Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Rating Rationale
Acuite has reaffirmed its long-term rating of 'ACUITE BB-' (read as ACUITE Double B minus) on the bank facilities of Rs.23.00 Cr. of Shree Rai Traders (SRT). The outlook remains 'Stable'.
Rationale for Rating
The rating reflects the benefit derived from the experienced proprietor of Shree Rai Traders, which supports operational stability. It also factors in the improvement in scale of operations in FY2026, driven by higher sales volumes, although profitability margins moderated due to increased freight costs. The financial risk profile remains average, characterised by increase in net worth base, relatively high gearing, and moderate debt protection metrics, with gearing continuing to remain elevated despite improvement. Liquidity is adequate, supported by steady accruals against low debt repayment obligations, moderate utilisation of bank limits, and an efficient working capital cycle aided by low inventory levels and timely receivables realisation. However, the rating is constrained by the leveraged capital structure, moderate coverage indicators, and exposure to commodity price volatility and regulatory factors (including variability in government procurement), which may exert pressure on margins. The proprietorship constitution of the firm also makes it vulnerable to the risk of capital withdrawal. These factors remain key monitorable.
About the Company
Shree Rai Traders (SRT), established in 2006 and based in Madhya Pradesh, is a proprietorship firm engaged in the trading of food grains such as paddy, wheat, gram, moong, and maize. The firm’s operations are supported by its promoter, Mr. Ajay Rai, who has over two decades of experience in the trading industry, aiding in maintaining stable relationships with suppliers and customers.
Unsupported Rating
Not Applicable
Analytical Approach
Acuité has considered a standalone approach to the business and the financial profile of Shree Rai Traders (SRT) to arrive at the rating.
Key Rating Drivers
Strengths
Benefits derived from experience of promoters SRT is promoted by Mr. Ajay Rai (Proprietor) who possess over two decades of experience in the trading industry. Hence, vast experience of management has helped the firm to develop healthy relationship with its customers and suppliers. The firm primarily operates as a trading entity with procurement is primarily undertaken through a network of commission agents (aadhatiyas) across various agricultural markets in Madhya Pradesh, ensuring steady sourcing. Procurement from government tenders constitutes a relatively smaller portion of total sourcing. SRT has an established sourcing base in Madhya Pradesh and caters to markets in southern states, including Tamil Nadu, Karnataka, and Andhra Pradesh. Acuité believes that SRT will sustain its existing business profile on the back of its experienced management.
Efficient Working capital management The firm has efficient working capital cycle as evident from gross current assets (GCA) of 23 days for FY2025 and 32 days for the FY2024. Debtor days stood at 12 days in FY2025, as against 12 days in FY2024. The inventory period reduced to 10 days in FY2025 from 15 days in FY2024, reflecting faster inventory turnover. The relatively lower holding period is driven by seasonal factors, particularly during the summer months, wherein the firm liquidates stock immediately upon procurement to avoid higher holding and storage costs. The inventory days are expected to remain low and may reduce further, supported by the firm’s quick stock turnover practices. Against this, the creditor days stood at 9 days in FY2025 as against 11 days in FY2024. Acuité believes that the working capital cycle of the firm will remain at the similar levels over the near term.
Weaknesses
Average financial risk profile
The firm 's financial risk profile is average marked by marginal increase in net worth, high gearing and moderate debt protection metrics. The tangible net worth of the firm has increased and stood at Rs. 3.77 Cr. as on March 31, FY2025 as compared to Rs.3.07 Cr. as on March 31, FY2024 due to accretion to reserves. The gearing of the firm improved to 3.77 times in FY2025 from 6.08 times in FY2024, primarily on account of lower dependence on short-term borrowings, particularly due to reduced utilisation of warehouse receipt financing. The gearing is expected to remain on similar level. Total Outside Liabilities/Tangible Net Worth (TOL/TNW) has improved to 5.44 times as on FY2025 as against 8.83 times as on FY2024. The debt protection metrices of the firm remain moderate marked by Interest coverage ratio (ICR) of 1.54 times and debt service coverage ratio (DSCR) of 1.22 times for FY2025. The net cash accruals to total debt (NCA/TD) stood at 0.07 times in FY2025. Going forward, Acuite believes that going forward the financial risk profile of the firm will improve backed by steady accruals and no major debt funded capex plans.
Pressure on Margins Amid Revenue Volatility
The firm’s revenue declined slightly to Rs. 295.39 crore in FY2025 from Rs. 306.92 crore in FY2024 mainly because it procured less goods from the government agencies. Although revenue was estimated at Rs. 313.27 crore in FY2026 driven by better wheat quality and higher sales volumes, the overall revenue trend remains susceptible to external factors such as government policies and procurement levels. This, in turn, led to lower trading volumes for the firm. Profitability continues to remain under pressure, with operating margins moderating to 0.92% in FY2025 from 0.95% in FY2024 and further estimated to decline to 0.78% in FY2026. This contraction is largely attributable to a sharp increase in freight costs, which rose by Rs. 1.57 crore in FY2026. While PAT margins have shown marginal improvement supported by lower interest costs, the inherently thin margin profile, coupled with cost pressures, remains a key credit concern.
Highly competitive and fragmented industry affected by agro climatic risks
The agro commodity trading industry is highly competitive with low entry barriers, leading to pricing pressures. While availability of agricultural produce is dependent on agro-climatic conditions such as monsoon, the impact is diversified across crops including wheat, moong and maize, which constitute a significant portion of the firm’s trading portfolio. Any volatility in crop output or government policies may impact trading volumes and margins.
Rating Sensitivities
Potential triggers (individual or collective) for an upward rating action:
Revenue growth above Rs 350 Cr.
Improvement in profitability margins and cash accruals
Reduction in gearing levels to 2 times with strengthening of capital structure
Potential triggers (individual or collective) for a downward rating action:
Decline in operating margins due to increase in freight or input cost.
Elongation in working capital cycle of above 90 days or higher utilisation of bank limits
Liquidity Position
Adequate
The firm has adequate liquidity marked by net cash accruals of Rs. 1.03 Cr. in FY2025 as against debt obligation of Rs. 0.50 Cr. over the same period. Going forward the Net cash accrual will stand between Rs 1.10 Cr to Rs 1.40 Cr. against debt repayment obligation ~Rs 0.20 Cr. The cash and bank balance stood at Rs. 0.16 Cr. for FY 2025. Further, the current ratio of the firm stood at 1.29 times in FY2025 from 1.13 times in FY2024. The average bank limit utilization for cash credit facility stood moderate at 83% percent over the last six months ended May2026. Acuité believes that the firm’s liquidity is likely to remain adequate over the medium term, supported by steady accruals, moderate reliance on short-term borrowings and a comfortable current ratio.
Outlook: Stable
Other Factors affecting Rating
None
Particulars
Unit
FY 25 (Actual)
FY 24 (Actual)
Operating Income
Rs. Cr.
295.39
306.92
PAT
Rs. Cr.
1.00
0.88
PAT Margin
(%)
0.34
0.29
Total Debt/Tangible Net Worth
Times
3.77
6.08
PBDIT/Interest
Times
1.54
1.41
Status of non-cooperation with previous CRA (if applicable)
ACUITE B-
(Downgraded & Issuer not co-operating* from ACUITE B)
Warehouse Receipt Financing
Long Term
8.00
ACUITE B-
(Downgraded & Issuer not co-operating* from ACUITE B)
26 Oct 2023
Cash Credit
Long Term
4.00
ACUITE B
(Reaffirmed & Issuer not co-operating*)
Warehouse Receipt Financing
Long Term
8.00
ACUITE B
(Reaffirmed & Issuer not co-operating*)
Lender’s Name
ISIN
Facilities
Listing Status
Regulated By
Date Of Issuance
Coupon Rate
Maturity Date
Quantum (Rs. Cr.)
Complexity Level
Rating
Union Bank of India
Not avl. / Not appl.
Cash Credit
Unlisted
RBI
30 Jun 2018
Not avl. / Not appl.
Not avl. / Not appl.
8.00
Simple
ACUITE BB- | Stable | Reaffirmed
Not Applicable
Not avl. / Not appl.
Proposed Long Term Bank Facility
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
1.75
Simple
ACUITE BB- | Stable | Reaffirmed
Union Bank of India
Not avl. / Not appl.
Term Loan
Unlisted
RBI
20 Nov 2021
Not avl. / Not appl.
20 Nov 2026
0.25
Simple
ACUITE BB- | Stable | Reaffirmed
Union Bank of India
Not avl. / Not appl.
Warehouse Receipt Financing
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
13.00
Simple
ACUITE BB- | Stable | Reaffirmed
Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Contacts
List of instruments and names of regulators of the instruments
