| Andrew Yule and Co Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 reaffirmed its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings on the bank facilities of Andrew Yule and Co Limited (AYCL).
The ratings continue to reflect the established position in the tea industry along with continued support from Government of India and moderate capital structure. These strengths are partially offset by modest debt protection metrices and susceptibility of profitability to fluctuations in tea prices.
Strengths: Established position in the tea industry along with continued support from Government of India: Currently, the government holds 89.25% stake in AYCL, which operates in three main sectors - tea, engineering and electrical. Furthermore, the promoters’ in-depth understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business. In H1 fiscal 2023, revenue is estimated to be over Rs 172 crore of which about Rs 122 crore is generated from tea segment, Rs 23 crore from Electrical-Chennai division and Rs 28 crore from Engineering vertical. The ratings also factor in instances of support from the government in the past to help the company revive under the Board for Industrial and Financial Reconstruction (BIFR).
Moderate capital structure: Limited reliance on external funds yielded gearing of 0.36 time and TOLANW ratio of 1.41 times as on March 31, 2022. The debt protection measures have also been moderate due to limited dependence on external borrowings while operating profitability improved marginally in fiscal 2022. Sustained accretion to reserves remain critical for improvement in capital structure.
Weaknesses: Modest debt protection metrices: The interest coverage and net cash accrual to adjusted debt ratios were 0.19 time and 0.12 time, respectively, for fiscal 2022 against -0.11 time and 0.40 time respectively in fiscal 2021. Profitability has remained modest is the past due to significant losses incurred in Electrical-Kolkata division. However, the division ceased operations w.e.f. November 2021 and consequently incurred extraordinary expenses of Rs 18.6 crore towards VRS which led to deterioration of net profits in fiscal 2022. Going forward, improvement in profitability leading to improvement in debt protection metrices is a key monitorable.
Susceptibility of profitability to fluctuations in tea prices: A significant portion of the sales is through auctions at Kolkata and Siliguri, West Bengal. Auction prices are determined at the centers based on demand-supply dynamics. The domestic demand-supply scenario directly impacts prices, while the global situation could affect market sentiment. Moreover, fragmentation in the tea industry limits pricing variation. For instance, realization price could not match the increase in production cost of tea in fiscal 2019, leading to reduced profitability or loss for many West Bengal-based tea manufacturers. The situation was similar in fiscal 2020, leading to operating loss for the tea division of AYCL and overall cash losses. Moreover, as plantation labor wage rate increased by Rs 32 per day effective from January 2023, profitability generated from the segment remains key monitorable. |
Liquidity: Adequate Bank limit utilization is around 80% percent for the past twelve months ended 31st August 2022. Cash accruals are expected to be around Rs 16-17 crore which are sufficient against term debt obligation of Rs 2 crore over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio was moderate at 1.1 times on March 31, 2022. Additionally, moderate cash and bank balance of around Rs 9 crore as on March 31, 2022 and around Rs 7 crore as on September 30, 2022 along with dividend income in range of Rs 21-28 crore during 5 fiscals through March 31, 2022 and Rs 37 crore in fiscal 2022 provide the necessary financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes AYCL will continue to benefit from the extensive experience of its promoters and established relationships with clients. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company AYCL was incorporated in 1919 as a private sector company. Later, it lost its traditional business of managing agency and the government acquired the company in 1979 and currently holds 89.25% stake. The company primarily functions in three sectors - tea, engineering and electrical. It manufactures and sells tea, transformers, regulators or rectifiers, circuit breakers, switches, industrial fans, tea machinery and undertakes turnkey jobs. It has four operating units, out of which three are in West Bengal and one in Chennai, Tamil Nadu. AYCL also owns 12 tea gardens of which 7 are in West Bengal, 4 in Dooars and 1 in Darjeeling. |
Key Financial Indicators
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Status of non cooperation with previous CRA: AYCL has not cooperated with India Ratings And Research Private Limited and Acuite Ratings and Research Limited which has classified it as non-cooperative vide release dated 9-Oct-2017 and 18-Jul-2022 respectively. The reason provided by India Ratings And Research Private Limited and Acuite Ratings and Research Limited is non-furnishing of information for monitoring of ratings. |
Any other information: Not Applicale |
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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This Annexure has been updated on 30-Jan-23 in line with the lender-wise facility details as on 29-Sep-21 received from the rated entity.
Criteria Details
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