| Solapur Bioenergy Systems Private Limited | ||||||
| Ratings placed on 'Watch Developing' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has placed its ratings on the bank facilities of Solapur Bioenergy Systems Private Limited (SBSPL) on ‘Rating Watch with Developing Implications'.
SBSPL has confirmed applying for a one time restructuring of its term loans availed from Bank of Baroda under the restructuring scheme as prescribed by the Reserve Bank of India (RBI), in the month of May 2021. The application was made on 14th September 2021 and has been invoked by the bank on 30th September 2021. CRISIL Ratings will continue to monitor the developments on the formal sanctioning of the restructuring by the bank and resolve the watch once the formal approval is received by the firm
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. 59 crore as on March 31st 2021, is treated as 75% equity and 25% debt, as it is expected to remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strength: Extensive experience of the promoters: 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.
Weaknesses: Small scale of operations: 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.
Continued Operating Losses: 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.
Stretched working capital cycle: 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 |
Liquidity: Poor Bank limit utilisation was high at 93.34% during the 12 months through April 2021. Cash accrual is expected at Rs 0.50-0.60 crore, against term debt obligation of Rs 0.84 crore, per fiscal over the medium term. The promoters are likely to extend support in the form of equity and unsecured loans to meet working capital requirement and repayment obligation |
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 | ||
| Facility | Amount (Rs.Crore) | Rating |
| Bank Guarantee | 0.9 | CRISIL A4/Watch Developing |
| Cash Credit | 0.75 | CRISIL B-/Watch Developing |
| Proposed Long Term Bank Loan Facility | 0.1 | CRISIL B-/Watch Developing |
| Term Loan | 3.75 | CRISIL B-/Watch Developing |
Criteria Details
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