Rating Rationale
June 06, 2019 | Mumbai
Jiya Eco-Products Limited
Rating downgraded to 'CRISIL BB+/Stable'
Rating Action
Total Bank Loan Facilities Rated Rs.28.47 Crore
Long Term Rating CRISIL BB+/Stable (Downgraded from 'CRISIL BBB-/Stable')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its rating on the long-term bank facility of Jiya Eco-Products Limited (JEPL; part of the Jiya group) to 'CRISIL BB+/Stable' from 'CRISIL BBB-/Stable'.
The downgrade reflects Jiya group's weaker than expected liquidity profile amidst rapid topline growth. During FY19, the group more than doubled its topline to Rs.213 cr from Rs.93 cr which translated into similar increase in working capital requirements as the working capital intensity remained high at around 7 months of gross current assets. The lower than expected correction in the working capital cycle and absence of commensurate increase in working capital limits meant fully drawn bank limits and stretched liquidity, despite equity infusion during the year. Also, the modest enhancement in working capital limits happened only towards the end of FY19. CRISIL believes that liquidity may remain constrained over medium term given the working capital intensity and will be contingent on enhancement in bank limits, capex and funding pattern.
The rating also reflects the ramp-up in operations, benefits from the extensive experience of the group's promoters and wide procurement network, and the moderate financial risk profile. These strengths are offset by working capital-intensive operations and risks associated with supply chain management.

Analytical Approach

CRISIL has consolidated the business and financial profile of JEPL with its subsidiaries, as the entities are in same line of business, under a common management, and they operate in the same value chain with financial and business interlinkages.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Extensive experience of the promoters and strong procurement network: Being one of the first movers in the briquettes and pellets segment, has helped the Jiya group's promoters to develop a strong understanding of the industry and market dynamics. Over the years, the company has set up a strong procurement network, and maintained healthy relationships with customers. Turnover rose to Rs 213 crore in fiscal 2019, from Rs 52 crore in fiscal 2017 aided by better capacity utilisation and better customer outreach.
* Moderate financial risk profile: Financial risk profile is marked by networth of Rs 77.8 crore and total outside liabilities to tangible net worth (TOLTNW) of less than 1 time as on March 31, 2019. Interest coverage and net cash accrual to total debt ratios were also adequate around 8 times and 0.9 time, respectively, for fiscal 2019.
* Easy access to raw material: The group will continue to benefit from easy access to the key raw material, agricultural waste, in the adjoining areas around Bhavnagar (Gujarat).
* Working capital-intensive nature of operations: Gross current assets were high at 7 months as on March 31, 2019, mainly driven primarily by large receivables.
* Reliance on collection agents and exposure to geographic concentration risk: The group is significantly dependent on collection agents (around 20), to procure agricultural waste. Continued access to agri-waste and uninterrupted supplies to customers remain critical. Further, the entire revenue coming from Gujarat, exposes the group to high geographical concentration risk.

Jiya group's liquidity is stretched driven by high incremental working capital requirements. The group generated healthy accruals of Rs. 20 cr in FY19 adequately covering the repayment obligations. However, the rapid topline growth and continued high working capital intensity resulted into almost fully drawn bank lines for the group and reliance on unsecured loans during fiscal 2019. CRISIL believes that liquidity may remain constrained over medium term given the working capital intensity and will be contingent on enhancement in bank limits, capex and funding pattern.

Outlook: Stable

CRISIL believes JEPL will continue to benefit from the extensive experience of its promoters, driven by first-mover advantage, and its moderate financial risk profile. The outlook may be revised to 'Positive' if infusion of capital by the promoters, or enhancement in working capital limit, coupled with better working capital management, leads to significant improvement in liquidity. The outlook may be revised to 'Negative' if increase in working capital requirement, or any large capital expenditure, weakens the financial risk profile, particularly liquidity.

About the Company

JEPL was incorporated in December 2011, by Mr Harshad Monpara, Mr Bhavesh Kakadiya, and Mr Yogesh Patel as a private limited company, to manufacture bio-briquettes and bio-pellets. In February 2014, the company was converted into a closely-held public limited company. It was listed on the SME stock exchange in June 2015, and subsequently moved to the Bombay Stock Exchange (main board) on February 8, 2018. The company has its ISO 9001:2008 certified manufacturing plant in Navagam, Bhavnagar.
In fiscal 2018, JEPL acquired Jiya Eco India Ltd (JEIL) (originally incorporated by promoters in fiscal 2017). JEIPL was formed with the purpose of increasing overall group sales from sale of pellets and leasing of pellet burners to retail customers.
JEPL formed another subsidiary called Jiya Eco (Gandhidham) Pvt Ltd (JEGPL), to set up a pellet manufacturing plant at Gandhidham, which operationalised in April 2019.

Key Financial Indicators (Consolidated)
Particulars Unit 2019 2018
Revenue Rs crore 213 93
Profit after tax Rs crore 18.3 8.5
Profit after tax margin % 8.6 9.1
Adjusted debt/adjusted networth Times 0.3 0.4
Interest coverage Times 8 6.3

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 Proposed Long Term
Bank Loan Facility
NA Cash Credit NA NA NA 8 CRISIL BB+/Stable
NA Long Term Loan NA NA Dec-19 3.47 CRISIL BB+/Stable
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Jiya Eco-Products Ltd
CRISIL has consolidated the business and financial profile of JEPL with its subsidiaries, as the entities are in same line of business, under a common management, and they operate in the same value chain with financial and business interlinkages.
Jiya Eco India Ltd
Jiya Eco (Gandhidham) Pvt Ltd
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  28.47  CRISIL BB+/Stable      19-10-18  CRISIL BBB-/Stable    --    --  -- 
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 8 CRISIL BB+/Stable Cash Credit 8 CRISIL BBB-/Stable
Long Term Loan 3.47 CRISIL BB+/Stable Long Term Loan 3.47 CRISIL BBB-/Stable
Proposed Long Term Bank Loan Facility 17 CRISIL BB+/Stable Proposed Long Term Bank Loan Facility 17 CRISIL BBB-/Stable
Total 28.47 -- Total 28.47 --
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
CRISILs Bank Loan Ratings
CRISILs Criteria for Consolidation

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