| Fact Trading Co | ||||
| Rated amount enhanced | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BB-/Stable’ rating to the long-term bank facilities of Fact Trading Co (FTC).
On March 14, 2022, CRISIL Ratings had assigned its ‘CRISIL BB-/Stable’ rating to the long-term bank facilities of FTC.
The rating reflects extensive experience of the partners in the ceramic raw material trading industry and prudent working capital management of FTC. These strengths are partially offset by susceptibility to risk related to intense competition and trading nature of business and exposure to inherent cyclicality in demand and volatility in raw material prices. |
Analytical Approach The partners and related parties have extended unsecured loans worth Rs 2.32-6.73 crore during the three fiscals through 2021; Rs 2.10 crore is to remain in the business for the near term. These loans have been treated as neither debt nor equity. |
Key Rating Drivers & Detailed Description Strengths:
The partners have over 25 years of experience in the ceramic raw material trading industry; their strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business.
The working capital cycle is likely to remain efficiently managed. Gross current assets (GCAs) have been 87-86 days for the past three fiscals. GCAs should improve to 70 days as on March 31, 2022, from 86 days a year ago as debtors reduced to 60 days from 76 days; inventory was steady at 10 days.
Weaknesses:
The ceramic raw material trading industry is highly fragmented owing to small initial investment and low complexity of operations; the consequent intense competitive pressure along with risk related to trading-based business may continue to constrain scalability, pricing power and profitability. Operating margin is expected at a modest 1.8% in the near term
The ceramic industry moves in line with the level of activity in the construction sector. Thus, the firm is likely to remain susceptible to the inherent cyclicality in end-user industries. Further, since cost of procuring the raw material accounts for a bulk of production cost, even a slight variation in price can drastically impact the operating margin. |
Liquidity: Stretched Bank limit utilisation was high, at around 94% for the 12 months through January 2022. Cash accrual is projected at more than Rs 2.77 crore per annum, against term debt obligation of Rs 1.72 crore over the medium term. Current ratio was 1.7 times on March 31, 2021.
The partners have withdrawn Rs 5.25 crore in fiscal 2021, leading to a decline in networth. Unsecured loan of about Rs 2.1 crore is to remain in the business for the near term. |
Outlook: Stable FTC will continue to benefit from its longstanding relationship with principals and experience of the management to mitigate the inherent risk in the trading business. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company FTC, a partnership firm set up in 1995, is engaged in trading and wholesaling of raw materials used in the ceramic and sanitaryware industries. The firm is located at Morbi in Gujarat and owned by Mr Chunilal Bopaliya and his family members. |
Key Financial Indicators
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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)
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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 06-Apr-22 in line with the lender-wise facility details as on 14-Mar-22 received from the rated entity.
Criteria Details
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