortable with an interest coverage and DSCR of 3.44 times and 1.63 times respectively in FY2023 (prov) as against 2.26 times and 1.59 times respectively in FY2022. The company is planning for capex in the near medium term for the amount of Rs.84.40 crore for the purposes of adding new products to its portfolio. Acuite believes the financial risk profile of the SCIL will continue to remain moderate over the medium term after considering the estimated debt funded capex plan. |
| Weaknesses |
| Working capital intensive operations
The operations of SCIL are intensive in nature marked by increasing GCA days. Gross Current Asset days (GCA) stood at 182 days and 151 days in FY2023 (prov) and FY2022 respectively. The GCA mainly consists of Debtors and Other current assets. Debtors days has increased to 97 days in FY2023 (prov) against 67 days in FY2022 . The inventory days stood at 33 days in FY2023 (prov) against 41 days in FY2022. The creditors’ days stood elongated at 88 days in FY2023 (prov) against 67 days in FY2022. Acuité believes that SCIL's ability to improve its working capital cycle over the medium term will remain a key rating sensitivity factor. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position: Adequate |
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The Liquidity position is adequate marked by adequate net cash accruals of Rs.7.75 crore in FY2023 (prov), and Rs.4.98 crore in FY2022 against the repayment obligations of Rs.3.09 crore in FY2023 (prov) and Rs.1.31 crore in FY2022. The net cash accruals of the SCIL’s are estimated to remain around Rs.10 - 14 crore during 2024-26 against the debt obligation of Rs.1.96 crore- 1.59 crore for the same year. Furthermore, the current ratio stood healthy at 1.33 times as on March 31, 2023 (prov) as against 1.43 times as on March 31, 2022. Liquidity is also managed by its fund based working capital limits which are highly utilised at about 96.05 percent and nonfund based with range of 55-65 percent for the last twelve months ended March, 2023. The liquidity profile of the Group is expected to remain adequate owing to healthy net cash accruals.
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| Outlook: Stable |
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Acuité believes that SCIL will maintain a 'Stable' outlook over the medium term backed by its experienced management and adequate revenue visibility. The outlook may be revised to 'Positive' in case of significant improvement of the revenues and profitability margins while improving its working capital management. Conversely, the outlook may be revised to 'Negative' in case of any stretch in its working capital management, stretch in the liquidity and larger-than-expected debt- funded capital expenditure.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 154.25 | 129.54 |
| PAT | Rs. Cr. | 5.61 | 2.96 |
| PAT Margin | (%) | 3.63 | 2.29 |
| Total Debt/Tangible Net Worth | Times | 0.75 | 0.62 |
| PBDIT/Interest | Times | 3.44 | 2.26 |
| 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 • Entities In Manufacturing Sector:- 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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| Rating History : |
| Not Applicable |
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