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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 54.00 | ACUITE BBB | Stable | Downgraded | - |
| Bank Loan Ratings | 106.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding | 160.00 | - | - |
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Rating Rationale |
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Acuité has downgraded the long term rating to 'ACUITE BBB' (read as ACUITE triple B) from 'Acuite BBB+' (read as ACUITE triple B plus) and reaffirmed the short term rating of 'ACUITE A2' (read as ACUITE A two) on the Rs 160 crore bank facilities of Spectrum Ethers Private Limited (SEPL). The outlook is ‘Stable’.
Rationale for Rating The rating downgrade factors in the moderation of the company’s financial risk profile in FY2023 and 9MFY2024 along with expected decline in the revenues and profitability in FY2024 led by heavy dumping from China leading to decline in the sales realisation of its key product Profenofous Tech. The rating continues to factor in working capital intensive nature of operations and company’s exposure to agro-climatic fluctuations. The ratings however, draws comfort from the healthy Financial risk profile and liquidity position despite moderation in FY23 and 9MFY2024. The rating also draws comfort from establish and wide distribution network, long standing relationship with its customers and suppliers. |
| About the Company |
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Incorporated in 1993, ?Spectrum Ethers Private Limited is engaged in manufacturing of agrochemicals and is based out of Nashik, Maharashtra. The key products of the company are Profenofous Tech, Propiconazole Tech,Turbofous Tech etc and the aggregate installed capacity of 6300 MT. The directors of the company are Dr. Milind Shankarrao Kolhe, Shri. Jugalkishore Ganpatlalji Agrawal, Shri. Arun Gangadhar Daware and Shri. Chandrashekhar Vitthalrao Joshi.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of SEPL to arrive at this rating.
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| Key Rating Drivers |
| Strengths |
| Established track record along with experienced management
Incorporated in 1993, SEPL has an established track record of operation of nearly 30 years in manufacturing of agrochemicals. The directors of the company Dr. Milind Shankarrao Kolhe, Shri. Jugalkishore Ganpatlalji Agrawal, Shri. Arun Gangadhar Daware and Shri. Chandrashekhar Vitthalrao Joshi.The experience of the management has helped the company to maintain a longstanding relationship with its customers and suppliers. Acuite believes that SEPL will continue to benefit from its experienced management and a longstanding relationship with reputed clientele. Healthy financial risk profile despite moderation The networth of the company remains healthy and incresaed from Rs.112.58 Crore in FY22 to Rs.145.26 Crore in FY23 on account of accreation to the reserves. The total debt of the company as on March 31, 2023 stood at Rs. 30.20 Cr consisting Rs. 24.4 crore working capital limits and Rs. 5.80 Cr of term debt. The capital structure of the company remains comfortable as reflected by low gearing ratio of 0.21 times in FY23 against 0.13 times in FY22. The financial risk profile of the company continued to remain healthy in FY2023 despite moderation as marked by DSCR and ICR of 14.42 times and 31.97 times against 59.05 times and 77.09 times in FY22 respectively. Acuite believes that the financial risk profile is expected to further moderate in FY24 and FY25 with the expected decline in the EBDITA though it will continue to remain comfortable. |
| Weaknesses |
| Revenue Growth Accompanied by Declining Profitability
SEPL registered revenue of Rs.402.97 Cr in FY23 against Rs.365.90 Crore in FY22 marking a growth of 10 %. Profenofous Tech and Ethion are two major revenue generating products of the company which has derived the revenue growth in FY2023. The growth driven by increased sales volumes majorly emanating from the export market. The company has achieved Rs. 213.90 Cr till December 2023 and expected to close the year at Rs. 285 Crore marking a decline of 29% compared to the previous fiscal. The decline is majorly on account of decline in the realisation for the company led by dumping from China. In the current fiscal the average prices of Profenous tech have decline by 35 % as compared to FY23. Working capital intensive operations The working capital operations of the company is marked by gross current assets days of 172 days in FY23 against 183 days in FY22. There is decrease in GCA days on an account of decreased inventory days. The debtor days of the company remained in a range of 80-100 days in last three years with 98 days in FY 2022, 89 days in FY 2022 and 84 days in FY 2021. Further, the creditor days of the company is at 105 days in FY23 against 147 days in FY22. Acuite believes that working capital operations of the company may continue to remain intensive considering the nature of business. Risks associated with agro-climatic fluctuations in the agro-chemicals sector The company is a part of the seasonal agro-chemicals sector, which is closely correlated to the volume of agriculture in the nation and, in turn, directly dependent on the monsoons. The potential need for various agro-chemicals, such as pesticides, insecticides etc. may be directly impacted by insufficient or untimely monsoons, which may have an effect on the production of some crops. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company's liquidity position stood adequate marked by net cash accruals of Rs. 49.76 crores in FY2023 against Rs.1.07 Cr of debt repayment obligations during the same tenure. Further, the cash accrual is expected to remain in the range of Rs. 50 to Rs. 54 Cr. against repayment of Rs. 2.59 Cr. and 6.76 Cr. respectively in FY2023 and FY2024. Besides, the company has free cash and bank balance (including FDs) of Rs. 37.14 Cr as on March 31, 2023. Also, the company has buffer in the working capital limits.
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| Outlook: Stable |
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Acuité believes that SEPL will maintain a ‘Stable’ outlook and will continue to derive benefit over the medium term due to its extensive experience of promoters, healthy financial risk profile. The outlook may be revised to ‘Positive’, if the company demonstrates substantial and sustained growth in its revenues along with increase in profitability margins from the current levels while maintaining its financial risk profile. Conversely, the outlook may be revised to ‘Negative’ if the company generates lower than anticipated cash accruals, or any significant debt-funded capex thereby impacting its financial risk profile and its liquidity.
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| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 402.97 | 365.90 |
| PAT | Rs. Cr. | 32.67 | 46.69 |
| PAT Margin | (%) | 8.11 | 12.76 |
| Total Debt/Tangible Net Worth | Times | 0.21 | 0.13 |
| PBDIT/Interest | Times | 31.97 | 77.09 |
| 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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