| Kaleesuwari Refinery Private Limited | ||||||
| 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' ratings on the bank facilities of Kaleesuwari Refinery Pvt Ltd (KRPL; a part of the Kaleesuwari group) continue to reflect the Kaleesuwari group's established position in South India's edible oil market, strong marketing and distribution network, and an above-average financial risk profile. These strengths are partially offset by exposure to intense competition and to raw material price volatility.
CRISIL Ratings had upgraded its rating on the long-term bank facilities of KRPL to 'CRISIL A+/Stable' from ‘CRISIL A/Stable’ while reaffirming the short rating at ‘CRISIL A1’ on October 20, 2021.
The upgrade factors in expectation of continued improvement in the group's credit risk profile supported by sustained operating performance and improvement in financial risk profile. The improved operating performance stems from its healthy market position in the sunflower oil segment supported by a strong recall for its 'Gold winner' brand. Healthy demand for the its products despite significant increase in edible oil prices during fiscal 2021 led to significant improvement in operating profitability to 12.4% vis-à-vis 4.8% in fiscal 2020. Though, prices of edible oil continue to moderate in the current fiscal, margins would be in the range of 7-8% for fiscal 2022. With larger accretions, financial risk profile has improved marked by Total outside liabilities to tangible net worth adjusted for cash and bank balance (TOLTNW) of less than 1 time and interest coverage of more than 10 times in fiscal 2021. The ratios were 1.64 times and 8.2 times, respectively in fiscal 2020. With healthy networth of about Rs 833 crores as on March 31, 2021 and large liquid asset to fund the incremental working capital requirement and capital expenditure plans, financial risk profile would remain healthy over the medium term. Extent of moderation in operating profitability and scale of operations will remain a key rating sensitivity factor. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of KRPL, Kaleesuwari Intercontinental Pte Ltd (KICPL), Arun Oil Trade (AOT), and Kaleesuwari Refinery and Industry Pvt Ltd (KRIPL). That is because all these entities, collectively referred to as the Kaleesuwari group, operate in similar businesses, have operational synergies, and are managed by the same promoter.
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 Strengths:
Over the past three decades, the Kaleesuwari group has established a strong market presence in South India, and built a strong marketing and distribution network. Revenue is expected to grow by 5-10% over the medium term, while profitability will be aided by strong brand recognition and moderate working capital requirement. The group's flagship brand, Gold winner, under which it retails the sunflower oil is the market leader in Tami Nadu and is estimated to be one of the top 3 players in the organised sunflower oil segment.
Weakness:
Presence of several small, unorganised players across the value chain, from crushing to solvent extraction, has led to intense competition in the edible oil industry. Given the price-sensitive nature of demand, players mainly cater to regional demand to avoid high marketing and distribution costs. Furthermore, the industry is vulnerable to government policies in the form of duties imposed on import of refined and crude edible oil, volatility in edible oil prices and foreign exchange rates. Any large volatility in edible oil prices or forex rates could adversely impact the operating profitability of players in the industry. |
Liquidity: Strong The group is estimated to generate accruals of about Rs 150 crores against repayment obligation of 20-25 crores per annum. The group has working capital limit of about Rs 700 crores which have been fully utilised. However, the group has unencumbered cash and bank balance of about Rs 175 crores, which aids the liquidity. The group has moderate expansion plans, which shall be majorly funded through internal accruals and shall not constrain the liquidity of the group. Any larger than expected capex or share buyback or investment in group companies shall be a key monitrable over the medium term. |
Outlook: Stable CRISIL Ratings believes the Kaleesuwari group will continue to benefit from an established market presence and strong brand recall. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Group KRPL, incorporated at Chennai in 1984, refines sunflower oil under the Gold Winner brand, and trades in other edible oils. Its subsidiary, Singapore-based KICPL, was set up in 2012, and trades in crude sunflower and palm oil. AOT, set up in 2007, trades in refined, bleached, and deodorised palm oil. Its operations are managed by Mr. Arun. Proprietor of the entity. KRIPL, wholly-owned by KRPL and acquired in fiscal 2014, manufactures bio-diesel, glycerine, and refined sunflower oil. |
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 – List of entities consolidated
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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 02-Nov-2021 in line with the lender-wise facility details as on 02-Nov-2021 received from the rated entity.
Criteria Details
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