Maa Ganga Rice Mill. December 26, 2017

Transcription

1 Maa Ganga Rice Mill December 26, 2017 Ratings Facilities Amount Rating 1 Long term Bank Facilities 4.80 CARE B+; ISSUER NOT COOPERATING (Single B plus; ISSUER NOT COOPERATING) Short term Bank facilities 0.32 Total 5.12 (Rupees Five Crore and twelve lakh Only) Details of facilities in Annexure-1 CARE A4; ISSUER NOT COOPERATING Rating Action ISSUER NOT COOPERATING ISSUER NOT COOPERATING Detailed Rationale & Key Rating Drivers CARE has been seeking information from Maa Ganga Rice Mill (MGRM) to monitor the ratings vide communications/ letters dated , , and numerous phone calls. However, despite our repeated requests, the company has not provided the requiste information for monitoring the rating. In the absence of minimum information required for the purpose of rating, CARE is unable to express opinion on the rating. In line with the extant SEBI guidelines CARE s rating on MGRM s bank facilities will now be denoted as CARE B+; ISSUER NOT COOPERATING. Users of this rating (including investors, lenders and the public at large) are hence requested to exercise caution while using the above ratings. Detailed description of the key rating drivers At the time of last rating in March 17, 2017 the following were the rating strengths and weaknesses: Key Rating Weaknesses Proprietorship nature of constitution: MGRM, being a proprietorship entity, is exposed to inherent risk of capital being withdrawn at time of personal contingency and risk of dissolution on account of poor succession planning. Moreover, proprietorship entity has restricted access to external borrowing as credit worthiness of proprietor would be the key factors affecting credit decision for the lenders. Small scale of operations with thin profitability margins: The scale of operations remained small as compared to its peers with a PAT of Rs.0.19 crore on total operating income of Rs crore during FY16. The profit margin of the firm remained thin marked by operating margin of 2.36% and PAT margin of 0.85% in FY16. Furthermore, the total capital employed of the firm decreased to Rs.5.23 crore as on Mar.31, 2016 as against Rs.5.76 crore as on March 31, Volatility in profit margins subject to government regulations: The Government of India (GoI) decides a minimum support price (MSP - to be paid to paddy growers) for paddy every year limiting the bargaining power of rice millers over the farmers. The MSP of paddy was increased during the crop year to Rs.1470/quintal from Rs.1410/quintal in 1 Complete definitions of the ratings are available at and in other CARE publications 1 Credit Analysis & Research Limited

2 crop year Given the market determined prices for finished product vis-à-vis fixed acquisition cost for paddy, the profitability margins are highly volatile. Such a situation does not augur well for the firm, especially in times of high paddy cultivation. Seasonal nature of availability of paddy resulting in working capital intensity & exposure to vagaries of nature: Rice milling is a working capital intensive business, as the rice millers have to stock paddy by the end of each season till the next season since the price and quality of paddy is better during the harvesting season. Further, while paddy is sourced generally on cash payment, the millers are required to extend credit period to their customers. Accordingly, average working capital utilization remained moderately high at 90% during the last 12 months ended February 28, Also, paddy cultivation is highly dependent on monsoons, thus exposing the fate of the entity s operation to vagaries of nature. Fragmented and competitive nature of industry: MGRM s plant is located in Burdwan district, which is one of the hubs for paddy/rice cultivating region of West Bengal. Owing to the advantage of close proximity to raw material sources, more than 350 units are engaged in milling and processing of rice in the region. This has resulted in intense competition which is also fuelled by low entry barriers. Given that the processing activity does not involve much of technical expertise or high investment, the entry barriers are low. Key Rating Strengths Long track record and experienced proprietor: MGRM has been engaged in rice milling business since Shri Rajendra Prasad Agarwala (aged 61 years), having an experience of around 35 years in same line of business (by virtue of working in a partnership firm engaged in rice milling before), looks after the overall day-to-day affairs of the business since inception. He is adequately supported by his son, Shri Rahul Agarwala (aged 36 years) (having experience of around two decades) and a team of experienced personnel. Proximity to raw material sources: MGRM s plant is located in Burdwan District, West Bengal which is in the midst of paddy growing region. The entire raw material requirement is met locally from the farmers (or local agents) which helps the entity to save substantial amount of transportation cost and also procure raw materials at effective price. Analytical approach: Standalone Applicable Criteria Policy in respect of Non-cooperation by issuer Criteria on assigning Outlook to Credit Ratings Financial ratios Non-Financial Sector CARE s Policy on Default Recognition Criteria for Short Term Instruments CARE s methodology for manufacturing companies About the Company Maa Ganga Rice Mill (MGRM) was set up as a partnership firm in the year 1996 by Shri Rajendra Prosad Agarwala and his brother Shri Tarak Nath Agarwala of Burdwan, West Bengal. Later on in 2000, it has been converted into proprietorship entity in the name of Rajendra Prasad Agarwala. The entity is engaged in the processing and milling of rice. The milling unit of the entity is located at Burdwan, West Bengal with processing capacity of 18,000 Metric Tonne Per Annum 2 Credit Analysis & Research Limited

3 (MTPA). MGRM procures paddy from farmers & local agents and sells its products through the wholesalers and distributors in the state of West Bengal. Brief Financials FY15 (A) FY16 (A) Total operating income PBILDT PAT Overall gearing (times) Interest coverage (times) Status of non-cooperation with previous CRA: Not Applicable Any other information: Not applicable Rating History (Last three years): Please refer Annexure-2 CARE has classified instruments rated by it on the basis of complexity. This classification is available at Investors/market intermediaries/regulators or others are welcome to write to for any clarifications. Analyst Contact: Name: Soumen Das Tel: Mobile: **For detailed Rationale Report and subscription information, please contact us at About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. 3 Credit Analysis & Research Limited

4 Annexure-1: Details of Instruments/Facilities Name of the Instrument Fund-based - LT-Cash Credit Date of Issuance Coupon Rate Maturity Date Size of the Issue Rating along with Rating Outlook CARE B+; ISSUER NOT Non-fund-based - ST- Bank Guarantees CARE A4; ISSUER NOT Annexure-2: Rating History of last three years Sr. No. Name of the Instrument/Bank Facilities 1. Fund-based - LT-Cash Credit Type Current Ratings Amount Outstanding Rating LT 4.80 CARE B+; ISSUER NOT in Rating history in )CARE B+; Stable (17-Mar-17) 2)Suspended (23-Dec-16) in )CARE B+ (28-Jul-15) in Non-fund-based - ST- Bank Guarantees ST 0.32 CARE A4; ISSUER NOT - 1)CARE A4 (17-Mar-17) 2)Suspended (23-Dec-16) 1)CARE A4 (28-Jul-15) - 4 Credit Analysis & Research Limited

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