Press Release

Press Release

October 03, 2024

SHRI PARAMSUKH EDIBLE FOODS PRIVATE LIMITED
Rating Assigned

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	60.00	ACUITE BBB- \| Stable \| Assigned	-
Total Outstanding	60.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuite has assigned its long term rating of 'ACUITE BBB-' (read as Acuite triple B minus) on the Rs. 60.00 crore bank facilities of Shri Paramsukh Edible Foods Private Limited. The outlook is 'Stable'.

Rationale for rating
The assigned rating takes into consideration the established market position of the group in the FMCG industry and long and extensive experience of the promoters. The rating also factors in the improvement in the scale of operations, moderate financial risk profile reflected by low gearing which is below unity, along sufficient net cash accruals against the debt repayment obligation in the same period. However, these strengths of the group are partially offset by the group’s high reliance on working capital limits and thin profitability margins due to presence in a highly fragmented and competitive industry. Acuite further takes into account the volatility in commodity trade and group's ability to increase its production capacity utilization resulting into substantial improvement in revenue and profitability remains key rating monitorable.

About the Company

Shri Paramsukh Edible Foods Private Limited is a company incorporated in 2020. The company is engaged in trading of cereals, agriculture produce and involved in manufacturing of edible oil. The present directors of the company are Mr. Girraj Bansal and Mr. Ketan Bansal. The company is based in Gwalior (M.P).

About the Group

Om Shri Shubh labh group is engaged in trading, repackaging of various FMCG products, processing of wheat flour and extraction of edible oil. It has four group companies- Om Shri Shubh labh Agrifresh Private Limited (OSSAF), Shri Paramsukh Edible Foods Private Limited (SPEF), B P Food Products Private Limited (BPF) and Om Shri Shubh labh Agritech Private Limited (OSSATL). Om Shri Shubh Labh Agritech Retailers Private Limited (OSSAR) is engaged in operating a retail chain- ‘C-mart’. The company has 27 retail stores across Uttar Pradesh, Haryana, Noida and Gaziabad. SPEF is engaged in extraction of oil from mustard seeds. It sells this edible oil under the brand name "Smart Wife'. The company has a plant located in Gwalior with a capacity of processing 40 MT seeds per day. BPF is engaged in processing of various wheat flour. It sells the flour under its brand 'Double Trishul'. The company has five plants located across Madhya Pradesh with a total capacity of 1800 MT per day. BPF was acquired by the promoters of OSSATL in May 2020 form NCLT. All these companies are 100% held by the promoters of OSSATL.

Unsupported Rating

Not applicable

Analytical Approach

Extent of Consolidation

•Full Consolidation

Rationale for Consolidation or Parent / Group / Govt. Support

Acuité has considered the consolidated business and financial risk profiles of Om Shri Shubh Labh Agritech Private Limited (OSSATL), Om Shri Shubh labh Agrifresh Private Limited (OSSAF), Shri Paramsukh Edible Foods Private Limited (SPEF) and B P Food Products Private Limited (BPF) to arrive at this rating. The consolidation is in view of the common management, strong operational linkages between the entities and the group is herein referred to as Om Shri Shubh Labh Group (OSSLG).

Key Rating Drivers

Strengths

Established t rack record of operations with experienced management
OSSLG is based out of Madhya Pradesh and was incorporated in the year 2017. The group is promoted by Mr. Girraj Bansaol who have been engaged in the FMCG industry for more than a decade. The extensive experience of the promoters has helped the group to established long and healthy relationships with reputed customers and suppliers over the years. Acuité believes that the promoter's experience and reputed clientele is expected to support in improvement of its business risk profile over the medium term.

Moderate financial risk profile
The financial risk profile of OSSLG is marked by a moderate net worth, low gearing and comfortable debt protection metrics. The tangible net-worth of the company stood at Rs. 182.89 Cr. as on 31st March 2024(P) as against Rs. 155.70 Cr. as on 31st March 2023. The Networth of the company has strengthened due to equity infusion and accretion of profits to reserves. The total Debt of the company stood at Rs. 161.09 crore as on 31st March, 2024 (Prov.) as against Rs. 68.38 Cr as on 31st March, 2023. Further, the gearing of the company stood at 0.88 times as on 31st March, 2024 (Prov.) as against 0.44 times as on 31st March, 2023. Gearing of the company has increased in FY24 on account of higher utilization of the short term debt to support working capital requirement. TOL/TNW of the company stood at 1.24 times as on 31 March, 2024 (Prov.) as against 1.11 times as on 31st March, 2023. In addition, Debt protection metrics remain comfortable with Debt service coverage ratio (DSCR) at 1.77 times in FY2024 (Prov.) as against 1.81 times in FY2023 and Interest Coverage ratio (ICR) stood at 2.31 times in FY2024 (Prov.) as against 4.31 times in FY2023. Going forward, Acuite believes that financial risk profile of the group is expected to add additional short term borrowings to fund the working capital requirements in near to medium term.

Efficient working capital operation
Working capital operations of the group though moderated is efficient with GCA days of 65 days in FY24 (Prov.) as against 67 days in FY23. GCA days of the company are driven by debtor collection period. The debtor collection period of the group stood at 38 days in FY24 (Prov.) as against 48 days in FY23. The group on an average extends 30-60 days of credit period to its customers. The inventory holding period stood at 22 days in FY24 (Prov.) as against 10 days in FY23 as the group changed in focus from pure trading to manufacturing wherein the company needs to hold higher inventory. The creditor days of the group stood at 9 days in FY2024 (Prov.) as against 23 days in FY2023. Acuite believes that working capital operations of the company is expected to remain in the same range in near to medium term.

Weaknesses

Thin profitability margins
Om Shri Shubh Labh Group (OSSLG) has recorded an increase in operating performance of 37 percent in FY23 which has increased from Rs.1494.14 Crore in FY23 to Rs.2042.42 Crore in FY24 (P). Despite increase in the top-line of the company the operating margins and PAT margins are thin reflected by EBITDA Margins of 1.94% in FY24 (P) against 1.50% in FY23 and PAT margins of 0.54% in FY24 (P) against 0.44% in FY23.

Highly fragmented and competitive industry
The industry is marked by presence of large number of organized and unorganized players in the industry. The industry is intensely competitive and fragmented because of low entry barriers and moderate capital requirements. The high competitive industry further limits the pricing flexibility and exerts pressures on the margins of all participants.

Rating Sensitivities

Improvement in the scale of operations while maintaining its profitability margin at current level
Stretch in the working capital cycle leading to stretched liquidity position

Liquidity Position

Adequate

Liquidity of the group is adequate with sufficient net cash accruals as against the debt repayment obligation. The net cash accruals of the company stood at Rs. 18.39 crore in FY24 (P) as against debt repayment obligation of Rs. 2.89 crore in the same period. The company is expected to generate sufficient net cash accruals against debt repayment obligation in near to medium term. The fund based bank limit utilization on consolidated basis stood at 97.77% in last six months ending July 2024. The company maintains unencumbered cash balance of Rs. 0.85 crore as on 31st March 2024 (Prov). Acuite believes that higher dependence on the external borrowings will remain a key monitorable.

Outlook: Stable

Acuité believes that Om Shri Shubh Labh Group will continue to maintain a ‘Stable’ outlook over the medium term owing to its experienced and qualified management. The outlook may be revised to 'Positive' if the group reports significant improvement in revenue and scale of operations while maintaining operating profitability, leading to higher cash accruals. Conversely, the outlook may be revised to 'Negative' if the group registers decline in revenue and profitability leading to lower than expected cash accruals or further deterioration in the debt protection metrices.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	2042.42	1494.14
PAT	Rs. Cr.	10.98	6.65
PAT Margin	(%)	0.54	0.44
Total Debt/Tangible Net Worth	Times	0.88	0.44
PBDIT/Interest	Times	2.31	4.31

Status of non-cooperation with previous CRA (if applicable)

None

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

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.

Rating History :

Not applicable

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Union Bank of India	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	25.00	Simple	ACUITE BBB- \| Stable \| Assigned
Axis Bank	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	15.00	Simple	ACUITE BBB- \| Stable \| Assigned
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	20.00	Simple	ACUITE BBB- \| Stable \| Assigned

*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)

Sr no.	Company Name
1	B P Food Products Private Limited
2	Om Shri Shubh Labh Agrifresh Private Limited
3	Shri Paramsukh Edible Foods Private Limited
4	Om Shri Shubh Labh Agritech Private Limited

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Depanshi Mittal
Lead Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.