Rating Rationale
January 28, 2022 | Mumbai
Sharat Industries Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.93 Crore (Enhanced from Rs.77 Crore)
Long Term RatingCRISIL BBB-/Stable (Reaffirmed)
Short Term RatingCRISIL A3 (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings on the bank facilities of Sharat Industries Limited (SIL).

 

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. 253 crore for fiscal 2021 over a period of 5 years from around Rs.150 crore in fiscal 2016. 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 around 1.50 times as on Mar 31, 2021. Supported by the absence of major debt funded capital expenditure, the capital structure is expected to improve over the medium term. Debt protection metrics are adequate, as reflected in interest coverage ratio and net cash accrual to total debt ratio of 2.03 times and 0.07 time, respectively, for fiscal 2021 and likely to remain adequate over the medium term; sustaining overall financial risk profile.

 

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

Liquidity remains adequate, indicated by moderate bank limit utilisation and sufficient cash accrual. Bank limit utilisation is around 88 percent for the past twelve months ended Nov 2021. Cash accrual of around Rs. 7-8 crore is expected to be generated against repayment obligations of Rs. 3-4 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

  • Sustained improvement in scale of operation and sustenance of operating margin, leading to higher cash accruals
  • Improvement in interest coverage to more than 3 times

 

Downward factor

  • Decline in revenue by 15% or fall in profitability, leading to lower net cash accrual
  • Any large debt funded capital expenditure or working capital stretch, resulting in weakening of financial risk profile

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

Particulars

Unit

2021

2020

Revenue

Rs.Crore

253.04

202.07

Profit After Tax (PAT)

Rs.Crore

2.58

1.77

PAT Margin

%

1.0

0.90

Adjusted debt/adjusted networth

Times

1.50

1.16

Interest coverage

Times

2.03

1.70

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)

Complexity Levels

Rating Assigned with Outlook

NA

Bank Guarantee

NA

NA

NA

1

NA

CRISIL A3

NA

Bill Discounting

NA

NA

NA

10

NA

CRISIL BBB-/Stable

NA

Bill Discounting under Letter of Credit

NA

NA

NA

10

NA

CRISIL A3

NA

Cash Credit

NA

NA

NA

20

NA

CRISIL BBB-/Stable

NA

Letter of Credit

NA

NA

NA

2

NA

CRISIL A3

NA

Packing Credit

NA

NA

NA

33

NA

CRISIL BBB-/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

0.38

NA

CRISIL BBB-/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

2

NA

CRISIL BBB-/Stable

NA

Term Loan

NA

NA

Mar 2025

14.62

NA

CRISIL BBB-/Stable

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 80.0 CRISIL BBB-/Stable   -- 28-05-21 CRISIL BBB-/Stable 20-01-20 CRISIL BBB-/Stable / CRISIL A3   -- CRISIL BB+/Stable / CRISIL A4+
      --   -- 01-04-21 CRISIL BBB-/Stable / CRISIL A3   --   -- --
Non-Fund Based Facilities ST 13.0 CRISIL A3   -- 28-05-21 CRISIL A3 20-01-20 CRISIL A3   -- CRISIL A4+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 1 Axis Bank Limited CRISIL A3
Bill Discounting 10 Axis Bank Limited CRISIL BBB-/Stable
Bill Discounting under Letter of Credit 10 Axis Bank Limited CRISIL A3
Cash Credit 20 Axis Bank Limited CRISIL BBB-/Stable
Letter of Credit 2 Axis Bank Limited CRISIL A3
Packing Credit 33 Axis Bank Limited CRISIL BBB-/Stable
Proposed Long Term Bank Loan Facility 0.38 Axis Bank Limited CRISIL BBB-/Stable
Proposed Long Term Bank Loan Facility 2 Not Applicable CRISIL BBB-/Stable
Term Loan 11 Axis Bank Limited CRISIL BBB-/Stable
Term Loan 3.62 Axis Bank Limited CRISIL BBB-/Stable

This Annexure has been updated on 28-Jan-2022 in line with the lender-wise facility details as on 04-Aug-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for rating short term debt

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