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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 35.90 | ACUITE BBB | Stable | Upgraded | Positive to Stable | - |
| Bank Loan Ratings | 24.10 | - | ACUITE A3+ | Upgraded |
| Total Outstanding | 60.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term ratings to ‘ACUITE BBB‘ (read as ACUITE Triple B) from ACUITE BBB- (read as ACUITE Triple B minus) and short-term rating to ‘ACUITE A3+’ (read as ACUITE A three plus) from ‘ACUITE A3’ (read as ACUITE A three) on the Rs.60.00 crore bank facilities of Supreme Gums Private Limited (SGPL). The outlook has been revised from 'Positive' to ‘Stable’.
Rationale for Upgradation/Revision in the Outlook Rating has been upgraded and outlook has been revised on account of higher than expected growth recorded in FY 22-23 as compared to FY21 & FY22. There has been constant improvement in operating performance in line with the margins, improved financial risk profile with healthy tangible net worth and strong liquidity position of the entity. |
| About the Company |
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S?upreme Gums Private Limited (SGPL) based in Rajasthan was incorporated in the year 2002. The company is promoted by Mr. Naresh Kumar Jain. The company is engaged in the manufacturing of guar gum powder and trading of guar splits. SGPL caters largely to the export market and sells its products under the ‘SUPREME’ brand name.
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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 SGPL to arrive at the rating
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| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
The company was incorporated in the year 2002 and has established presence of over a decade in the said line of business. The company also has an established market for its own brand ‘SUPREME’ in international market like USA, Russia, Latin America and Europe as well as in domestic market. The company is largely in export of its products which contributes to 98 percent of its total revenue in FY 2022. The promoter Mr. Naresh Kumar Jain has almost two decades of experience in the guar gum industry. The company’s operations are also supported by second generation entrepreneur, Mr. Tarun Jain and second line of management. Further, the company’s manufacturing facilities are located in Rajasthan which provides proximity to raw material thereby reducing logistic cost. Acuité believes that the company will continue to benefit from the promoter’s experience, its established presence in the industry and close proximity to raw material improving its business risk profile over the medium term.
Healthy financial risk profile The financial risk profile of the company stood healthy marked by improving net worth, low gearing and strong debt protection metrics. The tangible net worth stood at Rs. 95.05 Cr. as on 31st March 2023 against Rs. 62.25 Cr. in FY 2022. The company follows conservative leverage policy. Debt to Equity ratio improved by 40 bps and stood at 0.43 times in FY 23 as against 0.83 times in FY 22. Improvement is on account of profits accretions and no major capital expenditure done. The total outside liabilities to total net worth (TOL/TNW) stood at 0.63 times as on FY 23 against 0.98 times as on FY 22. the debt protection matrix (i.e. DSCR & ISCR) stood at 9.52 & 12.40 times in FY 23 against 6.39 & 8.46 times in FY 22 respectively. |
| Weaknesses |
| Volatility in raw material prices and foreign currency fluctuation risk
The major raw material for manufacturing guar gum powder is guar seed, which is an agro commodity. Its availability is highly dependent on monsoons; guar seed supply can vary which may lead to fluctuations in prices. However, the risk is mitigated to a certain extent as SGPL enters into contracts with customers after the harvest usually in the month of October to January. The company majorly exports its products to USA, Europe, Latin America etc. which contributes 98 percent of the revenue. The margins are partially impacted by foreign currency fluctuation. |
| Rating Sensitivities |
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| Liquidity Position |
| Strong |
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The company has strong liquidity marked by net cash accruals to its maturing debt obligations, current ratio, cash and bank balance. The company generated the net cash accruals of Rs. 33.76 Cr. for FY 23 as against the debt repayment obligations of Rs. 0.02 Cr. The current ratio of the company stood at 2.32 times as on 31 March 2023 as against 1.78 times in the previous year. Cash and Bank Balances of company stood at Rs. 13.99 crore. The liquidity of the company is expected to improve as company is expecting to generate net cash accruals of Rs. 20–25 Cr. in next medium term indicating availability of funds for any future endeavours. The average fund based utilization for last 15 months is 36.06%.
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| Outlook - Stable |
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Acuité believes that SGPL will maintain a ‘Stable’ outlook and benefit over the medium term from its experienced management. The outlook may be revised to 'Positive' if the company reports higher than expected revenues and profitability margins. Conversely, the outlook may be revised to 'Negative' in case of decline in the revenue from operations & margins of the company putting pressure on liquidity and leverage position. ?
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 334.22 | 196.26 |
| PAT | Rs. Cr. | 32.82 | 9.87 |
| PAT Margin | (%) | 9.82 | 5.03 |
| Total Debt/Tangible Net Worth | Times | 0.43 | 0.83 |
| PBDIT/Interest | Times | 12.40 | 8.46 |
| 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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