| Ajooni Biotech Limited | ||||
| Rating upgraded to 'CRISIL BB+/Stable' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the bank facilities of Ajooni Biotech Limited (ABL) to ‘CRISIL BB+/Stable’ from ‘CRISIL BB/Stable’.
The upgrade in rating reflects a belief that the business risk profile of ABL will continue to improve, driven by consistent growth in revenue and operating profitability. Revenue is expected to increase to Rs 80 crore in fiscal 2024, from Rs 74.49 crore in fiscal 2023, led by an increase in sales to existing customers.
The operating margin was reported at 1.06% for the first nine months of fiscal 2024, declining from 3.83% in fiscal 2023 and 4.02% in fiscal 2022, due to inventory loss of Rs 1.9 crore in flood; the margin is projected at 3.5-4.0% for fiscal 2024 as loss will be set off from the year-end inventory cost. The margin is expected at 4.5-6.0% over the medium term, aided by the incremental sales of feed supplements (that provide higher margins of 9-10%) along with working on multiple cost efficiency methods regularly.
Networth is expected at around Rs 84 crore as on March 31, 2025, as the company is raising additional capital through rights share issue of Rs 40 crore in fiscal 2025 (networth was Rs 41.67 crore as on March 31, 2023). The capital structure further remains supported by limited reliance on external debt; thus, gearing is expected to be low at 0.09 time and total outside liabilities to tangible networth (TOL/TNW) ratio at 0.33 time as on March 31, 2024 (against 0.12 time and 0.40 time, respectively, as on March 31, 2023). Debt protection metrics should continue to be healthy, with interest coverage ratio likely at around 7 times and net cash accrual to adjusted debt (NCAAD) ratio at 0.6 time in fiscal 2024.
The rating reflects the extensive experience of the promoter, established customer relationship and comfortable financial risk profile. These strengths are partially offset by exposure to fluctuations in raw material prices. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoter and established customer relationships The promoter has more than a decade of experience in the animal feed segment; his strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. ABL entered into an agreement with Indian Farmers Fertiliser Cooperative Ltd (IFFCO; ‘CRISIL AA+/Stable/CRISIL A1+’) in March 2020 to produce IFFCO branded animal feed.
Comfortable financial risk profile Networth is expected at around Rs 84 crore as on March 31, 2025, as the company is raising additional capital through rights share issue of Rs 40 crore in fiscal 2025 (networth was Rs 41.67 crore as on March 31, 2023). The capital structure further remains supported by limited reliance on external debt; thus, gearing is projected low at 0.09 time and TOL/TNW ratio at 0.33 time as on March 31, 2024 (against 0.12 time and 0.40 time, respectively, a year ago). Debt protection metrics should continue to be healthy, with interest coverage ratio likely at around 7 times and NCAAD ratio at 0.6 time in fiscal 2024.
The company is planning to open a new factory for capacity enhancement with total capital expenditure (capex) of Rs 16.5 crore funded by right issues of shares; the factory is expected to become operational by April 2025. Any large, debt-funded capex, impacting the financial risk profile, will remain monitorable.
Weakness: Susceptibility to fluctuations in raw material prices Operating margin remains volatile (3-4% during the three fiscals through 2023) because of fluctuations in the cost of key raw materials (de-oiled rice bran, maze, bran and mustard). Furthermore, the ability to pass on any increase in input cost is limited on account of high fragmentation. However, the margin is likely to be 4.5-6.0% over the medium term, driven by the incremental sales of feed supplements which provides higher margins of 9-10% and simultaneously working on multiple cost efficiency methods regularly. Sustaining profitability at this level will remain a key monitorable. |
Liquidity: Adequate Bank limit utilisation was 53.41% for the 12 months through December 2023. Cash accrual is expected at Rs 2-4 crore per annum, against yearly debt obligation of Rs 0.5-0.6 crore over the medium term. Current ratio was healthy at 2.29 times on March 31, 2023. Low gearing and comfortable networth will also aid financial flexibility |
Outlook: Stable ABL will continue to benefit from the extensive experience of its promoter and his established relationship with clients. |
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About the Company ABL was incorporated in February 2010 and is promoted by Mr Jasjot Singh (chairman and managing director). It manufactures a variety of compound animal feed such as cattle feed, cattle feed chips, camel feed, cotton oil cake, mustard oil cake and a wide range of feed supplements. The company is listed on the National Stock Exchange |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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Criteria Details
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