| Kirti Agrotech Limited | ||||
| Rating upgraded to 'CRISIL BBB/Positive' | ||||
| Rating Action | ||||
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| 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 Kirti Agrotech Limited (KATL; part of the Kirti group) to ’CRISIL BBB/Positive’ from ‘CRISIL BBB-/Positive’.
The rating upgrade reflects improved operating performance in fiscal 2021, which is likely to be sustained in the current fiscal. The group achieved net sales of Rs 3,408 crore in fiscal 2021, reporting growth of about 50% over the previous fiscal. Higher manufacturing sales and improved realisations led to better profit and cash accrual. Further, gross sales stood at Rs 2,197 crore as on July 31, 2021, largely driven by liquidation of inventory.
The financial risk profile was comfortable, backed by healthy networth and strong debt protection metrics. Networth rose to Rs 318 crore as on March 31, 2021, from Rs 210 crore a year earlier, owing to higher accretion. Interest coverage ratio was strong at around 9.6 times in fiscal 2021, while term debt was limited. The capital structure, however, moderated at the end of the year because of sizeable inventory, especially of soya bean, which necessitated the group to avail short-term loans and augment payables. The total outside liabilities to tangible networth (TOLTNW) ratio stood at 3.79 times as on March 31, 2021; sustained improvement in the ratio remains critical. Expected large capital expenditure (capex) of around Rs 170 crore for establishing a new facility will be supported through a healthy mix of external debt and equity from the promoters, limiting the impact on the overall financial risk profile.
The rating reflects the group’s established position in the edible oil industry, backed by experienced promoters, presence in multiple locations with facilities close to raw material sources and large scale of operations. The ratings also factor in healthy networth and strong debt protection metrics. These strengths are partially offset by susceptibility to volatility in raw material prices and intense competition, large working capital requirement and heightened exposure to project risks. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of KATL, Kirti Agrovet Ltd (KAVL), Kirti Gold Limited (KGL), Kirti Dal Mills Ltd (KDML) and Kirti Oil Industries Pvt Ltd (KOIL), collectively referred to as the Kirti group, as these entities have common promoters and management, and operational and financial linkages. Furthermore, unsecured loan of Rs 33.63 crore as on March 31, 2021, from the promoters/directors has been treated as neither debt nor equity as the loan is expected to remain in the business over the medium term.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key rating drivers and detailed description Strengths:
Gearing and TOLTNW ratio moderated to 1.59 and 3.79 times, respectively, as on March 31, 2021, owing to large inventory. Sizeable inventory exposes the group to inventory price risk.
Weaknesses:
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Liquidity: Adequate Cash accrual is expected to be healthy at Rs 130-140 crore over the medium term against limited debt obligation in fiscals 2022 and 2023. Bank lines are utilised extensively only during season; in the off-season, utilisation remains moderate. Liquidity is aided by fund support from the promoters through unsecured loans and annual subsidies from the government as most of the units are set up under a State Industrial Promotion Subsidy. |
Outlook: Positive CRISIL Ratings believes the Kirti group will continue to benefit from the extensive experience of the promoters, and show sustained improvement in revenue and profitability. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the GroupEstablished by Mr Vishnu das Bhutada, the Kirti group is currently managed by the second and third generation of the promoter family along with the founding promoter. The group primarily extracts, refines and markets edible oils, mainly soya bean oil and sunflower oil, along with DOC. It also trades in edible oils and agricultural commodities on opportunity basis. It has manufacturing units (solvent extraction and refinery) at Latur, Solapur, Nanded and Hingoli in Maharashtra, and at Bijapur in Karnataka. |
Key financial indicators (consolidated)
*Provisional |
Status of non-cooperation with previous CRA: KATL has not cooperated with Credit Analysis & Research Ltd (CARE), which has classified it as issuer non cooperative vide release dated August 3, 2021. The reason provided by CARE Limited is non-furnishing of information for monitoring of ratings. |
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 | |||
| Facility | Amount (Rs. Crore) | Name of Lender | Rating |
| Cash Credit | 32 | Union Bank of India | CRISIL BBB/Positive |
| Cash Credit | 18 | Union Bank of India | CRISIL BBB/Positive |
| Proposed Long Term Bank Loan Facility | 8 | Not Applicable | CRISIL BBB/Positive |
This Annexure has been updated on 04-Oct-2021 in line with the lender-wise facility details as on 04-Oct-2021 received from the rated entity.
Criteria Details
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