| Sharat Industries Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / Stable / CRISIL A3 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed the rating on the bank facilities of Sharat Industries Limited (SIL) at 'CRISIL BBB-/Stable/CRISIL A3'.
The ratings continue to reflect SIL’s established market position in the seafood exports industry and it’s above average financial risk profile. These strengths are partially offset by susceptibility of operating margin to volatility in input prices and foreign exchange rates and exposure to regulatory changes in export destinations. |
Key Rating Drivers & Detailed Description Strengths Established market position in the seafood exports industry: SIL enjoys an established market position in the seafood exports industry. The turnover has improved to around Rs. 200 crore for fiscal 2020 over a period of 4 years from around Rs.150 crore in fiscal 2016. Despite Covid-19 led disruptions, the turnover for the 9 month ended December 2020 was ay around Rs.200 crore against Rs.150 crore for the same period during the previous quarter. SIL also derives benefits from product diversification, with around 25 percent of the turnover from the sale of feed. Further the company derives benefits from promoter’s long standing presence of more than two decades in the seafood exports industry, which has aided the company to diversify the customer base and establish healthy relationships. CRISIL believes that SIL shall continue to benefit over the medium term, from its established market position in the seafood exports industry.
Above average financial risk profile: SIL’s financial risk profile is above average as reflected in its gearing of of around 1.12 times as on September 30, 2020. Supported by the absence of major debt funded capital expenditure, the capital structure is expected to improve over the medium term. However interest coverage for the 9 month ended December 2020 has declined to around 2.5 times from 3.6 times for the same period during the previous year primarily due to dip in operating profitability. Improvement in interest coverage supported by improvement in operating profitability shall remain a key monitorable over the medium term.
Weaknesses Susceptibility of operating margin to volatility in input prices and forex rates: The marine export market is marked by uncertainty, though more pronounced in supply than in demand. The supply is affected adversely because of seasonal conditions, lack of quality seeds and feed and rampant diseases. This results in volatility in the raw material prices based on the supply during the year. Increase in raw material prices has resulted in a dip inn operating profitability to around Also, the company derives significant portion of its revenue from the export market which exposes its operating profitability to fluctuations in the forex rates.
Regulatory changes in export destinations: Food product imports are subject to high quality standards in developed countries of Europe and U.SA. Since the company derives majority of its export revenues from these destinations, any adverse quality standards set by these countries or customers could affect the business risk profile. |
Liquidity: Adequate Bank limit utilisation is adequate around 70 percent for the past twelve months ended 30th October 2019. Cash accrual of around Rs.8-10 crore is expected to be generated against repayment obligations of Rs. 3 crore per annum Liquidity is also supported by the absence of debt funded capital expenditure and healthy cash and bank balances of around Rs.2-3 crore that is expected to be maintained at any point in time. CRISIL believes that SIL's liquidity shall continue to remain adequate over the medium term. |
Outlook Stable CRISIL Ratings believes that SIL will continue to benefit from its established market position |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company SIL was originally set up in 1990 as a private limited company by Mr S Prasad Reddy; this company was reconstituted as public limited company in 1992. SIL processes and exports shrimp and also manufacture and sells feed for shrimp. SIL is listed on the Bombay Stock Exchange. |
Key Financial Indicators
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Status of non-cooperation with previous CRA: SIL had not cooperated with Brickwork Ratings India Pvt Ltd, which classified it as non-cooperative vide release dated May 14, 2020. The reason provided by Brickwork Ratings India Pvt Ltd, is non-furnishing of information by SIL for monitoring of ratings. The ratings were subsequently withdrawn on 26th June 2020 |
Any other information: Not applicable |
| 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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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