Rating Rationale
June 16, 2022 | Mumbai
Gayatri Sugars Limited
Rating upgraded to 'CRISIL B-/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.136 Crore
Long Term RatingCRISIL B-/Stable (Upgraded from 'CRISIL D')
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 long-term bank facilities of Gayatri Sugars Limited (GSL) to ‘CRISIL B-/Stable’ from ‘CRISIL D’.

 

The rating upgrade reflects timely debt servicing by GSL for more than 90 consecutive days and expected sustenance of improved liquidity over the medium term. The rating action also factors in the approval received for restructuring of Sugar Development Fund (SDF) loan along with sanction of moratorium of 2 years (till May 2024) on both principal and interest payments which is expected to aid the liquidity & financial flexibility. Bank limit utilization remained at 98% for the past 6 months ending May 2022, the main seasonal months for the company, and will remain a monitorable going forward. Ability of the company to ramp up revenues and maintain operating level profits will also remain key monitorable.

 

Further, for arriving at the ratings, CRISIL Ratings has taken a deviation on post default curing period of 90 days for the SDF loan. This is because moratorium of 2 years has been granted on both principal and interest repayments for the SDF loan post restructuring and other existing term loans have been fully repaid. Also, NCD repayment for fiscal 2022 was also made on time and the last instalment on the same is due in March 2023 and is expected to be serviced from sufficient internal accruals. CRISIL Ratings believes that this along with improving business performance, with higher crushing and better recovery rates, repayment of all the term loans and restructuring of SDF loan, have fundamentally altered the liquidity and overall credit profile and have given a similar effect as sizeable inflow of long-term funds and restructuring of loans.

 

The rating reflects GSL’s weak financial risk profile, large working capital requirement and exposure to risks related to the regulated sugar industry. These weaknesses are partially offset by the extensive experience of the promoters and integrated nature of operations.

Key Rating Drivers & Detailed Description

Weaknesses:

  • Weak financial risk profile: Networth was negative at around Rs 162 crore as of March 31, 2022, due to sizeable accumulated losses in the past resulting in a weak capital structure. Debt protection metrics have also remained subdued because of low operating margin and high reliance on debt.

 

  • Large working capital requirement: Operations are working capital intensive, as reflected in gross current assets of 115 days as on March 31, 2022, driven by inventory of around 65 days.

 

  • Exposure to regulatory risks in the sugar industry: The sugar industry in India is regulated by several government policies, including sugarcane prices, export and import of sugar and the sugar release mechanism. These regulations constrain the credit quality of players in the industry.

 

Strengths:

  • Extensive experience of the promoters: The two-decade-long experience of the promoters will continue to support the business risk profile. Further the company also benefits from the fund support extended by the promoters.

 

  • Integrated operations: Company’s operations are fully integrated with sugar mills, distillery, and power generation units, whereby the by-products of sugar manufacturing process like molasses and bagasse are converted into Ethanol/Rectified Spirit and power respectively. Also, the recovery rate has remained above average at 10.5-11.5% in the past.

Liquidity: Stretched

GSL had reported cash losses in the past resulting in poor liquidity. However, in fiscal 2022, the performance has improved, and it reported net cash accrual of Rs 1.3 crore supported by higher crushing and better recovery rates and realisations. This has supported the liquidity and the company has repaid all the term loans outstanding with banks as per the repayment schedule. Further, restructuring of SDF loan with a moratorium of 2 years (till May 2024) supports its liquidity. The repayment of the last instalment of NCDs is due only in March 2023 which is expected to be met from internal accruals.  

Outlook: Stable

CRISIL Ratings believes GSL will continue to benefit over the medium term from its promoters' extensive experience and integrated nature of operations.

Rating Sensitivity factors

Upward factors

  • Better cane crushing & higher recovery rate leading to higher-than-expected accruals and better liquidity
  • Sustenance of operating margin at around 8-9%

 

Downward factors

  • Lower than expected revenue along with decline in operating margin to around 3-4%
  • Any large debt-funded capital expenditure weakening the financial risk profile & liquidity

About the Company

GSL, based in Hyderabad, was incorporated in in 1995 by Ms Indira Subbarami Reddy, Mr Sandeep Reddy and Ms Sarita Reddy. The company manufactures white crystal sugar and rectified spirit/extra neutral alcohol. The sugarcane crushing capacity is 7,000 tons per day while the distillery and co-generation units have 45 kilolitre per day and 25-megawatt capacities respectively. The company is listed on the Bombay Stock Exchange.

Key Financial Indicators

As on / for the period ended March 31

 

2022*

2021

Operating income

Rs crore

361.19

248.09

Reported profit after tax

Rs crore

-8.42

-28.46

PAT margins

%

-2.3

-11.5

Adjusted Debt/Adjusted Net worth

Times

-1.28

-1.34

Interest coverage

Times

1.08

0.29

*Provisional

 

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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 Levels

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

39.47

NA

CRISIL B-/Stable

NA

Cash Credit

NA

NA

NA

11.22

NA

CRISIL B-/Stable

NA

Cash Credit

NA

NA

NA

13.43

NA

CRISIL B-/Stable

NA

Cash Credit

NA

NA

NA

3.47

NA

CRISIL B-/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

68.41

NA

CRISIL B-/Stable

 

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 136.0 CRISIL B-/Stable 29-03-22 CRISIL D 30-01-21 CRISIL D (Issuer Not Cooperating)*   -- 23-10-19 CRISIL D CRISIL D
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 13.43 Bank of Baroda CRISIL B-/Stable
Cash Credit 3.47 Punjab National Bank CRISIL B-/Stable
Cash Credit 11.22 State Bank of India CRISIL B-/Stable
Cash Credit 39.47 Union Bank of India CRISIL B-/Stable
Proposed Long Term Bank Loan Facility 68.41 Not Applicable CRISIL B-/Stable

This Annexure has been updated on 09-Feb-23 in line with the lender-wise facility details as on 18-Jan-23 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings
Rating Criteria for Sugar Industry
CRISILs Approach to Financial Ratios
Rating criteria on Financial risk framework for manufacturing and services sector companies
CRISILs Approach to Recognising Default

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Himank Sharma
Director
CRISIL Ratings Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com

Jayashree Nandakumar
Associate Director
CRISIL Ratings Limited
D:+91 40 4032 8218
Jayashree.Nandakumar@crisil.com

Kavya Puthussery
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 40 4032 8200
Kavya.Puthussery@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html