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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 20.00 | ACUITE BB+ | Stable | Assigned | - |
| Bank Loan Ratings | 99.00 | ACUITE BB+ | Stable | Upgraded | - |
| Bank Loan Ratings | 4.00 | - | ACUITE A4+ | Assigned |
| Total Outstanding | 123.00 | - | - |
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Rating Rationale |
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Acuite has upgraded long-term rating from 'ACUITE BB’ (read as ACUITE double B) to 'ACUITE BB+’ (read as ACUITE double B Plus) on the Rs. 99.00 crore bank facilities of SMS BIOFUEL PRIVATE LIMITED. The outlook is 'Stable'
Acuite has further assigned the long-term rating of 'ACUITE BB+’ (read as ACUITE double B Plus) and Short Term rating of 'ACUITE A4+’ (read as ACUITE A four plus) on the Rs. 24 crore bank facilities of SMS BIOFUEL PRIVATE LIMITED. The outlook is 'Stable' Rationale for Rating The rating action takes into account the completion of construction phase of project and initiation of commercial production from December 30, 2023. Further the rating factors the promoters support in form of fund infusion of Rs~15 crore in form of Unsecured loan showing promoters commitment towards business however the rating is constrained by delay in project execution resulting in to lower than envisaged for current fiscal. |
| About the Company |
| Based in Indore, Madhya Pradesh and incorporated in 2021, SMS Biofuel Private Limited is engaged in the manufacturing of Ethanol and allied products. The company is directed by Mr. Sorabh Sood and Mr. Lakshyadeep Singh. Company has completed the construction of plant with capacity of 125 KLPD Ethanol Production with steam based captive power plant of 3MW in Timrani , Harda Distrct in Madhya Pradesh. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered the standalone business and financial risk profiles of SMS Biofuel Private Limited to arrive at the rating. Further the management linkage with oasis group is also factored in to arrive at rating. |
| Key Rating Drivers |
| Strengths |
| Experienced Management
Promoters and Directors of company have vast experienced in manufacturing of ENA, IMFL and Country liquor. Strong shareholding of Experienced Promoters will help the company in terms of Knowledge and Support. Mr. Satish Sood, Mr. Trilochan Singh and Mr. Chitwan Malhotra are promoters of the company and holds ~three decades of experince in the same line of business. Funding Risk: Low Company has raised Rs 9 crore in form of Equity share capital and promoters has infused Subordinated USLs Rs 23.50 crore in the company to meet the funding requirement. Company has taken debt of Rs 99 crore for the funding of Project. SBI has further sanctioned working capital limits as CC limit of Rs 20 crore, SLC limit of Rs 1 crore and Bank Guarantee of Rs 1 crore. Original project cost was Rs ~120 crore while actual project cost is Rs ~136 crore. As per our discussion with banker and management cost overrun is funded by promoters in form of USLs (Subordinated to Bank Debt) Demand Risk: Low The Company has been shortlisted for the state of Madhya Pradesh under the Expression of Interest (EOI) for signing long term bipartite agreement with upcoming dedicated ethanol plants in ethanol deficit states for supply of denatured anhydrous ethanol to oil marketing companies (OMCs) for Annual Offtake Quantity offer of 60 KLPD which is ~50% of the total production offtake and balance capacity with Reliance BP Mobility Limited. Company has 100% long term off take agreements accordingly demand risk is now assessed at low level. Ethanol demand will rise in upcoming years as the target to achieve 20% ethanol blending in petrol by 2025 will boost the demand. Company has started sale of Ethanol in month of January 24. |
| Weaknesses |
| Execution Risk: Project delayed and completed
SCOD for the Project was April 23 however project was not completed on time and got delayed. Company achieved actual COD on December 30, 2023.This delay in project execution resulted in cost over run of Rs~15 crore which was funded by promoters. company was unable its envisaged projections for FY 24. Regulated indutry Raw materials required for grain based ethanol unit (Bazra, Maze, Broked Rice) are regulated by governemnet policies. Any change in government policies may result in difficulties in raw material procurement. This may result in loss of revenue or lower operating margins. |
| Rating Sensitivities |
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Achievement of Operational performance as envisaged Company ability to acheive the optimum production level |
| Liquidity Position |
| Adequate |
| Company has stated generating operating income in Jan 24. Company has debt repayment of Rs 9.50 crore in FY 25. SBI has sanctioned cash credit limit of Rs 20 crore. Any shortfall of funds will be funded by the Promoters to meet the debt obligation or contingencies. |
| Outlook: Stable |
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Acuité believes that Company will pace for acheving the Optimum production level hence the outlook is stable and the company will benefit over the medium term from its experienced management. The outlook may be revised to 'Positive' in case of company reports higher operating income with better margins whhile maintaing the efficient working capital operations. The outlook may be revised to 'Negative' in case of lower operating incom and margin, deterioration in financial risk and liquidity profile of the company.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 0.00 | 0.00 |
| PAT | Rs. Cr. | (0.11) | (0.06) |
| PAT Margin | (%) | 0.00 | 0.00 |
| Total Debt/Tangible Net Worth | Times | 3.26 | 0.02 |
| PBDIT/Interest | Times | (3.74) | (18.81) |
| 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 • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.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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