| Mantora Oil Products Private Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+ / Stable / CRISIL A2 ' | ||||||
| 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 upgraded its ratings on the bank facilities of Mantora Oil Products Pvt Ltd (MOPPL) to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB/Stable/CRISIL A3+’.
The rating upgrade reflects MOPPL’s improved business risk profile driven by improvement in revenue by approx. 40% in fiscal 2022 to Rs.5524crore as against Rs. 3878crore in fiscal 2021. The growth in revenue is primarily driven by higher realisations from the sunflower and palm oils due to supply shortages. In the current fiscal the company has reported the revenue of Rs. 2890crore upto September 2022 and is expected to report the revenue of more than Rs.5800crore. Due to limited value Rating upgrade also factors company’s healthy financial and liquidity profile. MOPPL has strong networth of Rs.651crore as on March 31,2022 and is expected to be over Rs.790crore as on March 31,2023 supported by comfortable gearing of 0.33times as on March 31,2022. In absence of any debt funded capex, the capital structure is expected to remain comfortable over the medium term with overall gearing in the range of 0.3-0.4 times. Liquidity is strong marked by healthy cushion available in cash accruals against debt obligations and unencumbered cash and bank balance of Rs.125crore as September 30,2022.
The rating continues to reflect extensive experience of the promoters in the edible oil market, established market position of MOPPL in Uttar Pradesh, above-average financial risk profile and healthy revenue growth. These strengths are partially offset by exposure to intense competition and susceptibility to volatile raw material prices and government regulations. |
Key Rating Drivers & Detailed Description Strengths: Experience of promoters and established brand presence: The promoters have over four decades of experience in the edible oil market; their strong understanding of local market dynamics and healthy relations with customers and suppliers should continue to support the business. The brand, Bawarchi, is well-reputed in Uttar Pradesh and Bihar, resulting in steady revenue flow. Revenue growth is expected to be steady, aided by the extensive experience of the promoters and the diversified network. A gradual increase in production capacity, demand and established customer relationships has helped revenue to an expected Rs.5800 crore in fiscal 2023.
Healthy financial risk profile: Company has healthy financial risk profile on the back of strong networth is of Rs. 651crore as on March 31,2022 and is expected to be over Rs. 790crore in fiscal 2023 supported by comfortable gearing of 0.33times as on March 31,2022. In absence of any debt funded capex, the capital structure is expected to remain comfortable over the medium term with overall gearing in the range of 0.3-0.4 times. Robust debt protection metrics marked by interest coverage of 15.11times and NCAAD of 0.69times as on March 31,2022. Debt protection matrices are expected to remain healthy with interest coverage in the range of 10-12times over the medium term.
Prudently managed working capital: Company has efficient working capital management with gross current asset of 79 days as on March 31, 2022 and is expected to be in the range of 90-100days over the medium term. The company prudently manages its working capital requirements through moderate inventory level maintained and early debtor realization. The working capital requirement is supported by LC-backed credit period of 90days from the suppliers.
Weakness: Exposure to intense competition: Operations are exposed to risks inherent in the agriculture-based commodity business, such as availability of raw material or fluctuations in prices. For instance, the solvent extraction business is exposed to availability of soya bean seeds in the domestic market as well as the international prices of degummed soya oil and crude palm oil that are imported. Besides, when the monsoon is erratic, quality seeds are in short supply, which leads to high input costs, thereby adversely affecting the margins of players. This results in volatility in the edible oil business. Oil prices also depend on global demand-supply and movement in prices of other edible oils (such as palmolein and vanaspati).
Susceptibility to volatile raw material prices and government regulations: Profitability is vulnerable to risks emanating from weak harvests, and to volatility in commodity prices. The edible oil industry remains vulnerable to availability and prices of raw material, domestic production of oil seeds, government regulation pertaining to imports, annual rainfall, consumer preferences and global price fluctuations. Further, the company imports a sizeable bulk of its raw material; hence, risk related to any unfavourable fluctuation in foreign exchange rates persist although selective hedging covers around 65% of this exposure. |
Liquidity: Adequate Liquidity profile continues to be adequate supported by expected net cash accrual of about Rs. 125-140 crore against the repayment obligation in the range of Rs. 2-3crore over the medium term. Further moderately utilised working capital limits at 58% on average in past 15months ended in October 2022 and unencumbered cash and bank balance of Rs. 125.68crore as on October30,2022 also support liquidity. Though the maturing LC repayments are high, they are taken care by the margin build up on telescopic basis by the earmarked Fixed Deposits as LC are largely backed by 100% margin money. |
Outlook Stable CRISIL Ratings believes that MOPPL will continue to benefit from its established marketing network and brand presence in the edible oil industry. |
Upward factor
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About the Company MOPPL, incorporated in 1984, processes, extracts, and refines all kinds of vegetable oils, vanaspati ghee and other edible oils. This company is based in Kanpur (Uttar Pradesh) and commenced commercial operations in June 1987 when it launched its refined vegetable oil under the brand, Bawarchi. |
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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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
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This Annexure has been updated on 01-Dec-2022 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity.
Criteria Details
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