Rating Rationale

Rating Rationale

January 17, 2025 | Mumbai

Omm Agroexim Private Limited

Ratings reaffirmed at 'Crisil BBB/Stable/Crisil A3+'; Rated amount enhanced for Bank Debt

Rating Action

Total Bank Loan Facilities Rated	Rs.110 Crore (Enhanced from Rs.50 Crore)
Long Term Rating	Crisil BBB/Stable (Reaffirmed)
Short Term Rating	Crisil A3+ (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 BBB/Stable/Crisil A3+’ ratings on the bank loan facilities of Omm Agroexim Pvt Ltd (OAPL; part of the Sarala group).

The ratings continue to reflect the extensive experience of the promoters in the agricultural commodities trading business, and the efficient working capital management, sound operating efficiency and moderate financial risk profile of the group. These strengths are partially offset by low operating margin due to the trading business and vulnerability to fluctuations in raw material prices and foreign exchange (forex) rates.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of OAPL, Sarala Foods Pvt Ltd (SFPL) and Sri Seetaramanjaneya Sortex (SSS). This is because these entities, collectively referred to as the Sarala group, are in the same industry and have operational and financial linkages and fungible cash flow.

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Extensive industry experience of the promoters: The promoters have been engaged in the agro commodities trading business (mainly non-basmati rice) since 1985 and have a strong understanding of the business dynamics and healthy relationships with customers and suppliers. The promoters later added rice sorting capacities and have developed a strong clientele in overseas markets. With strict adherence to quality and timely deliveries, the group was able to get repeat orders. In the past three fiscals, the promoters have significantly scaled up the business; the group is among the top non-basmati rice exporters in India.

Efficient working capital management and sound operating efficiency: Gross current assets remained range-bound at 53-83 days over the three fiscals ended March 31, 2024. The working capital cycle is managed efficiently, resulting in healthy return on capital employed (RoCE) of 22% in fiscal 2024. The RoCE is expected to remain healthy at more than 20% over the medium term.

Moderate financial risk profile: Networth was Rs 83.28 crore and gearing was 2.15 times as on March 31, 2024. Debt protection metrics were adequate, as reflected in interest coverage and net cash accrual to adjusted debt ratios of 4.69 times and 0.15 time, respectively, in fiscal 2024. However, total outside liabilities to adjusted networth ratio was high at over 3.68 times as on March 31, 2024, and is expected to improve to 2.90-2.95 times as on March 31, 2025.

Weaknesses:

Low operating margin and susceptibility to volatility in raw material prices and forex rates: Small initial investment and low complexity of operations have resulted in innumerable small entities in the agro commodities business, leading to significant fragmentation and low operating margin. The group derives over 80% of revenue from exports, and to mitigate forex risk, it hedges majority of its foreign currency exposure. Furthermore, it sources most of the stock required to fulfill an order within a week of receiving the purchase order, which mitigates exposure to raw material price fluctuations and forex fluctuation risks. Nevertheless, considering the limited value addition and low operating margin, any sharp volatility in raw material prices or foreign currency will likely impact the revenue and profit margin.

Customer concentration in the revenue profile and susceptibility to regulatory changes: The group faces significant customer concentration risk. Its top five customers account for about 51% of its revenue. Hence, any change in the procurement policies of the customers may impact the group’s credit risk profile. Moreover, government regulations directly impact non-basmati rice exports. However, the group’s order book of around Rs 500 crore provides near-term revenue visibility.

Liquidity: Adequate

Bank limit utilisation was moderate at 86% on average for the 12 months through November 2024. At the group level, net cash accrual expected at Rs 47 crore in fiscal 2025 will sufficiently cover minimal debt obligation.

Current ratio was moderate at 1.21 times as on March 31, 2024. The promoters will likely extend equity and unsecured loans to meet working capital requirement and debt obligation.

Outlook: Stable

Crisil Ratings believes the Sarala group will continue to benefit from its longstanding relationships with principal suppliers and the experience of the management to mitigate the inherent risks in trading

Rating sensitivity factors

Upward factors:

Steady growth in revenue and stable operating margin over 3.5% leading to net cash accrual over Rs 55 crore
Improvement in the financial risk profile, with the total outside liabilities to tangible net worth (TOLTNW) ratio below 2.5 times.

Downward factors:

Decline in revenue or fall in operating margin below 2.8% leading to lower cash accrual
Weakening in the financial risk profile and liquidity with weakened debt protection metrics and increase in TOLTNW ratio to above 3.2 times
Any sharp reduction in net cash accrual or large, debt-funded capital expenditure or significantly larger-than-expected inventory, impacting the capital structure and liquidity

About the Group

Incorporated in 2005, SFPL trades and exports agricultural products such as brown basmati rice, sweet brown rice, parboiled basmati rice, brown rice, rice husk, maize, paddy seeds and wheat seeds. Set up in 2005 in Kakinada, Andhra Pradesh, SSS trades in agro food commodities, such as raw, par boiled and broken rice. OAPL was set up as a partnership in 2017. The company processes and trades in rice. Its plant is in Kakinada, Andhra Pradesh, and has total capacity of 200 MT. The group is owned and managed by Mr Vinod Agarwal and his family members.

OAPL was set up as a partnership in 2017. The firm was reconstituted as a private limited company in 2022. The company processes and trades in rice. Its plant is in Kakinada, Andhra Pradesh, and has total capacity of 200 MT.

The group is owned and managed by Mr Vinod Agarwal and his family members.

Key Financial Indicators

Combined
As on / for the period ended March 31	Unit	2024	2023
Operating income	Rs crore	1,617.21	1888.15
Reported profit after tax	Rs crore	28.81	23.22
PAT margins	%	1.78	1.23
Adjusted Debt/Adjusted Net worth	Times	2.15	1.87
Interest coverage	Times	4.69	5.83

SFPL
As on / for the period ended March 31	Unit	2024	2023
Operating income	Rs crore	895.36	963.23
Reported profit after tax	Rs crore	17.19	13.24
PAT margins	%	1.92	1.37
Adjusted Debt/Adjusted Net worth	Times	2.14	1.93
Interest coverage	Times	5.18	6.84

OAPL
As on / for the period ended March 31	Unit	2024	2023
Operating income	Rs crore	625.11	669.51
Reported profit after tax	Rs crore	10.04	6.63
PAT margins	%	1.61	0.99
Adjusted Debt/Adjusted Net worth	Times	3.36	1.76
Interest coverage	Times	5.86	5.65

SSS
As on / for the period ended March 31	Unit	2024	2023
Operating income	Rs crore	119.07	332.29
Reported profit after tax	Rs crore	1.57	3.34
PAT margins	%	1.32	1.01
Adjusted Debt/Adjusted Net worth	Times	0.07	1.75
Interest coverage	Times	1.12	4.11

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. Crore)	Complexity Levels	Rating Outstanding with Outlook
NA	Export Packing Credit	NA	NA	NA	50.00	NA	Crisil A3+
NA	Export Packing Credit & Export Bills Negotiation/Foreign Bill discounting	NA	NA	NA	15.00	NA	Crisil A3+
NA	Packing Credit	NA	NA	NA	15.00	NA	Crisil A3+
NA	Packing Credit in Foreign Currency	NA	NA	NA	15.00	NA	Crisil A3+
NA	Proposed Fund-Based Bank Limits	NA	NA	NA	15.00	NA	Crisil BBB/Stable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Sarala Foods Private Limited	Full consolidation	Operate in the same industry and have operational and financial linkages with common promoters
Sri Seetaramanjaneya Sortex	Full consolidation	Operate in the same industry and have operational and financial linkages with common promoters
Omm Agroexim Private Limited	Full consolidation	Operate in the same industry and have operational and financial linkages with common promoters

Annexure - Rating History for last 3 Years

	Current			2025 (History)		2024		2023		2022		Start of 2022
Instrument	Type	Outstanding Amount	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating	Rating
Fund Based Facilities	ST/LT	110.0	Crisil BBB/Stable / Crisil A3+		--	27-12-24	Crisil BBB/Stable / Crisil A3+	03-10-23	Crisil A3 / Crisil BBB-/Stable		--	--
			--		--	19-12-24	Crisil A4+ / Crisil BB+ /Stable(Issuer Not Cooperating)*		--		--	--

All amounts are in Rs.Cr.

* - Issuer did not cooperate; based on best-available information

Annexure - Details of Bank Lenders & Facilities

Facility	Amount (Rs.Crore)	Name of Lender	Rating
Export Packing Credit	25	HDFC Bank Limited	Crisil A3+
Export Packing Credit	25	HDFC Bank Limited	Crisil A3+
Export Packing Credit & Export Bills Negotiation/Foreign Bill discounting	15	Kotak Mahindra Bank Limited	Crisil A3+
Packing Credit	15	DBS Bank India Limited	Crisil A3+
Packing Credit in Foreign Currency	15	Axis Bank Limited	Crisil A3+
Proposed Fund-Based Bank Limits	15	Not Applicable	Crisil BBB/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

Criteria for rating entities belonging to homogenous groups

CRISILs Criteria for Consolidation

Media Relations	Analytical Contacts	Customer Service Helpdesk
Ramkumar Uppara Media Relations Crisil Limited M: +91 98201 77907 B: +91 22 6137 3000 ramkumar.uppara@crisil.com Sanjay Lawrence Media Relations Crisil Limited M: +91 89833 21061 B: +91 22 6137 3000 sanjay.lawrence@crisil.com	Himank Sharma Director Crisil Ratings Limited B:+91 124 672 2000 himank.sharma@crisil.com Nagarjun Alaparthi Associate Director Crisil Ratings Limited B:+91 40 4032 8200 nagarjun.alaparthi@crisil.com Bharathi Alla Senior Rating Analyst Crisil Ratings Limited B:+91 40 4032 8200 Bharathi.Alla@crisil.com	Timings: 10.00 am to 7.00 pm Toll free Number:1800 267 1301 For a copy of Rationales / Rating Reports: CRISILratingdesk@crisil.com For Analytical queries: ratingsinvestordesk@crisil.com