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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1.30 | ACUITE BB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 32.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 33.30 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long term rating of 'ACUITE BB' (read as ACUITE Double B) and the short term rating of 'ACUITE A4+' (read as ACUITE A four plus) on the Rs. 33.30 crore bank facilities of Sungold Processed Foods (SPF). The outlook is ‘Stable’.
Reasons for Reaffirmation The rating reaffirmation is on account of stable operating performance and improvement in debt protection metrics of Sungold Processed Foods. The operating income of the firm improved to Rs. 66.38 Cr. in FY2023 as against Rs.62.47 Cr. in FY2022. The Interest Coverage ratio (ICR) improved significantly to 5.35 times in FY2023 as against 3.30 times in FY2022. The Debt Service Coverage Ratio (DSCR) stood at 3.21 times in FY2023 as against 1.23 times in FY2022. The rating also factors the experienced management and established track record of operations of the firm. However, the rating is constrained by working capital intensive nature of operations and exposed to foreign exchange fluctuations and seasonal nature of business. Going forward, improvement in scale of operations while maintaining the profitability margins and capital structure will be a key rating monitorable. |
| About the Firm |
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Constituted in 2002, Andhra Pradesh based Sungold Processed Foods (SPF) is a partnership firm engaged in processing & exporting of mango pulp. The manufacturing facility is located at Bangarupalyam in Chittoor, Andhra Pradesh, with an installed capacity of 10000 MT per annum. The firm is also engaged in processing of papaya and Guava on job work basis. The operations of the firm are managed by its partners Mr. Abhishek Sashidharan and Ms. Geeta Sashidharan.
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| Unsupported Rating |
| Not applicable |
| Analytical Approach |
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Acuité has considered the standalone business & financial risk profiles of Sungold Processed Foods (SPF) to arrive at the ratings.
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| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations
SPF started operations in 2002. The firm is engaged in processing and export mango pulp. The partners, Mr. Abhishek Sashidharan and Ms. Geeta Sashidharan have over a decade of experience in the industry. The extensive experience of the partners has helped the firm in maintaining good business relations with clients, majority of whom have been associated with the firm for more than a decade. SPF exports around 95 percent of its total sales primarily in the markets of Saudi Arabia, Switzerland, Kuwait, Germany etc. On the back of stable and repeated orders, the operating income of the firm increased to Rs.66.38 Cr. in FY2023 as against Rs.62.47 Cr. in FY2022. The operating margins stood at 12.51 percent in FY2023 as against 14.53 percent in FY2022. The PAT margin of the firm stood at 8.20 percent in FY2023 as against 7.95 percent in FY2022. Acuité believes that SPF will continue to benefit from the experience of its partners and established track record of operations in maintaining their business risk profile over the near to medium term. Moderate Financial risk profile
SPF’s financial risk profile is moderate, marked by low net worth, moderate gearing and comfortable debt protection metrics. The tangible net worth stood at Rs.9.30 Cr as on March 31, 2023. The company’ total debt stood at Rs.19.39 Cr. as on March 31, 2023 includes long term loans of Rs.4.53 Cr., Short term debt of Rs.2.81 Cr, current maturities for the long portion of Rs.1.85 Cr and USL directors and promoters of Rs.10.20 Cr. The USL from directors and promoters includes Partner's current account of Rs.9.45 Cr. The firm's overall gearing stood at 2.08 times as on March 31, 2023 as against 1.56 times as on March 31, 2022. However, adjusted debt equity (adding back the partner’s current account into equity) stood at 0.53 times as on March 31, 2023 as against 0.82 times as March 31, 2022. The Total outside liabilities to Tangible net worth (TOL/TNW) stood at 2.65 times as on March 31, 2023 as against 2.49 times as on March 31, 2022. The debt protection metrics is comfortable marked by Interest coverage ratio (ICR) at 5.35 times in FY2023 as against 3.30 times in FY2022. The Debt service coverage ratio (DSCR) stood at 3.21 times in FY2023 as against 1.23 times in FY2022. The net cash accruals to total debt (NCA/TD) stood at 0.36 times in FY2023 as against 0.44 times in FY2021. Acuité expects the firm's financial risk profile to remain moderate over the medium term in absence of any major debt-funded capex plan. |
| Weaknesses |
| Working capital intensive nature of operations
SPF’s operations are working capital intensive marked by Gross current asset (GCA) days of 134-136 days for the last two years ending March 31, 2023. The GCA days are mainly driven by debtor days. The debtor days stood high at 109 days as on March 31, 2023 as against Rs.112 days as on March 31, 2022. The inventory days stood to 9 days as on March 31, 2023 as against 21 days as on March 31, 2022. The creditor days improved and stood at 42 days as on March 31,2023 as against 76 days as on March 31, 2022. The average utilization of the fund based bank limits of the firm stood at 71.1 percent for last twelve months period ended October 2023. The utilisation is generally high during procurement season and moderates during non-peak season. Acuite believes that the working capital management to remain intensive in nature over the medium term. Exposed to foreign exchange fluctuations and seasonal nature of business
SPF’s sales are through exports to Saudi Arabia, Switzerland, Yemen, Germany, Kuwait, etc., thus being exposed to fluctuations in foreign currency. On the other hand, operating in a seasonal industry, the raw materials are prone to price fluctuations. Moreover, the firm also remains vulnerable to agroclimatic risks since it deals with mangoes. Being seasonal, the prices of fruit pulp are vulnerable to the idiosyncrasies of nature. Hence, the ability of SPF to protect its profitability and profit margins in case of any adverse or sharp fluctuations in the exchange rates or mango prices, shall be a key monitorable. |
| Rating Sensitivities |
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| Liquidity: Adequate |
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The firm has adequate cash accruals against the its debt obligations. It has generated NCA of Rs.6.97 Cr. in FY2023 against its debt obligation of Rs.1.85 Cr during the same period. Going forward, the net cash accruals are expected to remain in the range of Rs.7.50 – 8.06 Cr. in FY24-25 as against maturing debt obligations of Rs.1.76- 1.68 Cr. The current ratio of the firm stood at 2.44 times as on March 31, 2023. The average utilisation of its fund based working capital facility stood moderate at 71.1 percent for the last twelve months ended October, 2023. The unencumbered cash and bank balance stood at Rs.2.24 Cr. as on March 31, 2023.
Acuite believes that the liquidity position would be adequate over the medium term on account of moderate cash accruals as against negligible repayment obligations. |
| Outlook: Stable |
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Acuité believes that SPF will maintain a stable business risk profile over the medium term. The firm will continue to benefit from its established operations and long-standing relations with customers and suppliers. The outlook may be revised to ‘Positive’ in case the firm registers higher-than-expected improvement in its scale of operations while maintain its profitability margins and capital structure. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in the firm’s revenue or profitability or significant deterioration in the capital structure and liquidity position
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 66.38 | 62.47 |
| PAT | Rs. Cr. | 5.44 | 4.96 |
| PAT Margin | (%) | 8.20 | 7.95 |
| Total Debt/Tangible Net Worth | Times | 2.08 | 1.56 |
| PBDIT/Interest | Times | 5.35 | 3.30 |
| 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 • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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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