Detailed Rationale CRISIL Ratings’ rating on the bank facilities of Sheel Chand Agroils Private Limited (SCAPL) continues to reflect the established market position in the veg oil and affiliate industries, integrated operations, healthy product diversity and its moderate financial profile. These strengths are partially offset by its susceptibility to intense competition in edible oil industry.
CRISIL Ratings had upgraded its rating on the bank facilities of SCAPL to ‘CRISIL A-/Stable’ from 'CRISIL BBB+/Stable’ on May 09, 2022. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of SCAPL and with its subsidiary, Sheel Oil and Fats Private Limited (SOAFPL), as they have synergistic businesses and are operated by the same promoters and management. SCAPL holds an 80 % stake in SOAFPL. |
Key Rating Drivers & Detailed Description Strengths: Established market position: The group has healthy scale which provides it an operating flexibility in an intensely competitive industry. Further, it also benefits from the promoters' experience of over the decades, their strong understanding of market dynamics, and healthy relations with customers and suppliers and will continue to support the business which is further reflected by estimated volumetric growth of more than 20% leading to revenues of more than 2200 crores in FY22.
Integrated operations: The group had gradually made use of forward integration allowing it penetrate deep into value chain. The group commenced its operation in 1994 with solvent extraction plant and subsequently the company created additional capacity by installing Oil Expellers for its seed processing and cake requirement. Later, a physical refinery was installed and then, a Vanaspati Plant was also added making it a composite facility. Later the company had installed a new unit of oil splitting and distillation plant to enter in oleo chemical field for manufacturing Distilled fatty acid, Glycerin and Stearic Acid. Recently, a new plant has been setup with significantly improved capacities in Gandhidham, Gujrat to bolster the manufacturing capabilities. The forward integration in value chain supports above average profitability.
Healthy product diversity support the scale and sustainability: Over multiple decades of presence in the edible oil industry the group has been able to develop a healthy mix of product portfolio with significant revenue contribution from processing of by-products. The group has one of the largest refining capacities for glycerin in India. A healthy mix of refined edible oil, oleo chemicals, glycerin and other fatty acids is expected to support business risk profile over the medium term.
Moderate financial profile: The group’s capital structure is moderately aggressive on account of high debt levels, however is expected to improve over medium term on account of improving net worth coupled with absence of any debt funded capex plan over the next 2-3 years. The gearing was 1.26 times and net cash accruals to adjusted debt was 0.21 times as on 31st March, 2021 with estimated gearing of less than 1 time in FY22.
Weakness: Susceptibility to intense competition in edible oil industry: The edible oil industry is marked by the presence of a few big players and many small unorganized players. About 60 per cent of the edible oil industry is serviced by the unorganized sector. These players primarily cater to regional demand, in order to save on transportation cost. Intense market competition has resulted in low operating margins for all the industry players. Furthermore, prices of soya oil highly volatile; also domestic vegetable oil market depends on availability of CPO and vegetable oil substitutes in the international market. Furthermore, the industry is vulnerable to government policies in the form of duties imposed on the import of refined and crude edible oil, and volatility in edible oil prices and foreign exchange (forex) rates. Any large changes in edible oil prices or forex rates could adversely impact the operating margins of players in the industry. |
Liquidity: Strong The group’s liquidity position is expected to remain adequate with 12-month average bank limit utilization of 80.2% through January, 2022. Additionally, the cash accruals at group level are expected to be sufficient against the expected repayment obligations. Unsecured loans of Rs 29.08 cr as on 31st March 2021 (estimated on similar levels for FY 2022) provides support to the liquidity. Moreover, the group has been able to raise debenture of ~Rs 50 crore in current fiscal for meeting working capital requirements. Current ratio as on 31st March, 2021 was 1.25 times for the group, estimated at 1.3 times for fiscal 2022. |
Outlook: Stable CRISIL Ratings believes the group will continue to benefit from the established presence, and established relationships with clients. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company SCAPL was incorporated in 1994 by Mr. Mohan Goel and his brother Mr. Pramod Goel. SCAPL is engaged in the manufacturing of refined edible oil, vanaspati ghee, palm stearin, palm fatty acid, soft oil, glycerin soap noodles and various grades of steric acid. SCAPL is located in Rudrapur, Uttarakhand. |
About the Subsidiary SOAFPL, was incorporated in 2009, however it commenced its commercial operations from December, 2018. The plant is located in Gandhidham, Gujrat near Kandla port. It’s engaged in the manufacturing of edible oil, oleo chemicals, fatty acids & glycerin. SCAPL currently hold an 80% stake in SOAFPL. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 30 | Axis Bank Limited | CRISIL A-/Stable |
| Cash Credit | 40 | HDFC Bank Limited | CRISIL A-/Stable |
| Cash Credit | 10 | YES Bank Limited | CRISIL A-/Stable |
| Cash Credit | 15 | YES Bank Limited | CRISIL A-/Stable |
| Proposed Working Capital Facility | 5 | Not Applicable | CRISIL A-/Stable |
This Annexure has been updated on 11-Feb-23 in line with the lender-wise facility details as on 23-Jan-23 received from the rated entity.
Criteria Details
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