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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 18.40 | ACUITE BBB- | Positive | Assigned | - |
| Bank Loan Ratings | 17.50 | ACUITE BBB- | Positive | Reaffirmed | Stable to Positive | - |
| Bank Loan Ratings | 6.60 | - | ACUITE A3 | Assigned |
| Bank Loan Ratings | 17.50 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 60.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating at ‘ACUITE BBB-‘ (read as ACUITE Triple B minus) and short term rating at ‘ACUITE A3’ (read as ACUITE A three) on the Rs.35.00 crore bank facilities of Supreme Gums Private Limited (SGPL). The Outlook is revised from ‘Stable’ to ‘Positive’. Acuité has assigned the long term rating of ‘ACUITE BBB-‘ (read as ACUITE Triple B minus) and short term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.25.00 crore bank facilities of Supreme Gums Private Limited (SGPL). The Outlook is ‘Positive’. Rationale for reaffirmation/revision in outlook Rating has been reaffirmed and outlook has been revised from ‘Stable’ to ‘Positive’. The reaffirmation and revision in outlook takes into account the improvement in revenue, healthy financial risk profile of the company and adequate liquidity position. Company has recovered from the disruptions of covid pandemic and has improved revenue position by earning Rs. 196.26 Cr in FY 2022 (Audited). Company’s financial risk profile is healthy although gearing has moderated in FY 2022 (Audited) from 0.20 times in FY 2021 to 0.83 times in FY 2022 (Audited) due to increase in total debt. In the current fiscal company’s operating metrics have further improved with enhanced profitability hence on expectations of growth potential of the company going forward, Acuite has revised the outlook of the company to ‘Positive’. |
| About the Company |
| Supreme 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. |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of SGPL to arrive at the rating. |
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 healthy net worth, low gearing and strong debt protection metrics. The tangible net worth stood at Rs. 62.25 Cr as on 31st March 2022 (Audited) as against Rs. 52.38 Cr in FY 2021 (Audited). The total debt of Rs. 51.71 Cr in FY 2022 consists of Rs. 10.00 Cr of long term borrowings in the form of GECL (WCTL) loan, Rs. 39.90 Cr of short term borrowings, Rs. 1.79 Cr of unsecured loans and Rs. 0.02 Cr of CPLTD. The gearing (debt-equity) stood comfortable at 0.83 times in FY 2022 (Audited) and moderated from 0.20 times in FY 2021 on account of increase in short term borrowings. Interest Coverage Ratio stood strong at 8.46 times in FY 2022 and is expected to remain healthy in the near term. TOL/TNW moderated to 0.98 times in FY 2022 from 0.29 times in FY 2021. |
| Weaknesses |
| Moderately intensive working capital cycle The working capital management of the company is moderately intensive marked by GCA days of 187 in FY 2022 (Audited). The debtor realization period stood at 108 days in FY 2022 (Audited). Inventory holding period for FY 2022 (Audited) stood at 44 days. Creditor days stood at 5 days in FY 2022. As a result, the average bank limit utilization for the 20 months’ period between April 2021 to November 2022 stood at 70.84% on a consolidated level for the working capital facilities. 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 November. 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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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
| The company has adequate liquidity marked by its net cash accruals vs its maturing debt obligations. In FY 2022 Company generated NCA of Rs. 10.82 Cr against maturing debt obligation of Rs. 0.09. Going forward company is expected to generate NCA of Rs. 39.57 Cr in FY 2023 against maturing debt obligation of Rs. 0.02 Cr and Rs. 44.07 Cr in FY 2024 against nil maturing debt obligation since repayment of working capital term loan will start from April 2024. Company maintained cash and bank position of Rs. 13.76 Cr in FY 2022 and had current ratio of 2.07 times for the fiscal. |
| Outlook: Positive |
| Acuité believes that SGPL will maintain a ‘Positive’ outlook and benefit over the medium term from its experienced management. The rating may be upgraded if the company reports higher than expected revenues and profitability margins. Conversely, the outlook may be revised to 'Stable' in case of deterioration in the working capital cycle, thereby impacting its financial risk profile, particularly its liquidity. |
| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 196.26 | 76.36 |
| PAT | Rs. Cr. | 9.87 | 3.77 |
| PAT Margin | (%) | 5.03 | 4.94 |
| Total Debt/Tangible Net Worth | Times | 0.83 | 0.20 |
| PBDIT/Interest | Times | 8.46 | 8.39 |
| 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 • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| 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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