| Extensive experience of partners in in the rice milling business
The Thirumurugan group is led by Mr.R.R.Chidambarasamy and his Wife Mrs. S Dhanalakshmi and his son MR .C. Srinivasan. The promoter Mr. R.R.Chidambarasamy possesses nearly three decades of experience in the rice milling industry. The extensive experience of the promoters supported by experience has enabled the firm to forge healthy relationships with customers for repeated business. The Group has reported operating income of Rs.58.43 Cr in FY2022 (provisional) as against Rs.58.26 Cr in FY2021. Acuité believes that the firm will continue to benefit from its experienced management and established relationships with its customers in the medium term.
Stable revenue over the past three years, as prices are recovering post covid.
Thirumurugan group reported stable income over the past three years as the price of paddy has fallen during the covid and prices are still in recovery post covid. The cost of 1kg of old paddy at Rs.30-33(Rs. 30,000 per Tonne) and newly grown paddy at Rs.22-25 per Kg. The sale price of 25kg rice bag is Rs.1450 per bag (Amman sona quality, which is popularly known as Sonamasuri in south India). Thirumurugan group reported revenue of Rs.58.43Cr in FY22(Provisionals) and operating margins slightly decreased to 8.27 in FY22(Provisionals).
Stable and Favourable demand prospects for rice
The demand prospects of the rice industry are likely to remain good as rice is a staple food grain and India is the world’s second largest producer and consumer of rice.
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| Moderate financial risk profile:
Thirumurugan group’s gearing has improved but stood high at 2.93 times as on March 31,2022(Provisionals) against 4.05 times as on March 31,2021. Group’s Net worth is moderate at Rs.10.29Cr as on March 31, 2022(Provisionals) against Rs.8.02Cr for previous year. Total outside liabilities to total tangible net worth (TOL/TNW) stood high as on March 31, 2022 at 3.07 times against 4.68 times in previous year. Debt protection metrics of the group are moderate marked by interest coverage ratio, Debt service coverage ratio and Net cash accruals to total debt (NCA/TD) of 2.32 times, 1.13 times and 0.08 times respectively as on March 31, 2022 against 2.46 times, 1.24 times and 0.08 times as on March 31, 2021.
Moderate working capital Management
Thirumurugan Group’s working capital operations are efficient as evident from Gross Current Assets days of (GCA) of 154 days as on March 31, 2022(Provisionals) against 177 days as on March 31, 2021. Debtor days increased to 51 days as on March 31, 2022 from 32 days in March 31, 2021. Inventory days stood at 92 days as on March 31, 2022. Current ratio stood at 1.29 times as on March 31, 2022. Acuite believes that working capital operations of the group will remain moderate over the medium term.
Highly competitive and fragmented industry affected by agro climatic risks
The agro commodity (rice) industry is highly competitive with multiple players coupled with low entry barriers resulting into intense competition from both the organised as well as unorganised players. Paddy which is the main raw material required for rice is a seasonal crop and production of the same is highly dependent upon monsoon. Thus, inadequate rainfall may affect the availability of paddy. The rice milling business remains working capital intensive in nature, with high requirement to stock paddy in season majorly on cash and carry business leading to a relatively higher procurement cost; also the profitability is partly susceptible to the volatile paddy costs and Government regulation of minimum support price (MSP) of paddy besides prone to monsoon and availability of paddy. The Group is further exposed to the risks inherent to a partnership firm; including the capital withdrawal risk, any substantial cash withdrawals by the partners are likely to have an adverse impact on the capital structure.
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