Rating Rationale
October 27, 2023 | Mumbai
M lakhamsi industries limited
Ratings reaffirmed at 'CRISIL BB-/Stable/CRISIL A4+'
 
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 3.6 crores as on March 2023 has been treated as debt in absence of track record of non-withdrawal.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of promoters: MLIL will continue to benefit from the promoters' experience of over  four decade whom, their strong understanding of market dynamics, and healthy relations with customers and suppliers and will continue to support the business

 

  • Moderate financial risk profile: Financial risk profile is expected to remain moderate in absence of any large debt funded capital expenditure and no large dividends expected to be given. The net worth of the company is Rs 7.04 crore as on 31st March 2023. Total outside liabilities to tangible net worth ratio is estimated to be moderate at 2.99 times as on 31st March 2023. Furthermore, Debt protection metric is moderate with interest coverage of 1.82 times in fiscal 23.

 

Weakness:

  • Susceptibility of operating performance to changes in regulation and volatile agro commodity prices: Vulnerability of the crops to the vagaries of the rainfall can lead to fluctuations in availability and prices of peanuts and sesame seeds, and thus could impact the business risk profile.  Moreover, it will continue to remain exposed to government regulations in terms of prices of agro commodities, export/ import restrictions, all of which will continue to affect operating performance of the Company.

 

  • Working capital intensive nature of operations: Operations have been working capital intensive, with gross current assets (GCA) days at 74 days primarily driven by inventory of 72 days. GCA days are expected to remain high on account of the nature of the business.

Liquidity: Stretched

Bank limit utilisation is moderate at around 68.7 percent for the past 12 months ended July 2023.Cash accrual are expected to be over Rs 1.2 crore which are sufficient against term debt obligation of Rs 59 lakhs over the medium term. In addition, it will act as a cushion to the liquidity of the company.

 

Current ratio is modest at 1.12 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 believes that MLIL will continue to benefit from the extensive experience of the promoters.

Rating Sensitivity Factors

Upward factor

  • 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 factor

  • Decline in revenue or operating margin leading or more than expected debt, leading to net cash accrual to repayment obligations (NCA/RO) dropping below 1 times.
  • 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 

2023

2022

Operating income

Rs.Crore

116.08

39.84

Reported profit after tax

Rs.Crore

0.73

0.33

PAT margins

%

0.63

1.11

Adjusted Debt/Adjusted Networth

Times

1.43

1.98

Interest coverage

Times

1.82

1.67

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 2023 (History) 2022  2021  2020  Start of 2020
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+   -- 02-08-22 CRISIL BB-/Stable / CRISIL A4+ 31-05-21 CRISIL BB-/Stable / CRISIL A4+ 12-02-20 CRISIL BB-/Stable / CRISIL A4+ CRISIL BB-/Stable / CRISIL A4+
Non-Fund Based Facilities ST 2.0 CRISIL A4+   -- 02-08-22 CRISIL A4+ 31-05-21 CRISIL A4+ 12-02-20 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
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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