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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 30.00 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 30.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the short term of ACUITE A4’ (read as ACUITE A four) on the Rs. 30.00 crore bank facilities of S R S Export Private Limited (SEPL).
Rationale for the Reaffirmation The rating reaffirmation considers improvement in company’s operating income albeit decline in profitability margins. SEPL’s operating income in FY2023 (Prov.) stood at Rs.122.24 crore as compared to Rs. 72.85 crore in FY2022 and Rs.100.56 crores in FY2021. The company majorly imports and export its products (~90%) and distributes across globe. Despite improvement in revenues, the profitability of the company witnessed significant deterioration marked by decline in operating profit margin to 0.17 percent in FY2023 (Prov.) as compared to 3.85 percent in FY2022 and 0.60 percent in FY2021. The rating continues to derive comfort from long track record of operation and experience of the management. The above strengths are constrained by working capital intensive nature of operations and presence in the in a competitive industry with low entry barriers. |
| About the Company |
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Incorporated in 1995 , S R S Exports Private Limited (SRSEPL) a Punjab based company is currently managed by by Mr. Sandeep Mohan,Mrs. Shivani Mohan and Mr. Virender Kumar Upadhyay. The company is engaged in export-import of agro based commodities such as yellow peas, wheat, lentils, rice, other pulses and sugar.
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| Standalone (Unsupported) Rating |
| None |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of SEPL to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Long track record of operation and experienced management
SEPL was incorporated in 1995 and is currently managed by Mr. Sandeep Kumar Mohan, Mrs. Shivani Mohan and Mr. Virender Kumar Upadyay. Mr. Sandeep Mohan has more than two decades of experience in the agro commodity industry.. The experience of the management has aided the company in establishing healthy relations with its customers and suppliers over the years, which help it to get repeat business. Acuite believes that the company will continue to be benefitted from the long track record of operations and experienced management over the medium term. Average financial risk profile The financial risk profile of the company is average marked by marked by low gearing and moderate debt protection metrics. The net worth of the company stood at Rs.12.55 Cr as on FY2023(Provisional) as compared to Rs.12.28 Cr. as on FY2022. The gearing (debt-equity) stood at 0.32 times as on FY2023 (Provisional) against nil last year. The interest coverage ratio stood moderate at 2.05 times for FY2023(Provisional) as against 6.54 times for FY2022. Acuité believes that the financial risk profile of SEPL will continue to remain average in absence of any debt funded capex plan |
| Weaknesses |
| Working Capital Intensive nature of operations
The working capital management of the company remained intensive, though recorded an improvement in FY2023 (Prov.) vis-à-vis last year. The Gross Current Assets (GCA) stood high at 395 days for FY2023 (Provisional) as compared to 583 days as on FY2022. The debtor period stood at 76 days for FY2023 (Provisional) as against 253 days for FY22. Further, the inventory holding stood at 310 days for FY2023 (Provisional) as against 318 days for FY2022. The payment cycle varies from 15-30 days. The working capital cycle of the Company is expected to remain at similar levels over the medium term. Presence in a competitive industry with low entry barriers The wholesale trading industry of agro-commodities is a fragmented industry with low entry barriers. The industry is characterized by a large number of organized and unorganized players which leads to intense competition. Moreover, due to low value additive nature of trading business, the profitability margins are thin. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Stretched |
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The company has a stretched liquidity profile as reflected from its high GCA days of 395 days in FY2023(Provisional) due to high debtor and inventory days. Current ratio stood modest at 1.11 times in FY2023(Provisional). Acuité believes liquidity profile will continue to remain stretched in the medium term due to high working capital requirement.
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| Outlook: |
| Not Applicable |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 122.24 | 72.85 |
| PAT | Rs. Cr. | 0.71 | 1.80 |
| PAT Margin | (%) | 0.58 | 2.48 |
| Total Debt/Tangible Net Worth | Times | 0.32 | 0.00 |
| PBDIT/Interest | Times | 2.05 | 6.54 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| 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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