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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 19.32 | ACUITE BB- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 19.32 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE BB-’ (read as ACUITE double B minus) to the Rs.19.32 Cr bank facilities of Suprabha Industries Limited (SIL). The outlook remains ‘Stable’.
The rationale for the rating The rating factors the improvement in the scale of operations. The rating also considers the reputed clientele base, experienced management and the company’s long presence in the industry. These strengths are, however, offset by the company’s moderate financial risk profile, working capital intensive nature of operations and the exposure to the volatile raw material prices. |
| About the Company |
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Incorporated in 1995, Suprabha Industries Limited (SIL) is based in Lucknow and is engaged in the manufacturing of automobile parts of commercial vehicle exclusively for Tata Motors’ plant in Lucknow. The company is headed by Mr. Devendra Kumar Mantri, Mrs. Tanuja Mantri and Mr. Shashankdhar Mantri. The manufacturing unit is located in Lucknow.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of SIL to arrive at the rating.
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Key Rating Drivers
| Strengths |
SIL has a long track record of operations of over two decades and has an extensively experienced management with more than two decades of industry knowledge. The company is headed by Mr. Devendra Kumar Mantri, Mrs. Tanuja Mantri and Mr. Shashankdhar Mantri. Acuité believes that the experienced promoters and the company’s long standing in the industry will continue to aid the company in maintaining healthy relations with its reputed customers and suppliers.
SIL has achieved improvement in FY2022 and has achieved revenues of Rs.41.11 Cr in FY2022 as compared to revenues of Rs.14.64 Cr in FY2021. The improvement in the operating revenues is due to increase in the demand and orders from the customers and the timely fulfilment of such over the same period. The clients of SIL are Tata Motors, Omax Auto Limited and Claas India Private Limited. Moreover, the company has generated revenues of Rs.25.02 till September, 2022 (provisional). Acuité believes that, going forward the growth in scale of operations will be key monitorable.
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| Weaknesses |
The company’s moderate financial risk profile is marked by relatively low but improving net worth base, moderate gearing and healthy debt protection metrics. The tangible net worth (TNW) of the company increased to Rs.16.23 Cr as on March 31, 2022 from Rs.10.50 Cr as on March 31, 2021. Gearing of the company stood at 1.01 times as on March 31, 2022 as against 1.35 times as on March 31, 2021. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood moderate at 1.94 times as on March 31, 2022 as against 2.27 times as on March 31, 2021. The healthy debt protection metrics of the company is marked by Interest Coverage Ratio (ICR) at 2.67 times as on March 31, 2022 and Debt Service Coverage Ratio (DSCR) at 2.14 times as on March 31, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.13 times as on March 31, 2022. Acuité believes that going forward the financial risk profile of the company will remain moderate over the medium term, in the absence of any major debt funded capex plans.
The working capital intensive nature of operations of the company is marked by Gross Current Assets (GCA) of 225 days as on 31st March 2022 as compared to 381 days as on 31st March 2021. The high GCA days are on account of high inventory period. The inventory holding stood at 137 days as on 31st March 2022 as compared to 289 days as on 31st March 2021. The debtor period stood moderate at 66 days as on 31st March 2022 as compared to 120 days as on 31st March 2021. Acuité believes that the working capital operations of the firm will remain almost at similar levels as evident from the high inventory levels over the medium term.
The operating margin of SIL declined to 8.57 per cent in FY2022 as compared to 17.37 per cent in FY2021. The PAT margin on the other hand recovered to 0.25 per cent in FY2022 as against losses of 5.44 per cent as on FY2021. The ROCE levels stood at 5.41 per cent in FY2022 as against 1.30 per cent in FY2021. Acuité believes that the company's ability to increase their profitability margins over the medium term would be a key rating sensitivity.
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| Rating Sensitivities |
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| Material covenants |
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None
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| Liquidity Position: Adequate |
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The company’s liquidity is adequate marked by steady net cash accruals of Rs.2.17 Cr as on March 31, 2022 against long term debt repayment of only Rs.0.30 Cr over the same period. The cash and bank balances of the company stood at Rs.2.41 Cr as on March 31, 2022 as compared to Rs.0.95 Cr as on March 31, 2021. The current ratio stood moderate at 1.04 times as on March 31, 2022 as compared to 0.88 times as on March 31, 2021. However, the fund based limit utilisation is at 70 per cent over the six months ended September, 2022. The working capital management of the company is intensive in nature marked by Gross Current Assets (GCA) of 225 days as on 31st March 2022 as compared to 381 days as on 31st March 2021. Acuité believes that going forward the company will maintain adequate liquidity position due to the gradually improving cash accruals.
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| Outlook: Stable |
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Acuité believes that the outlook on SIL will remain 'Stable' over the medium term on account of the long track record of operations, experienced management and improvement in the operating income. The outlook may be revised to 'Positive' in case of significant growth in revenue or profit margins from the current levels. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or profitability margins, deterioration in financial risk profile or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 41.11 | 14.64 |
| PAT | Rs. Cr. | 0.10 | (0.80) |
| PAT Margin | (%) | 0.25 | (5.44) |
| Total Debt/Tangible Net Worth | Times | 1.01 | 1.35 |
| PBDIT/Interest | Times | 2.67 | 1.81 |
| Status of non-cooperation with previous CRA (if applicable) |
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None
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| Any other information |
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None
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| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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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