Rating Rationale
December 06, 2019 | Mumbai
Parvati Sweetners and Power Limited
'CRISIL BB+/Stable' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.30 Crore
Long Term Rating CRISIL BB+/Stable (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL BB+/Stable' rating to the bank facilities of Parvati Sweetners and Power Limited (PSPL).

The rating reflects the extensive experience of the promoters in the sugar industry and PSLPL's above average financial risk profile. These strengths are partially offset by the cyclicality associated with the sugar business, dependence on monsoon and large working capital requirements.

Analytical Approach

Unsecured loans (outstanding at Rs 40.96 crore as on March 31, 2019) extended to PSPL by the promoters have been treated as NDNE.  That is because these loans are expected to convert into equity by March 2020.

Key Rating Drivers & Detailed Description
Strengths:
* Extensive experience of the promoters: Benefits derived from the promoters' experience of over a decade, their strong understanding of local market dynamics, and healthy relations with suppliers and customers should continue to support the business.
 
* Above average financial risk profile: The total outside liabilities to tangible net-worth ratio was low at 0.46 time as on March 31, 2019, and has been so for the past three fiscals. Debt protection metrics were adequate, with interest coverage and net cash accrual to total debt ratios of 3.28 times and 0.17 time, respectively, for fiscal 2019. The financial risk profile likely to remain at similar level over the medium term, supported by healthy profitability and limited reliance on external funds.
 
Weaknesses:
* Cyclicality associated with sugar business and dependence on monsoon: Cane production is highly dependent on the monsoons and better realisations in alternatives such as rice and wheat might prompt farmers to switch to sowing these crops as well. Also, cane availability is restricted to the command area allocated to each company. In India, alternative sweeteners to sugar are gur and khandsari. Lower sugarcane yields and an increase in the sale of sugarcane to gur and khandsari manufacturers may lead to decrease in sugar production. Further, sugarcane and the other by-products manufactured remain extremely sensitive to fluctuations to commodity prices thereby significantly impacting the revenue and profitability. 
 
* Large working capital requirements: Gross current assets were 504 days as on March 31, 2019, driven by inventory of 260 days. Inventory level is high due to seasonal nature of sugarcane as it has to be procured in bulk during the season (October to April) to meet the demand throughout the year. CRISIL believes The working capital cycle is expected to remain stretched over medium term.
Liquidity Adequate

Cash accrual projected at Rs 6.02-12.90 crore per annum over the medium term should comfortably meet the yearly maturing debt of Rs 4.58-5.95 crore; the surplus cash will be used as working capital. Thus, bank limit utilisation was low and averaged 23% during the 12 months through September 2019. The promoters are also expected to continue extending timely, need-based funds to aid financial flexibility.

Outlook: Stable

CRISIL believe PSPL will continue to benefit from the extensive experience of the promoters, and established relationships with clients.

Rating Sensitivity factors
Upward factor
* Increase in scale of operation by 40% on account of addition in capacity while maintaining operating margins leading to significant increase in cash accruals
*  Improvement in working capital cycle
 
Downward factor
* Decline in revenue by more than 30 percent with operating margins less than 12 % leading to lower than expected net cash accruals
* Delay in project for capacity addition or cost overrun impacting financial risk profile
* Sizeable stretch in the working capital cycle.
About the Company

PSPL, incorporated in December 2011, is a Madhya Pradesh-based company that has a sugar manufacturing plant in Sankhini near Gwalior (Madhya Pradesh), with installed capacity to crush up to 2,500 tonne per day.

Key Financial Indicators
As on/for the period ended March 31  Units 2019 2018
Operating income Rs crore 59.75 59.83
Reported profit after tax Rs crore 0.05 1.45
PAT margins % 0.1 2.4
Adjusted Debt/Adjusted Net worth Times 0.46 0.72
Interest coverage Times 3.28 2.60
Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. 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)
Rating Assigned
with Outlook
NA Proposed Cash Credit / Bills Discounting Limit NA NA NA 6.0 CRISIL BB+/Stable
NA Term Loan NA NA Mar-2024 6.3 CRISIL BB+/Stable
NA Proposed Fund-Based Bank Limits NA NA NA 17.7 CRISIL BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  30.00  CRISIL BB+/Stable    --    --    --    --  -- 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Term Loan 6.3 CRISIL BB+/Stable -- 0 --
Proposed Cash Credit / Bills Discounting Limit 6 CRISIL BB+/Stable -- 0 --
Proposed Fund-Based Bank Limits 17.7 CRISIL BB+/Stable -- 0 --
Total 30 -- Total 0 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings
Rating Criteria for Sugar Industry
CRISILs Bank Loan Ratings

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Nitin Kansal
Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Akshita Jain
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2189
Akshita.Jain@crisil.com


ABHISHEK SINGH
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 124 254 3450
Abhishek.Singh1@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


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL