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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 67.00 | ACUITE BBB- | Negative | Reaffirmed | - |
| Bank Loan Ratings | 5.00 | - | ACUITE A3 | Assigned |
| Bank Loan Ratings | 88.00 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 160.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) and reaffirmed and assigned a short-term rating to ‘ACUITE A3' (Read as ACUITE A Three) on Rs.160.00Cr. of bank facilities of Soubhik Exports Limited (SEL). The outlook is ‘Negative’.
Rating Rationale The rating reaffirmation takes into account its experienced promoters, comfortable financial risk profile of the group during FY2022. The rating also factors the moderate working capital management marked by comfortable gross current asset (GCA) days during FY2022. These strengths are partially constrained by the low profitability margin and exposure to geographic concentration and commodity product risk. |
| About Company |
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West Bengal based - Soubhik Exports Limited was incorporated in 1996. It is involved in wholesale trading of agricultural goods such as cotton, wheat, maize, sugar, chick seeds among others to Bangladesh. The company is also involved in manufacturing of rice bran oil from 2015 onwards with an installed capacity of 250 MTPD. Currently the company is managed by Mr. Prodiptto Majumder, Mr. Pawan Shaw, and Mr. Suresh Halder.
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| About the Group |
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West Bengal- based, Remo Exports Enterprise was incorporated in 1996 as a proprietorship concern. The company is engaged in the business of trading of agricultural goods such as cotton, wheat, maize, sugar, chick seeds among others to Bangladesh. The proprietor of the firm is Mr. Prodiptto Majumder.
West Bengal- based, Stoney Vinimay Private Limited was incorporated in 2011. The company is engaged in the business of trading of agricultural goods such as cotton, wheat, maize, sugar, chick seeds among others to Bangladesh. The present directors of the firm are Mr. Prodiptto Majumder and Mr. Pawan Shaw. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| For arriving at this rating, Acuité has revised the approach to include Stoney Vinimay Private Limited and Remo Exports Enterprise into the ‘Soubhik Group’ as the group has common management, same line of operation, financial linkages in terms of corporate guarantee and operational linkages in terms of inter- company sales and purchases. Soubhik Exports Ltd has given a corporate guarantee for the bank limits availed by Stoney Vinimay Pvt Ltd and Remo Export Enterprise and Stoney Vinimay Pvt Ltd is holding ~8% stake in Soubhik Exports Limited. Hence, Acuité has consolidated the business and financial risk profiles of Soubhik Exports Limited, Stoney Vinimay Pvt. Ltd. and Remo Exports Enterprise together referred to as ‘Soubhik Group’. |
Key Rating Drivers
| Strengths |
| Experienced management and long track record of operation
The flagship company of the group, Soubhik Exports Limited was established in1966byMr. Prodiptto Majumder and engaged in export of agricultural products such as rice, wheat, maize, pulses, chickpeas and cotton mainly to Bangladesh. In 2015, the company has installed rice bran oil mill in West Bengal. During 1996 the group has started trading business in Remo Exports Enterprises and in 2011 they started trading of commodities in Stoney Vinimay Pvt Ltd. Currently the group is managed by Mr. Prodiptto Majumder, who has experience of more than six decades in the agricultural trading business along with his son Mr. Soumyadeep Majumder, who also has more than two decades of experience in similar industry. Acuité derives comfort from the long experience of the promoter will continue to support the business going forward. Comfortable working capital management The working capital management of the company is marked by comfortable gross current assets (GCA) days of 44 days in FY2022 as compared to 120 days in FY2020. This significant improvement in GCA day is mainly on account of decrease in debtor days during FY2022 to 17 days from 66 days in the previous year. Further, the improvement in GCA days are also emanates from the improving inventory holding period to 16 days in FY2022 as compared to 41 days in the previous year. This improvement in inventory is on account of decrease in trading material during the year end. Acuité believes that the ability of the company to manage its working capital operations efficiently will remain a key rating sensitivity. Comfortable financial risk profile The financial risk profile of the group is marked by modest net worth, moderate gearing and healthy debt protection metrics. The net worth of the company stood comfortable at Rs.73.63 crore in FY 2022 as compared to Rs. 62.57 crore in FY2021. This improvement in networth is mainly due to the retention of profit for FY2022. Acuite has also considered unsecured loan of Rs.22.40 crore as quasi equity, as the same amount is subordinated with bank debt. The gearing of the company stood moderate at 1.22 times as on March 31, 2022 when compared to 1.91 times as on March 31,2021. This improvement in overall gearing is on account of decrease in short term borrowings during 31st March 2022. The total outside liability to tangible networth (TOL/TNW) stood high at 3.27 times in FY2022 as compared to 3.47 times in the previous year. Interest coverage ratio (ICR) is healthy and stood 3.27 times in FY2022 as against 3.05times in FY 2021. The debt service coverage ratio (DSCR) of the company also stood comfortable at 2.87 times in FY2022 as compared to 2.82 times in the previous year. The net cash accruals to total debt (NCA/TD) stood comfortable at 0.17 times in FY2022 and in 0.06 times the previous year. Going forward, Acuité believes that the financial risk profile of the firm is expected to remain comfortable backed by average net cash accruals and in absence of any major debt funded capex in near to medium term. |
| Weaknesses |
| Low profitability margin |
| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity Position |
| Stretched |
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The group has stretched liquidity marked by ~95 percent utilization of bank limit for the last six months ended January 2023. The current ratio of the group stood low at 1.10 times as on 31st March 2022. The group has comfortable net cash accruals of Rs.15.10 crore as against nil long term debt obligations in FY2022. The cash accruals of the company are estimated to remain in the range of around Rs. 5.51crore to Rs. 7.29 crore during 2023-24as against Rs.1.00 crore long term debt obligation in FY2023 and in FY2024 respectively. The moderate working capital management of the group is marked by comfortable Gross Current Asset (GCA) days of 44 days as on 31st March 2022. Acuité believes that the liquidity of the company is likely to remain stretched over the medium term on account high reliance on external borrowings along with of moderate cash accruals against long debt repayments over the medium term. |
| Outlook: Negative |
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Acuité has revised the outlook of Soubhik Group to ‘Negative’ on account of decline in business risk profile and stretched liquidity position. The rating may be 'downgraded' if there is higher than expected decline in its revenues or profitability or further deterioration in working capital management. The outlook may be revised to 'Stable ' if the company is able to show significant improvement revenue and in profitability margins and further improvement in financial risk profile. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 1844.68 | 656.86 |
| PAT | Rs. Cr. | 11.75 | 3.07 |
| PAT Margin | (%) | 0.64 | 0.47 |
| Total Debt/Tangible Net Worth | Times | 1.22 | 1.91 |
| PBDIT/Interest | Times | 3.27 | 3.05 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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• 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 • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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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