Rating Rationale
October 31, 2020 | Mumbai
Samrat Pharmachem Limited
'CRISIL BB+/Stable' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.10 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 long term bank facilities of Samrat Pharmachem Limited (SPL).
 
The ratings reflect the extensive experience of the promoters in the chemicals industry, and the company's above average financial risk profile. These strengths are partially offset by a moderate scale of operations and susceptibility to volatility in raw material prices.

Key Rating Drivers & Detailed Description
Strengths:
* Extensive experience of the promoters
The promoters have experience of over 30 years in the industry. This has given them an understanding of the market dynamics and helped to establish strong relationships with suppliers and customers. Over the years SPL has increased its product range catering to various industrial segments of Pharmaceutical, FMCG, Animal Feed, and Agrochemicals among others.
 
* Above average financial risk profile
Low gearing estimated at 0.4 time and total outside liabilities to adjusted networth (TOLANW) estimated at 1.4 times on a networth base of over Rs 24 crore as on March 31, 2020, depicts a healthy capital structure. Debt protection metrics are healthy with interest coverage ratio and net cash accruals to adjusted debt estimated at above 6.4 times and 0.49 time respectively for fiscal 2020. The financial risk profile is expected to remain strong in absence of any major capex, and steady accretions.
 
Weakness:
* Susceptibility to volatility in raw material prices
SPL supplies to reputed pharmaceutical and bio-tech companies in India and abroad with which it has limited bargaining power. Moreover, the prices of major raw material iodine remain volatile as per global demand and supply; this can partially impact profitability. The company's operating profitability has remained volatile in range of 2.1% - 6.6% over last 5 years ended fiscal 2020.
 
* Moderate scale of operations
Business profile is constrained by its moderate scale of operations in the intensely competitive chemicals industry. The revenue although improving at growth rate of 30% on a compounded basis over the past 5 fiscals remains moderate estimated at Rs 138 crore for fiscal 2020. Moderate scale of operations will continue to limit its operating flexibility. The revenues are expected to grow in current fiscal 2021 as well supported by a growing demand and will remain a key monitorable.
Liquidity Adequate

Liquidity is likely to remain adequate in the absence of any major capital expenditure (capex) over the medium term. Cash accrual is estimated at Rs 4.5 ' 5.5 crore over the medium term vis-a-vis maturing debt of Rs 0.31 crore in fiscal 2021. Bank limit utilisation averaged 74% over the 12 months through August 2020. Current ratio was moderate estimated at 1.48 times as on March 31, 2020.

Outlook: Stable

CRISIL believes the SPL will continue to benefit from the extensive experience of its promoters and an above average financial risk profile.
 
Rating Sensitivity Factors
Upward factors
* Sustained increase in revenue and stable operating margin above 6% leading to higher cash accrual
* Efficient working capital management, indicated by gross current assets of 90 days or lower
 
Downward factors
* Significant decline in revenue and operating margin below 3%
* GCAs increasing to more than 160 days over the medium term.

About the Company

SPL was incorporated in June, 1992, in Gujarat. It is promoted by Mr. Lalit Mehta & Mr. Rajesh Mehta. The Company is engaged in manufacturing Iodine compounds that finds its application in Pharmaceutical, FMCG, Animal Feed, Chemicals and Agrochemicals. The company became a public limited company in 1995 and is listed on Bombay Stock Exchange.

Key Financial Indicators
Particulars Unit 2020* 2019
Revenue Rs crore 138.02 111.49
Profit After Tax (PAT) Rs crore 4.23 1.54
PAT Margin % 3.1 1.4
Adjusted debt/adjusted networth Times 0.39 0.33
Interest coverage Times 6.49 3.43
*Provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs.Crore) Complexity level Rating assigned with outlook
NA Cash Credit NA NA NA 10 NA CRISIL BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  10.00  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
Cash Credit 10 CRISIL BB+/Stable -- 0 --
Total 10 -- Total 0 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Recognising Default
CRISILs Criteria for rating short term debt
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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