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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 23.60 | ACUITE BB | Stable | Assigned | - |
| Bank Loan Ratings | 26.90 | ACUITE BB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 0.50 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 51.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating to ‘ACUITE BB’ (read as ACUITE double B) and the short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs. 27.40 crore bank facilities of Sifti Rice Mills (SRM). The outlook is ‘Stable’.
Acuité has further assigned the long-term rating to ‘ACUITE BB’ (read as ACUITE double B) on the Rs. 23.60 crore bank facilities of Sifti Rice Mills (SRM).The outlook is ‘Stable’. Rationale for Rating The rating takes into cognizance stable revenues albeit declining operating profitability as on FY23. The turnover expected for FY 2024 has slightly declined since there were no exports which forms a major part of it's revenues. The PAT margin has remained on the similar lines until FY 2023. The rating is supported by long track record of operations and proximity to raw materials. However these strengths are constrained by the below average financial risk profile, marked by it's leveraged capital structure, average debt protection metrices and intensive working capital cycle. |
| About the Company |
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Sifti Rice Mills (SRM) is a Punjab based partnership firm established in 2000 by Mr. Vinod Kumar. The firm is engaged in processing of basmati rice. It processes two types of basmati rice: Permal and Pusa. The main raw material for the business is paddy. Currently, the firm is being managed by Mr. Vinod Kumar, Mrs. Parveen Rani, Mr. Sanjeev Chada and Mrs. Kriti Chada.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of the Sifti Rice Mills to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and long track of operation
The firm was established in 2000 reflecting a long track of operation of more than two decades in the rice industry. The firm is managed by Mr. Vinod Kumar, Mrs. Parveen Rani, Mr. Sanjeev Chada and Mrs. Kriti Chada who have extensive experience in the rice industry. Proximity to raw materials Punjab is a major rice producing region and enables easy access to raw material i.e. paddy. All the major suppliers of the firm are either in Punjab or neighbouring states like Uttar Pradesh & Delhi. Stable revenues albeit decline in operating profitability The operating income of the firm has increased to Rs.170.24 Cr. as on March 31, 2023 as compared to Rs. 102.81 Cr. as on March 31, 2022 on account of increase in the quantity sold and average sale price. In FY 2024(Estd.), the turnover is about Rs. 161.59 Cr. The slight decline is because there were no exports which forms a major part of it's revenues. The EBITDA margins has decreased to 4.42 percent as on March 31, 2023 as compared to 5.93 percent as on March 31, 2022. |
| Weaknesses |
| Below average financial risk profile
The financial risk profile is below average marked by an increase in the net worth to Rs.13.16 Cr. as on March 31, 2023 as compared to Rs.10.84 Cr. as on March 31, 2022 due to accretion of reserves. Gearing stood at 3.51 times as on March 31, 2023 as against 3.73 times as on March 31, 2022. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 4.25 times as on March 31, 2023 as compared to 4.06 times as on March 31, 2022. The debt protection metrics is marked by Interest Coverage Ratio at 2.46 times as on March 31, 2023 as compared to 2.15 times as on March 31, 2022 and Debt Service Coverage Ratio at 1.42 times as on March 31, 2023 as compared to 1.34 times as on March 31, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood at 0.10 times as on March 31, 2023 as compared to 0.08 times as on March 31, 2022. Acuité believes that going forward the financial risk profile will improve over the medium term. Elongated working capital cycle The working capital cycle is marked by Gross Current Assets (GCA) of 110 days as on March 31, 2023 as compared to 137 days as on March 31, 2023. The debtor days decreased to 38 days as on March 31, 2023 as compared to 45 days as on March 31,2022. Furthermore, the inventory days decreased to 71 days in March 31, 2023 as compared from 94 days as on March 31, 2022. The creditor days increased to 23 days as on March 31, 2023 from 14 days as on March 31, 2022. The firm funds it's working capital by availing bank limits which witnessed high utilisation with availment of adhoc limits since November 2023 .Acuité believes that going forward the working capital operations of the company will remain intensive over the medium term. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The liquidity is stretched marked by steady net cash accruals of Rs.4.76 Cr. as on March 31, 2023 as against long term debt repayment of Rs. 2.40 Cr. over the same period. The cash and bank balances stood at Rs.0.09 Cr. as on March 31, 2023 as compared to Rs. 0.25 Cr. as on March 31, 2022. The current ratio stood at 1.15 times as on March 31, 2023 as compared to 1.19 times as on March 31, 2022. The bank limit utilisation remained utilised at 75 percent , the firm has also availed adhoc limit from time to time .Acuité believes that going forward the liquidity position of the company will remain stretched due to small accretions. high dependence on bank lines to fund working capital requirement , low current ratio albeit in the absence of any major debt funded capex plans.
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| Outlook: Stable |
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Acuité believes that the outlook on SRM will remain 'Stable' over the medium term on account of experienced management. The outlook may be revised to 'Positive' in case the firm registers higher-than expected growth in its revenue and profitability while improving its liquidity position. Conversely, the outlook may be revised to 'Negative' in case the firm faces deterioration in the firm financial risk profile or significant elongation in working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 170.24 | 102.81 |
| PAT | Rs. Cr. | 2.80 | 1.04 |
| PAT Margin | (%) | 1.64 | 1.02 |
| Total Debt/Tangible Net Worth | Times | 3.51 | 3.73 |
| PBDIT/Interest | Times | 2.46 | 2.15 |
| 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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