| Kovilpatti Lakshmi Roller Flour Mills Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+' | ||||||
| Rating Action | ||||||
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| 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 reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings on the bank facilities of Kovilpatti Lakshmi Roller Flour Mills Limited (KLRFML).
The rating continues to reflect KLRFML's extensive industry experience of the promoters, moderate working capital cycle, well established customer base, healthy product diversity supports the scale and sustainability and moderate financial profile. These strengths are partially offset by its susceptibility to climatic conditions and susceptibility of operating margin to volatility in raw material prices. |
Analytical Approach USL from promoters of around Rs. 2.85 crore, as on March 2023, has been treated as NDNE. The same is expected to remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strengths: Extensive industry experience of the promoters: The promoters have experience of over 40 years in agriculture and engineering division industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers.
Moderate working capital cycle: Gross current asset is at 80-100 days over the three fiscals ended March 31, 2023. Its moderate working capital management is reflected in its gross current assets (GCA) of 72 days as on March 31, 2023. It is required to extend the long credit period in line with the industry standards. As the customers are small and medium-sized player who require credit. Furthermore, to meet its business requirements, it hold large work in process & inventory.
Moderate financial profile: KLRFML’s capital structure has been at moderate healthy level due to limited reliance on external funds yielding gearing of around 0.69 times in March 2023. KLRFML’s debt protection measures have also been at a comfortable level despite leverage due to moderately healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 4.67 times and 0.38 times for fiscal 2023. KLRFML’s debt protection measures are expected to remain at a similar level over medium term.
Weakness: Susceptibility to climatic conditions: The crop yield of agricultural commodities is dependent on adequate and favorable climatic conditions. Thus, KLRFML is exposed to the risk of limited availability of its key raw material during a unfavorable climatic condition. Also, production may be impacted by pests or crop infection leading to higher unpredictability in production and pricing of agri-commodities and derived products.
Susceptibility of operating margin to volatility in raw material prices: In the engineering division, the prices of iron, steel, etc key raw material are volatile. As raw material costs comprise a majority of the operating income/cost of manufacturing, operating profit margin is susceptible to sharp adverse movement in input prices. The impact of engineering division’s profitability and subsequent effect of on the business risk profile of the company shall remain a key rating monitorable, going forward. |
Liquidity: Adequate Liquidity is adequate marked by large cushion in working capital limits and sufficient cushion between cash accruals and repayment obligations. The working capital bank limits have been utilised at 55 percent for the twelve months ended September 2023. The group is expected to generate cash accrual of Rs.15 crore per annum, against which that shall be adequate to meet repayment obligations of around Rs 6-8 crore. Further liquidity is also supported by funding support in the form of unsecured loans from promoters, which were at around Rs.2.85 crore as on March 31, 2023. The current ratio are healthy at 1.97 times on March 31, 2023. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. |
Outlook: Stable CRISIL Ratings believe KLRFML will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company KLRFML was incorporated in 1961. The company operates in two segments: the engineering division and foods division. Foods division offers maida, sooji, atta and wheat products under Kuthuvilakku, Kera and Alamaram brands. The engineering division produces ferrous castings and sheet metal designs which caters to a range of clients in the automotive, capital equipment, pumps & valves and general engineering sectors. It has two manufacturing facilities located at Tamil Nadu and is promoted by Mr. Suresh Jagannathan and family. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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Criteria Details
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