Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil BBB-/Stable/Crisil A3’ ratings on the bank loan facilities of Riddhi Siddhi Gluco Biols Ltd (RSGBL).

 

The ratings continue to reflect stabilisation of operations of RSGBL, Shree Rama Newsprint Ltd (SRNL) and Bluecraft Agro Pvt Ltd (BAPL), together known as the Riddhi Siddhi group, the extensive experience of the promoters in starch and maize trading business and healthy financial risk profile. These strengths are partially offset by exposure to counterparty risk associated with inter-corporate deposits (ICDs), shut down of the paper manufacturing facility and susceptibility to maize prices.

 

The group's overall revenue is anticipated at Rs 1,700-1,900 crore, driven by the expansion of the Yamunanagar plant's capacity from 1,000 tonne per day (TPD) to 1,400 TPD, leading to improved capacity utilisation. Meanwhile, revenue from other divisions is expected to remain stable, as no significant capital expenditure (capex) is planned. However, the operating margin is likely to decline by 6-7% in the current fiscal year owing to unforeseen price increases in reserved rice and the entry of Chinese players with large starch production capacities, which may impact exports. Nevertheless, potential changes in government regulations on reserved prices are expected to lead to improvement in the operating margin in the medium term

 

The financial risk profile of the group remains comfortable with adjusted interest coverage and net cash accrual to adjusted debt ratios of 4 times and 0.10 time, respectively, in fiscal 2024. As there is no significant capex planned, these metrics are likely to improve further to over 5 times and 0.10 time, respectively, in fiscal 2025, and are likely to remain robust in the medium term. Additionally, the group's gearing and total outside liabilities to tangible networth (TOLTNW) ratio are anticipated to stay below 1 time in the medium term, indicating a healthy financial position.

 

The group’s financial flexibility is aided by net external investments of Rs 665 crore, including ICDs of Rs 365 crore as on March 31, 2024.

Analytical Approach

For arriving at its ratings, Crisil Ratings has applied the homogenous criteria and combined the business and financial risk profiles of RSGBL, SRNL and BAPL. The other associate companies have not been considered for arriving at the ratings due to no significant business linkages with these entities.

 

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 experience of the promoters: The group is promoted by the Chowdhary family which have more than four decades of experience in the maize starch industry. RSGBL initially used to manufacture starch and starch derivatives. The division was sold to Roquette India Pvt Ltd for ~Rs 950 crore in fiscal 2012 and the company entered into a non-compete deal. As a result, RSGBL entered trading, power generation, bottling and kraft paper manufacturing businesses. Post expiry of the non-compete deal with Roquette Feres in 2017, the group re-entered the starch business through BAPL and now has capacity of 1,400 TPD. In this short period, the company achieved operating income of Rs 1,523 crore with earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 7.8% in fiscal 2024.

 

• Stabilisation of operations in BAPL, backed by diversified customer profile: In 2018-19, BAPL expanded the Yamunanagar plant capacity from 200 TPD to 750 TPD. In the first nine months of fiscal 2025, the capacity was further increased to 1,400 TPD with utilisation above 70% while reaching the operating margin of 8% in the medium term. This is a result of its established relationships with customers who have been associated with the company for 20-30 years.

 

The company has good customer diversification with top five customers accounting for only 32% of total sales and exports forming 18% of total sales in fiscal 2024. Though exports are inclined to South-East Asian countries, the company also has presence in Africa, UAE and Mexico.

 

• Comfortable financial risk profile at the group level: The financial risk profile of the group will remain comfortable over the medium term, supported by healthy accrual, resulting in healthy debt protection metrics. The consolidated debt increased to Rs 710 crore as on March 31, 2024, from Rs 549 crore as on March 31, 2023, owing to capex in BAPL. Gearing and TOLTNW ratio were healthy at 0.41 time and 0.55 time, respectively, as on March 31, 2024.

 

Weaknesses:

• Exposure to counterparty risk associated with ICDs: ICDs extended to unrelated and undisclosed parties were Rs 378.78 crore as on December 31, 2024. Since the credit profile of these entities is unknown, the counterparty risk associated with the ICDs remains. Reduction in ICDs to external parties and loans provided to the group companies will remain monitorable.

 

• Susceptibility to project risk and raw material prices: The company has recently completed the capex in Yamunanagar plant wherein capacity increased from 1,000 TPD to 1,400 TPD. In fiscal 2024, capex in Telangana plant is ongoing where capacity increased from 200 TPD to 350 TPD and rice-based starch with the capacity of 125 TPD is established. Stability of operations and capacity utilisation will be monitorable.

 

Maize being an agricultural product and key raw material for the production of starch, is exposed to climatic conditions, government policies and other factors which may have potential impact on the company's operating margin.

Liquidity: Adequate

The Riddhi Siddhi group has adequate liquidity driven by expected annual cash accrual of over Rs 100 crore against yearly debt obligation of Rs 80-100 crore over the medium term. The group also has access to fund-based limit of approximately Rs 409 crore (Rs 369 crore in BAPL and Rs 40 crore in RSGBL), which was utilised at 22% on average over the six months through September 2024.

Outlook: Stable

Crisil Ratings believes the credit risk profile of the Riddhi Siddhi group will benefit from the increasing revenue in the starch business and sustenance of healthy financial risk profile, supported by adequate liquidity.

Rating sensitivity factors

Upward factors:

• Substantial increase in revenue while maintaining profitability above 10% on sustained basis
• Higher-than-expected decline in debt, driven by prepayment, leading to improvement in debt protection metrics.
   

Downward factors:

• Decline in operating margin below 5% on sustained basis
• Higher-than-expected, debt-funded capex or acquisition, leading to weakening of debt protection metrics

About the Company

RSGBL is promoted by the Ahmedabad-based Chowdhary group having decades of experience in marketing starch and starch products in India. However, in 2011-12 the corn wet milling business was transferred to Roquette Feres. The wind energy segment was retained in RSGBL.

 

The total capacity of windmills stood at 31.65 megawatt (MW) in Tamil Nadu (30 MW) and Gujarat (1.65 MW). Energy generated from the windmills was sold to the respective state distribution companies. Total energy generated during the year under review was 31.44 million units against 25.71 million units in the previous year yielding revenue of Rs 1,018.69 lakh against Rs 862.41 lakh in the previous year.

 

Starch and its by-products manufactured by BAPL are used in varied industries such as pharmaceuticals, food, paper and boards, textiles and animal nutrition. The company procures maize from Madhya Pradesh, Telangana, Punjab, Haryana, Uttar Pradesh and Bihar during the two harvesting seasons, rabi and kharif. The company has a total storage capacity of 50,000 TPD (owned) and leased a total of 36 warehouses in Bihar, Madhya Pradesh and Odisha with cumulative maize crushing capacity of 4.9 lakh TPD.

 

SRNL had no production in the paper division during fiscal 2023 as against 63,000 TPD (48% capacity utilisation) during fiscal 2022. The paper division of the company was shut down from December 18, 2021, for want of coal and later because rise in rates of wastepaper and coal rendered its operations unviable. The company retrenched all workmen in the paper division with effect from February 17, 2022.

 

SRNL also manufactures packaged drinking bottles under the brand Clear on behalf of Energy Beverages Pvt Ltd. The company produced 44.57 lakh cases (1,629.54 lakh bottles) during fiscal 2023 against 30.78 lakh cases (1,087.44 lakh bottles) in the previous fiscal.

Key Financial Indicators (Riddhi Siddhi Group)*

As on/for the period ended March 31	Units	2024	2023
Revenue	Rs crore	1523	1450
Profit after tax (PAT)	Rs crore	49	-38
PAT margin	%	3.24	-2.6
Adjusted debt/adjusted networth	Times	0.41	0.34
Interest coverage	Times	4.99	6.59

*Crisil Ratings-adjusted financials. Impairment losses of Rs 28 crore have been recognised as an exceptional item.

 

Key financial indicators (RSGBL)*

As on / for the period ended March 31	Units	2024	2023
Revenue	Rs crore	269	173
Profit after tax (PAT)	Rs crore	44	-85
PAT margin	%	-16.3	-49.1
Adjusted debt/adjusted networth	Times	0.04	0.10
Interest coverage	Times	9.87	10.88

*RSGBL consolidated with SRNL. Crisil Ratings-adjusted financials. Impairment losses of Rs 28 crore has been recognised as an exceptional item.

Any other information: Not Applicable