| Solapur Bioenergy Systems Private Limited | ||||||
| Ratings removed from 'Watch Developing'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has removed its ratings on the bank facilities of Solapur Bioenergy Systems Private Limited (SBSPL) from 'Rating Watch with Developing Implications' and has reaffirmed the rating at 'CRISIL B-/CRISIL A4', while assigning a 'Stable' outlook to the long term rating.
CRISIL Ratings had placed its ratings on “watch with developing implications” on 8th October 2021 ,following confirmation from SBSPL’s management, along with its bankers, that it had applied for a one-time restructuring of its term loans availed from Bank of Baroda on 14th September 2021, under the restructuring scheme as prescribed by the Reserve Bank of India (RBI). CRISIL Ratings has resolved the watch as the OTR has been sanctioned on 30th November 2021, and subsequently implemented.
The ratings reflect a small scale of operations, continued operating losses leading to weak debt protection, and stretched working capital cycle. These weaknesses are partially offset by the extensive experience of the promoters in the waste processing industry. |
Analytical Approach Unsecured loan of Rs. 56.7 crore as on March 31st 2021, have been treated as debt, as they are getting repaid. |
Key Rating Drivers & Detailed Description Weaknesses:
Revenue remained low at Rs 4.2 crore in fiscal 2021 with a net loss due to limited supply of raw material (municipal waste) and modest capacity utilisation, respectively. The small scale should continue to constrain pricing power and profitability.
The company has been facing losses in past five years ended 31st March 2021. The company were running at lower capacity, which led to lower absorption of fixed cost, which resulted in operating losses. The company expects the higher absorption of capacity in current year, which will support the business and will improve the profitability.
Gross current assets were sizeable at 582 days as on March 31, 2021, driven high inventory and receivables which stood at 90 days and 225 days, respectively as on March 31, 2021.
Strengths:
Benefits derived from the promoters' industry experience of over a decade, their strong understanding of local market dynamics, and healthy relationship with suppliers and customers should continue to support the business. |
Liquidity: Poor Bank limit utilisation was high at 92% during the 12 months through April 2021. Cash accrual is expected negative, against term debt obligation of Rs. 75-85 lakhs, per fiscal over the medium term. The company has received sanction on the OTR application wherein they have received moratorium of 12 months on existing repayment of term loans as well as received a fresh term loan of Rs. 1.23 crore. The promoters are likely to extend support in the form of equity and unsecured loans to meet working capital requirement and repayment obligation. |
Outlook: Stable SBSPL should continue to benefit from the extensive experience of the promoters and established relationship with clients. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in 2005, SBSPL is a special-purpose vehicle of Organic Recycling Systems Pvt Ltd. The company processes municipal solid waste (MSW) into compost and energy. It has a capacity of 4 megawatt for producing energy through processing of MSW procured from Solapur Municipal Corporation. Sales are backed by a power purchase agreement with Maharashtra State Electricity Distribution Company Ltd. |
Key Financial Indicators
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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)
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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 | ||||||||||||
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Criteria Details
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