Rating Rationale
August 02, 2022 | Mumbai
M lakhamsi industries limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.11.5 Crore
Long Term RatingCRISIL BB-/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
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 BB-/Stable/CRISIL A4+' ratings on the bank facilities of M Lakhamsi Industries limited (MLIL; erstwhile M.Lakhamsi and Co.).

 

The rating continues to reflect the extensive experience of the Promoters in the agricultural (agro) commodities trading and moderate financial risk profile of MLIL These strengths are partially offset by susceptibility of operating performance to volatile agro commodity prices and changes in regulation, and large working capital requirement.

Analytical Approach

Unsecured loan of Rs 5.6 crore as on March 31, 2022, extended by the promoters, has been treated as debt.

Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of promoters:

Company's business risk profile will continue to benefit over the medium term from the extensive experience of its promoters, who have been engaged in the in domestic and international agro commodity markets as a trader for more than 4 decades. Over the years, the company has established strong relationship with its customers and suppliers.

 

Moderate financial risk profile: Financial risk profile is expected to remain supported by the absence of any large, debt-funded capital expenditure (capex) and no further large capital withdrawal by the promoters. Despite estimated modest networth of Rs 6.35 crore as on March 31, 2022, total outside liabilities to tangible networth ratio is estimated to be comfortable at 2.59 times. Furthermore, Debt protection metrics is estimated with interest coverage ratio of 1.72 times in fiscal 2022.

 

Weakness:

Susceptibility of operating performance to changes in regulation and volatile agro commodity prices: As an agro commodities trader, MLIL is exposed to risks relating to volatility in commodity prices. Moreover, the domestic agro commodity industry is highly regulated in terms of minimum selling price, export/import policies and other relevant policies, all of which will continue to affect operating performance of the Company.

 

Working capital intensive nature of operations: Operations are expected to remain working capital intensive as reflected in estimated Gross Current Assets (GCA) of around 112 days as on March 31, 2022 primarily on account of estimated inventory and debtors of 72 days and 16 days respectively.

Liquidity: Stretched

Bank limit utilisation is at around 93 percent for period ended March 2022. Cash accruals are expected to be over Rs1.5 crore which are sufficient against term debt obligation of Rs 0.3-0.5 crore over the medium term. In addition, it will act as cushion to the liquidity of the company.

Current ratio is estimated to be healthy at 1.40 times on March 31, 2022 and cash and bank balance of Rs 0.4 crore on March 31,2022. No major capex plans over medium term.

Outlook: Stable

CRISIL Ratings believes that MLIL will continue to benefit from the extensive experience of the promoters.

Rating Sensitivity Factors

Upward Factors

  • Growth in scale of operations and improved profit margins, resulting in cash accrual of above Rs 2.5 crore per annum on sustained basis
  • Significant improvement in liquidity and financial risk profile, driven by substantial increase in networth

 

Downward Factors

  • Decline in revenue or operating margin dropping below 2% resulting in much lower cash accruals
  • Stretch in the working capital cycle, further large capital withdrawals or any large, debt-funded capex.

About the Company

Incorporated in 1985, MLIL is a public limited company engaged in trading of agro commodities such as peanuts, sesame seeds, spices, and vegetable oils, both edible and non-edible while other products include chickpeas, raisins, wheat flour, oil cakes, maize, coarse grains and cereals. Mr Sanjiv Sawla currently manages the business.

Key Financial Indicators

As on/for the period ended March 31

Unit

2021

2020

Operating income

Rs.Crore

108.91

97.65

Reported profit after tax

Rs.Crore

1.04

0.11

PAT margins

%

0.95

0.12

Adjusted Debt/Adjusted Networth

Times

2.96

2.61

Interest coverage

Times

2.6

1.82

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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.Cr)

Complexity levels

Rating Assigned with Outlook

NA

Foreign Documentary Bills Purchase

NA

NA

NA

2.5

NA

CRISIL A4+

NA

Inland/Import

Letter of Credit

NA

NA

NA

1

NA

CRISIL A4+

NA

Packing Credit

NA

NA

NA

6

NA

CRISIL BB-/Stable

NA

Term Loan

NA

NA

July-2024

1

NA

CRISIL BB-/Stable

NA

Letter of Guarantee

NA

NA

NA

1

NA

CRISIL A4+

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 9.5 CRISIL BB-/Stable / CRISIL A4+   -- 31-05-21 CRISIL BB-/Stable / CRISIL A4+ 12-02-20 CRISIL BB-/Stable / CRISIL A4+ 25-03-19 CRISIL BB-/Stable / CRISIL A4+ CRISIL B+/Stable / CRISIL A4
Non-Fund Based Facilities ST 2.0 CRISIL A4+   -- 31-05-21 CRISIL A4+ 12-02-20 CRISIL A4+ 25-03-19 CRISIL A4+ CRISIL A4
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Foreign Documentary Bills Purchase 2.5 Union Bank of India CRISIL A4+
Inland/Import Letter of Credit 1 Union Bank of India CRISIL A4+
Letter Of Guarantee 1 Union Bank of India CRISIL A4+
Packing Credit 6 Union Bank of India CRISIL BB-/Stable
Term Loan 1 Union Bank of India CRISIL BB-/Stable

This Annexure has been updated on 12-May-2023 in line with the lender-wise facility details as on 05-May-2023 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
CRISILs Bank Loan Ratings
Understanding CRISILs Ratings and Rating Scales

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