Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 140.00 ACUITE BBB | Stable | Reaffirmed -
Total Outstanding 140.00 - -
 
Rating Rationale

Acuite has reaffirmed its long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs.140.00 crore bank facilities of Tirupati Starch And Chemicals Limited. The outlook is 'Stable’.

Rationale for Rating
The rating takes into account the experienced management and long track record of operations of the company. The company witnessed a decline in the operating income in FY2024 to Rs.306.11 Cr from Rs.364.69 Cr in FY2023. The decline in revenue in FY2024 is on account of capital expenditure being undertaken by the company to add a new product i.e liquid glucose in the product profile which required an increase in the existing starch capacity due to which the capacity utilisation remained subdued in order to complete the capacity expansion. However, the operating profit margin of the company improved and stood at 6.69% in FY2024 against 5.89% in FY2023.
Further, in Q1FY25, the company’s operating income stood at Rs.86.23 Cr with a significant decline in operating profitability margin to 3.00% leading to losses at PBT levels. Further, as learned from management, the capex which was to be completed by February 2024 is still undergoing and is expected to be completed soon.
Acuite believes, that the extent of impact of delay in capex completion on the business and financial risk profile along with overall liquidity position remains a critical rating monitorable.
Further, the rating remains constrained on account of moderately intensive working capital nature of operations with GCA days of 112 days in FY 2024 and by susceptibility of its profitability to fluctuations in raw material prices.

About the Company
Indore based, Tirupati Starch and Chemicals Limited (TSCL) is engaged in the manufacturing of various products such as maize starch, maize gluten, dextrose monohydrates (edible), poultry feed etc. Tirupati Starch and Chemicals Limited was incorporated in 1985 by Late Mr. Damodar Modi, Mr. Ramdas Goyal and Mr. Prakash Chandra Bafna.
 
Unsupported Rating
­Not Applicable
 
Analytical Approach
­Acuité has taken a standalone view of business and financial risk profile of TSPL to arrive at the rating
 
Key Rating Drivers

Strengths

Experienced Management
Tirupati Starch and Chemicals Limited (TSCL) was established in 1985 by by late Mr. Damodar Modi, Mr. Ramdas Goyal and Mr. Prakash Chandra Bafna. Mr. Ramdas Goyal holds an overall experience of around four decades in the business of Maize Starch, dextrose and other chemicals. Mr. Prakash Chandra Bafna holds an overall experience of around three decades in manufacturing and trading of chemicals and he also takes care of procurement of raw material and other purchases. The promoters are supported by Mr. Amit Modi and Mr. Yogesh Kumar Agarwal, both of whom hold extensive experience of more than two decades in the business. Extensive experience of the management has helped TSCL establish healthy relationships with customers and suppliers in the industry over the years.

Moderate financial risk profile
The tangible net worth of the company stood at Rs.73.00 crore as on March 31, 2024, as against Rs.65.55 crore as on March 31, 2023. The increase in the net worth is due to accretion of profits to reserves and equity infusion of Rs.1.50 Cr by the company in FY24 and consideration of Rs.19.53 Cr USL as quasi-equity. The gearing of the company stood at 1.84 times as on March 31, 2024, as against 1.07 times as on March 31, 2023. The interest coverage ratio stood at 2.07 times as on March 31, 2024, as against 2.59 times as on March 31, 2023. The DSCR stood at 1.20 times as on March 31, 2024, as against1.97 times as on March 31, 2023. The moderation in debt coverage indicators is on account of increased interest cost as the company assumed higher debt during the year to fund working capital operations and ongoing capital expenditure. The capex is being undertaken for addition of liquid glucose in their portfolio.
Acuite believes the company’s ability to complete the ongoing capex without further delays and improve its scale of operations and profitability while maintaining adequate liquidity position will be a key rating monitorable.


Weaknesses
Moderately Intensive Working Capital Operations
The company’s working capital operations stood moderately intensive marked by GCA days of 112 days as on March 31, 2024 as against GCA days of 62 days as on March 31, 2023. The inventory days stood at 62 days for FY24 as against 15 days for FY23. Average inventory holding period is around 15-30 days. The debtors’ days stood at 41 days for FY24 as against 33 days for FY23. The average credit period allowed to the customers is around 45 days. The creditors days stood at 13 days for FY24 against 29 days for FY23. The average credit period received from the supplier is around 15 days.
Acuite believes that the ability of the company to maintain the working capital efficient operations will remain key monitorable in medium term.

Competitive nature of industry and high dependence on environmental conditions
Starch industry in India is highly fragmented, marked by presence of a variety of organized and unorganized manufacturers offering different types and derivatives of starch thereby limiting TSCL's pricing power. Further, TSCL uses maize as the raw material for almost all of its products and the prices of maize are susceptible to volatility due to factors such as weather conditions, revision in minimum support price of maize by the government and demand and supply scenario in the agricultural markets. The prices for maize had increased during the last year. Thus, increase in raw material prices and the competitive nature of the industry affects profitability of the company.
Rating Sensitivities
  • Growth in revenue with improvement of the profitability margins in subsequent quarters.
  • Deterioration in the financial risk profile of the company.
  • Further delay in completion of ongoing capex leading to deterioration in the liquidity position.
 
Liquidity Position
Stretched

The company has a stretched liquidity position. The company generated sufficient net cash accruals against maturing debt obligations in FY24. The net cash accruals stood at Rs.9.81 Cr in FY24 as against maturing debt obligations of Rs. 6.53 crore over the same period. However, the company’s estimated cash accruals are likely to remain modest against repayment obligations, in case of further delay in completion of ongoing capex. The current ratio stood at 1.42 times as on March 31, 2024. Acuite believes timely completion of ongoing capex will be critical to augment company’s business risk profile and improve the liquidity position.
 
Outlook: Stable
Acuité believes that TSCL will maintain a 'Stable' outlook over the medium term on the back of its experienced management and long track record of operations. The outlook may be revised to 'Positive' if TSCL records higher than expected improvement in scale of operations and profitability from Q2FY25 onwards, while maintaining financial risk profile and adequate liquidity position. The outlook may be revised to 'Negative' if TSCL experiences lower than expected revenue growth and improvement in profitability or deterioration in financial risk profile or stretch in its liquidity.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 24 (Actual) FY 23 (Actual)
Operating Income Rs. Cr. 306.11 364.69
PAT Rs. Cr. 2.07 6.57
PAT Margin (%) 0.68 1.80
Total Debt/Tangible Net Worth Times 1.84 1.07
PBDIT/Interest Times 2.07 2.59
Status of non-cooperation with previous CRA (if applicable)
­Not Applicable
 
Any other information
­None
 
Applicable Criteria
• 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
­­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 tothe 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 levelsof risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
22 Jan 2024 Term Loan Long Term 26.68 ACUITE BBB | Stable (Reaffirmed)
Covid Emergency Line. Long Term 12.60 ACUITE BBB | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 20.72 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 20.00 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 15.00 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 40.00 ACUITE BBB | Stable (Assigned)
Term Loan Long Term 5.00 ACUITE BBB | Stable (Reaffirmed)
03 Jan 2024 Covid Emergency Line. Long Term 12.60 ACUITE BBB | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 25.72 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 20.00 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 15.00 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 26.68 ACUITE BBB | Stable (Reaffirmed)
06 Oct 2022 Term Loan Long Term 39.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Cash Credit Long Term 8.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Cash Credit Long Term 12.00 ACUITE BBB | Stable (Assigned)
Proposed Long Term Bank Facility Long Term 3.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Covid Emergency Line. Long Term 12.60 ACUITE BBB | Stable (Assigned)
Proposed Long Term Bank Facility Long Term 25.40 ACUITE BBB | Stable (Assigned)
02 Dec 2021 Proposed Long Term Bank Facility Long Term 2.00 ACUITE BBB- | Stable (Reaffirmed)
Cash Credit Long Term 8.00 ACUITE BBB- | Stable (Reaffirmed)
Term Loan Long Term 40.00 ACUITE BBB- | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
State Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 20.00 Simple ACUITE BBB | Stable | Reaffirmed
HDFC Bank Ltd Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 15.00 Simple ACUITE BBB | Stable | Reaffirmed
State Bank of India Not avl. / Not appl. Covid Emergency Line. Not avl. / Not appl. Not avl. / Not appl. 15 Dec 2026 12.60 Simple ACUITE BBB | Stable | Reaffirmed
Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 20.72 Simple ACUITE BBB | Stable | Reaffirmed
State Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 31 Dec 2030 26.68 Simple ACUITE BBB | Stable | Reaffirmed
HDFC Bank Ltd Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 30 Apr 2031 40.00 Simple ACUITE BBB | Stable | Reaffirmed
HDFC Bank Ltd Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 30 Apr 2031 5.00 Simple ACUITE BBB | Stable | Reaffirmed
­

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