Rating Rationale
August 17, 2021 | Mumbai
Bergwerff Organic India Private Limited
Rating outlook revised to 'Stable'; Ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.175 Crore
Long Term RatingCRISIL A-/Stable (Outlook revised from 'Negative' and rating reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has revised its outlook on the long term bank facilities of Bergwerff Organic India Private Limited (BOIPL, part of Suminter group) to ‘Stable’ from ‘Negative’ while reaffirming the rating at ‘CRISIL A-‘. Short term rating has been reaffirmed at ‘CRISIL A2+’.

 

Revision in outlook reflects restoration in the business risk profile supported by increase in revenue and revival in operating profitability. Group is estimated to report revenue of around Rs 600 crore in fiscal 2021 at an operating margin of around 7.5-8%. Operating performance improved on back of healthy demand and better realization given group’s presence in multiple commodities. This has also resulted in higher accruals and better debt protection metrics, resulting in better financial flexibility, which is expected to sustain over the medium term.

 

The ratings continue to reflect the synergies derived from the parent, Suminter India Organics Private Limited (SIOPL, part of Suminter group; Rated: CRISIL A-/Stable/CRISIL A2+) on account of SIOPL's established market position and comfortable financial risk profile. These strengths are partially offset by susceptibility of operating performance to volatility in agricultural commodity prices and changes in yield and the group's susceptibility to certification and regulatory risks.

Analytical Approach:

CRISIL Ratings has applied its parent notch-up framework to factor in business, managerial and financial support from BOIPL's parent, SIOPL, part of Suminter group consisting of SIOPL, BOIPL and The Suminter Organic And Fair Trade Cotton Ginning Mill Private Limited (rated: CRISIL A2+)).

Key Rating Drivers & Detailed Description

Strengths:

  • Synergies derived from parent SIOPL: SIOPL is part of Suminter group which is the leading organic product exporter from India and has a strong global customer base with marquee customers such as Perdue Agribusiness LLC, Southern Appalachian Man and the Biosphere (SAMAB), High Quality Organics and Starbucks amongst others. The group's position in the industry is cemented by the availability of a large number of organic certified farms by Agricultural and Processed Food Products Export Development Authority (APEDA) across diverse geographic locations in India as group’s ability to procure internationally from Africa.

 

Further, group has diversified product portfolio which consist of organics products processed from Soya, Sugar, Cotton and Spices which has resulted in reduced reliance on performance of single commodity thereby diversifying the risk.

 

  • Above average financial risk profile: Comfortable total outside liabilities to adjusted networth (TOLANW) estimated at sub 0.7 time on a networth base of over Rs 265 crore as on March 31, 2021 represents healthy capital structure. Debt protection metrics is also comfortable with interest coverage ratio and net cash accruals to adjusted debt of above 7 times and 0.2 times respectively, for fiscal 2021. Group’s financial risk profile is expected to remain above average over the medium term.

 

Weaknesses:

  • Susceptibility of operating performance to volatility in agricultural commodity prices and changes in yield: The agro based nature of industry exposes Suminter group to volatility in agricultural commodity prices and changes in yield. The availability of organic agricultural products for Suminter group and their prices are subject to vagaries in monsoon and climatic changes which can impact operating performance of the group. In periods of low availability in the domestic market, the prices of agricultural products tend to increase, while the realization for organic certified products of Suminter group are governed by the prevailing prices in the global market. Group’s operating margin had reduced below 5% in fiscal 2020. However, these risks are partly mitigated by presence across different products and procurement of international and domestic market.

 

  • Susceptibility to certification and regulatory risks: Suminter group's products need to be certified by the requisite regulatory authorities, for instance APEDA in India, before exporting to its customers. Lack of adequate certification would lead to rejection of the group's products thereby adversely impacting its revenue profile. While the group has not faced any certification issues in the past, tight monitoring of the procurement channel to ensure 100 percent organic produce would remain critical to the group's growth plans over the medium term.

Liquidity: Adequate

The rated instrument of BOIPL has adequate liquidity available to it, driven by support from the parent SIOPL to provide ongoing and need based support, in case of exigencies. Group enjoys adequate liquidity driven by expected cash accruals of more than Rs. 35 crore per annum in fiscal 2022 and fiscal 2023 respectively and cash and cash equivalents of Rs. 22 crore as on March 31, 2021. Group also has access to fund based limits of Rs. 152.5 crore, utilized to the tune of 54.7% on an average over the 12 months ended July 2021. The Group has long term repayment obligations around Rs. 8 crore per annum. Capex is expected to be in range of Rs 6-10 crore during fiscal 2022. The group can fund its repayment obligations and capex requirements through internal accruals. With a gearing of around 0.5 time, group has sufficient gearing headroom, to raise additional debt to meet its capex/working capital requirement.

Outlook: Stable

CRISIL Ratings believes that the Suminter group will continue to benefit from its established market position in the Indian organic products industry.

Rating Sensitivity factors

Upward factors

  • Sustained growth in revenue with operating profit margin improving to over 8% resulting in accruals of over Rs 45 crore.
  • Improvement in working capital cycle

 

Downward factors

  • Lower-than-expected operating performance resulting in accruals of less than Rs 22 crore.
  • Stretch in working capital cycle or higher than expected debt funded capex resulting in increased reliance on external debt

About the Group

Established in 2004, SIOPL is a Mumbai based company promoted by Mr. Sameer Mehra. The company is engaged in procurement and sale of various organic agro commodities such as soya, cotton, sugar and spices.

 

BOIPL, set up in 2006 is a wholly owned subsidiary of SOIPL. The company is engaged in processing of organic spices and soya procured from SIOPL and export of the same.

 

Acquired in 2014, SOFPL operates a ginning mill to process organic cotton. The company is a 100 per cent subsidiary of SIOPL.

Key Financial Indicators (Standalone)

Particulars

Unit

2021

2020

Revenue

Rs crore

274.75

224.84

Profit after tax (PAT)

Rs crore

16.56

1.63

PAT margin

%

6.03

0.73

Adjusted debt/adjusted networth

Times

0.68

0.81

Interest coverage

Times

5.55

2.35

 

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of Instrument

Date of Allotment

Coupon Rate (%)

Maturity

Date

Issue Size

(Rs.Cr)

Complexity

level

Rating Assigned

with Outlook

NA

Long Term Loan

NA

NA

Mar-24

28

NA

CRISIL A-/Stable

NA

Proposed Long Term

Bank Loan Facility

NA

NA

NA

25

NA

CRISIL A-/Stable

NA

Proposed Short Term

Bank Loan Facility

NA

NA

NA

2

NA

CRISIL A2+

NA

Working Capital Facility

NA

NA

NA

120

NA

CRISIL A-/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 175.0 CRISIL A2+ / CRISIL A-/Stable   -- 29-12-20 CRISIL A2+ / CRISIL A-/Negative 09-10-19 CRISIL A2+ / CRISIL A-/Negative 25-10-18 CRISIL A-/Negative CRISIL A2+ / CRISIL A-/Stable
      --   -- 04-11-20 CRISIL A-/Negative 30-09-19 CRISIL A-/Negative   -- --
      --   --   -- 20-09-19 CRISIL A-/Negative   -- --
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Long Term Loan 28 CRISIL A-/Stable Long Term Loan 28 CRISIL A-/Negative
Proposed Long Term Bank Loan Facility 25 CRISIL A-/Stable Proposed Long Term Bank Loan Facility 25 CRISIL A-/Negative
Proposed Short Term Bank Loan Facility 2 CRISIL A2+ Proposed Short Term Bank Loan Facility 2 CRISIL A2+
Working Capital Facility 120 CRISIL A-/Stable Working Capital Facility 120 CRISIL A-/Negative
Total 175 - Total 175 -
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
Understanding CRISILs Ratings and Rating Scales

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