| Sahakar Maharshi Shankarrao Kolhe SSK Limited | ||||
| Rated amount enhanced | ||||
| Rating Action | ||||
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| 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’ rating on the long-term bank facilities of. Sahakar Maharshi Shankarrao Kolhe SSK Limited (SMSKSSKL).
The rating reflects the established position of the society in the sugar business backed by its long vintage, healthy relationships with member farmers, integrated operations, and moderate scale of operations supported by favourable industry outlook. These strengths are partially offset by below-average financial risk profile, large working capital requirement and vulnerability to regulatory changes and cyclicality in sugar industry. |
Key Rating Drivers & Detailed Description Strengths: Established market position backed by longstanding presence and healthy relationships with member farmers: The society has an operational track record of around six decades in the sugar industry and has an established presence in the area of operation. Its established presence and association with several member farmers from nearby villages ensures regular supply of sugarcane. The Board of representatives consists of directors elected by member farmers and other directors are nominated by various regulatory and industry bodies. The Board is supported by a qualified management team. Long operational vintage and established presence support the business.
Moderate revenue, integrated operations and favorable industry outlook: The society has expanded it’s crushing capacity to 6,000 tonne of cane per day (TCD) for crushing season 2022-23. It regularly crushes 7-9 lakh MT of sugar cane. It also has a 75 kilolitre per day (KLPD) distillery and a 12-MW cogeneration plant. Thus, its operations are integrated in nature. It recorded net sales of Rs 428 crore (provisional) in fiscal 2023, up from Rs 336.77 crore in fiscal 2022. The society is undertaking expansion of distillery, trial run of which is expected in SS-2023-24. Timely completion of expansion and ramp up of operation remains crucial.
Further benefits from steadily growing sugar realisations and remunerative and ramping up ethanol sales should support the operating performance over medium term. Society is expected to benefit from the favourable outlook for sugar and ethanol in near to medium term.
Weakness: Below-average financial risk profile: Financial risk profile is constrained by low profits and weak debt protection metrics. Interest coverage ratio had remained weak in the range of 1.2-1.6 times in last three fiscals while net cash accruals to total debt ratio has been in the range of 0.02-0.04 times during same period. Debt levels are high owing to debt funded capex and also because of sugar-pledged loans, modernisation and other related loan availed by the society.
Being a co-operative society, the profits of Society are distributed to farmer members via incremental sugarcane procurement prices or various subsidies. Hence, profitability remains suppressed and accretion to reserves is also limited, which constrains financial risk profile.
The society has undertaken capital expenditure (capex) of around Rs 50 crore towards crushing capacity expansion during last 2 year. Also, it is udertaking distillery expansion with capex of around Rs.80 Crore which is again debt funded to the tune of 80%-85%. The capital structure is expected remain leveraged over the medium term because of large working capital during sugar season and planned capex.
Susceptibility to regulatory changes and cyclicality in the sugar industry: The input prices are driven by the government, while sugar prices are volatile and based on open market prices (which are dependent on the production levels) leading to volatility in players’ profitability. Besides, the government regulates domestic demand-supply through restrictions on imports and exports, and stock holdings. Regulatory mechanisms and dependence on monsoons have rendered the sugar industry cyclical. Society’s performance can be affected by draught and limited availability sugar cane in its area. Currently sugar realizations are improving and there is also healthy demand for ethanol. The focus on ethanol production partly allays the risks related to volatility in sugar prices. |
Liquidity: Stretched Cash accrual of Rs 10-15 crore expected per fiscal are insufficient to cover the debt obligation of Rs 17-23 crore over the medium term. Being a cooperative sugar factory, the society distributes profit among the members (usually cane farmers) in the form of incremental procurement prices for sugarcane. Accordingly, the society generates low accrual. However, funds can be earmarked for debt repayment and also sugar pledge limit of Rs 140 crore can be used to cover its funding needs. Moreover, society always has an option to retain profit in case of higher internal fund requirement. |
Outlook: Stable CRISIL Ratings believes SMSKSSKL will continue to benefit from the extensive experience of its members in the sugar industry. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company SMSKSSKL was registered as a cooperative society in 1960. SMSKSSKL manufactures sugar and has its plant at Ahmednagar, Maharashtra with installed capacity of 6000 tonnes crushing per day (TCD). Also, sugar mill has a 12 MW captive power generation capacity, which it fuels using bagasse generated in the sugar production and 72 KLPD Molasses based ethanol plant (or distrilleries). SMSKSSKL is a part of Sanjivani Group. |
Key Financial Indicators
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Status of noncooperation with previous CRA SMSKSSKL has not cooperated with Brickwork Rating Agency of India Limited (BRA) which has classified it as non-cooperative vide release dated 5th May,2022. The reason provided by BRA is non-furnishing of information for monitoring of ratings. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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This Annexure has been updated on 17-May-2023 in line with the lender-wise facility details as on 13-Apr-2023 received from the rated entity.
Criteria Details
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