Rating Rationale
October 23, 2019 | Mumbai
Gayatri Sugars Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.136 Crore
Long Term Rating CRISIL D (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL D' rating on the long-term bank facilities of Gayatri Sugars Limited (GSL).
 
The rating continues to reflect delays by the company in servicing its debt obligations.
 
The rating also takes into account GSL's weak financial risk profile, large working capital requirement, and exposure to risks arising from the regulated nature of the sugar industry. These weaknesses are partially offset by the extensive experience of the promoters.

Key Rating Drivers & Detailed Description
* Delays in servicing debt obligations: Insufficient cash accrual has led to weak liquidity, and thus, delayed servicing of interest and principal obligation. The cash credit limit has also been fully utilised.
 
Weaknesses

* Average financial risk profile: Financial risk profile is weak. Networth and gearing were negative Rs 94.71 crore and 2.27 times, respectively, as on March 31, 2019. Debt protection metrics were also subdued, with interest coverage and net cash accrual to total debt ratios of around 0.6 time and 0.07 time, respectively, in fiscal 2019.
 
* Large working capital requirement: Operations are working capital intensive, with gross current assets of 189 days as on March 31, 2019, driven, in turn, by inventory of around 147 days.
 
* Exposure to regulatory risks in the sugar industry: The sugar industry in India is regulated by several governmental 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.
 
Strength
* Extensive experience of the promoters: Benefits from the promoters' experience of two decades should continue to support business risk profile.
 
Liquidity: Poor
Liquidity is poor because of continuous losses, which have completely eroded networth. Net cash accrual has remained insufficient against maturing debt in the 4 fiscals ended 2019. Moreover, the cash credit limit has remained fully utilised, with significant delays in interest servicing. Current ratio was weak at 0.58 time on March 31, 2019.

Rating sensitivity factors
Upward factor
* Track record of timely servicing of debt for more than 90 days
* Sustained improvement in financial risk profile, especially liquidity
About the Company

GSL, based in Hyderabad, was set up by Ms Indira Subbarami Reddy, Mr Sandeep Reddy, and Ms Sarita Reddy in 1995. It manufactures white crystal sugar and rectified spirit/extra neutral alcohol. It is also involved in the power generation business. The company is listed on the Bombay Stock Exchange (BSE).

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 311.9 251.1
Profit after tax (PAT) Rs crore (26.3) 12.96
Profit margin % (8.4) 5.2
Adjusted debt / adjusted networth Times (2.27) (3.4)
Interest coverage Times 0.6 2.1

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 crore)
Rating assigned with outlook
NA Cash Credit NA NA NA 67.59 CRISIL D
NA Long Term Loan NA NA July-2021 5.22 CRISIL D
NA Long Term Loan NA NA Dec-2020 4.75 CRISIL D
NA Long Term Loan NA NA Aug-2021 2.94 CRISIL D
NA Long Term Loan NA NA Aug-2021 3.24 CRISIL D
NA Long Term Loan NA NA Aug-2021 0.76 CRISIL D
NA Long Term Loan NA NA Jun-2020 0.55 CRISIL D
NA Long Term Loan NA NA Aug-2021 3.28 CRISIL D
NA Proposed Long-Term Bank Loan Facility NA NA NA 47.68 CRISIL D
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  136.00  CRISIL D      21-09-18  CRISIL D  12-09-17  CRISIL D  06-01-16  CRISIL D  CRISIL D 
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
Cash Credit 67.59 CRISIL D Cash Credit 67.59 CRISIL D
Long Term Loan 20.73 CRISIL D Long Term Loan 47.13 CRISIL D
Proposed Long Term Bank Loan Facility 47.68 CRISIL D Proposed Long Term Bank Loan Facility 21.28 CRISIL D
Total 136 -- Total 136 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Sugar Industry
CRISILs Approach to Recognising Default

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