­Established track record and experienced management
The firm is engaged in the layer poultry farming and wholesale trading of eggs for more than a decade. Its promoter, Mr. Phani Kumar has been engaged in this line of business since the past three decades and gained vast amount of experience in the industry. The extensive experience of the promoter is also reflected through the healthy revenue growth. The revenue of the firm stood at Rs.48.23 crore in FY2023 as against Rs.47.77 crore in FY2022. Further, SRPF has successfully completed expansion of layer bird’s capacity from 3.60 Lakh layer bird’s capacity to 7.30 Lakh layer birds. Acuité believes that the long track record along with experienced management and capex may help the firm maintain a stable business risk profile.

Average financial risk profile
The financial risk profile of the firm recorded improvement in FY2023 albeit remains average marked by moderate gearing and modest debt protection metrics. The networth of the firm stood at Rs. 10.14 crore on March 31, 2023 as against Rs. 4.90 crore on March 31, 2022. The increase in networth is on account of profit accretion and additional funds infused by the partners as capital. The gearing ratio stood at 2.43 times on March 31, 2023 as against 2.86 times on March 31, 2022. The TOL/TNW stood at 2.59 times on March 31, 2023 as against 3.36 times on March 31, 2022. The Interest coverage ratio stood at 2.35 times on March 31, 2023 as against 3.00 times on March 31, 2022. The Debt Service Coverage Ratio stood at 1.41 times on March 31, 2023 as against 1.54 times on March 31, 2022. The decrease in coverage ratios is due to increase in the debt levels of the firm. The total debt of the firm stood at Rs. 24.67 crore on March 31, 2023 (PY Rs. 14.01 crore), which consists of long term debt of Rs. 10.22 crore, Rs. 0.40 crore USL from directors, Rs. 13.00 crore of short term debt and CPLTD of Rs. 1.06 crore. Debt/EBITDA stood at 6.65 crore on March 31, 2023 as against 4.53 crore on March 31, 2022.

Elongation in working capital cycle 
SRPF's operation are working capital intensive in nature marked by Gross Current Asset (GCA) days of 144 days in FY2023 and 72 days in  FY2022. The debtor collection period of the firm stood at 6 days as on March 31, 2023. The firm's inventory levels increased to 112 days as on March 31, 2023 vis-à-vis 63 days as on March 31, 2022. The creditor payback period stands at 14 days as on March 31, 2023 as against 23 days as on March 31, 2022.

Susceptibility of profit margins to volatility in eggs and raw material prices
The profit margins are susceptible to volatility in eggs prices - inherent in the poultry business. Raw materials refer to maize and soya beans which are required for manufacturing of poultry feeds. Raw materials’ prices are largely dependent on several external factors like demand outlook and productions and are also susceptible to volatility due to factors such as weather conditions, revision in minimum support price of maize by the government and demand and supply scenario in agricultural markets. Also, bird flu and other diseases are critical risks in the poultry business, which can affect demand and cause prolonged impact on prices.

Risk of capital withdrawal associated with partnership nature.
SRPF is a partnership firm established in 2007. Any substantial withdrawal of capital by the partners is likely to have an adverse impact on the capital structure.