Rating Rationale
September 30, 2022 | Mumbai
Suminter India Organics Private Limited
Rating outlook revised to 'Positive'; Ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.55 Crore
Long Term RatingCRISIL A-/Positive (Outlook revised from 'Stable'; Rating Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has revised its outlook on the bank facilities of Suminter India Organics Private Limited (SIOPL) to ‘Positive’ from ‘Stable’ and has reaffirmed the rating at ‘CRISIL A-’. The short term rating has been reaffirmed at ‘CRISIL A2+’

 

The revision in outlook reflects expected sustenance of improvement in the business risk profile over the medium term, supported by increase in sales volume of Soya meal on account of imposition of higher antidumping duty on other players as compared to BOIPL. Group had reported revenue of Rs 730 crore in fiscal 2022 showing growth of ~11% as compared to fiscal 2021, driven by higher sales volumes of Soya meal and increased realisations. And, Group’s operating profitability improved from 6.8% in fiscal 2021 to 12.1% in fiscal 2022. Impact of the antidumping duty order and sustanence of operating margins needs to be monitored over medium term.

 

The rating continues to reflect the established presence of Suminter group in the Indian organic products industry supported by diversified procurement channels and product portfolio. Rating also factors in above average financial risk profile. These strengths are partially offset by susceptibility of operating performance to volatility in agricultural commodity prices and changes in yield and the group's susceptibility to certification and regulatory risks.

Analytical Approach:

For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of SIOPL, Bergwerff Organics India Pvt. Ltd. (BOIPL), and The Suminter Organic and Fairtrade Ginning Mills Pvt. Ltd. (SOFPL). This is because all the three companies, together referred to as the Suminter group, are managed by the same promoters, have significant operational synergies with sizeable intercompany transactions. Also, BOIPL and SOFPL are wholly owned subsidiaries of SIOPL.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Rating Drivers & Detailed Description

Strengths:

  • Established presence in the Indian organic products industry supported by diversified procurement channels and product portfolio: Suminter group is the leading organic product exporter from India and has a strong global customer base with marquee customers such as Perdue Agribusiness LLC, Southern Appalachian Man and the Biosphere (SAMAB), High Quality Organics and Starbucks amongst others. The group's position in the industry is cemented by the availability of a large number of organic certified farms by Agricultural and Processed Food Products Export Development Authority (APEDA) across diverse geographic locations in India as group’s ability to procure internationally from Africa.

 

Further, group has diversified product portfolio which consist of organics products processed from Soya, Sugar, Cotton and Spices which has resulted in reduced

reliance on performance of single commodity thereby diversifying the risk.

 

  • Above average financial risk profile: Comfortable total outside liabilities to adjusted networth (TOLANW) estimated at sub 0.60 time on a networth base of over Rs 325.04 crore as on March 31, 2022 represents healthy capital structure. Debt protection metrics is also comfortable with interest coverage ratio and net cash accruals to adjusted debt of ~10.9 times and 0.2 times respectively, for fiscal 2022. Group’s financial risk profile is expected to remain above average over the medium term.

 

Weakness:

  • Susceptibility to certification and regulatory risks: Suminter group's products need to be certified by the requisite regulatory authorities, for instance APEDA in India, before exporting to its customers. Lack of adequate certification would lead to rejection of the group's products thereby adversely impacting its revenue profile. While the group has not faced any certification issues in the past, tight monitoring of the procurement channel to ensure 100 percent organic produce would remain critical to the group's growth plans over the medium term.

 

  • Susceptibility of operating performance to volatility in agricultural commodity prices and changes in yield: The agro based nature of industry exposes Suminter group to volatility in agricultural commodity prices and changes in yield. The availability of organic agricultural products for Suminter group and their prices are subject to vagaries in monsoon and climatic changes which can impact operating performance of the group. In periods of low availability in the domestic market, the prices of agricultural products tend to increase, while the realization for organic certified products of Suminter group are governed by the prevailing prices in the global market. Group’s operating margin is 12.1% in fiscal 2022. However, these risks are partly mitigated by presence across different products and procurement of international and domestic market.

Liquidity Adequate 

Net cash accruals of more than Rs. 70 crore per annum in fiscal 2023 and fiscal 2024 respectively- against term debt obligations of ~Rs 2-9 crores.               Cash and cash equivalents of Rs. 78 crore as on March 31, 2022. Group also has access to fund based limits of Rs. 152.5 crore, utilized to the tune of 44.7% on an average over the 12 months ended March 2022. No major capex is expected over medium term. Current ratio as on March 31, 2022 was ~2.73 times. Internal accrual, cash and equivalents and unutilised bank lines will be sufficient to meet the incremental working capital requirement.

Outlook Stable

CRISIL Ratings believes that the Suminter group will continue to benefit from its established market position in the Indian organic products industry.

Rating Sensitivity factors

Upward factor

* Revenue of more than Rs 1175 crores with operating profit margin improving to over 11.5%.

* Improvement in working capital cycle

 

Downward factor

* Lower-than-expected operating performance resulting in accruals of less than Rs 50 crore.

* Stretch in working capital cycle or higher than expected debt funded capex resulting in increased reliance on external debt

About the Group

Established in 2004, SIOPL is a Mumbai based company promoted by Mr. Sameer Mehra. The company is engaged in procurement and sale of various organic agro commodities such as soya, cotton, sugar and spices.

 

BOIPL, set up in 2006 is a wholly owned subsidiary of SOIPL. The company is engaged in processing of organic spices and soya procured from SIOPL and export of the same.

 

Acquired in 2014, SOFPL operates a ginning mill to process organic cotton. The company is a 100 per cent subsidiary of SIOPL.

Key Financial Indicators

(Consolidated)

As on / for the period ended March 31

 

2022*

2021

Operating income

Rs crore

729.55

670.48

Reported profit after tax

Rs crore

60.38

26.48

PAT margins

%

8.28

3.89

Adjusted Debt/Adjusted Net worth

Times

0.34

0.52
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 Level

Rating Assigned with Outlook

NA

Pre Shipment Credit

NA

NA

NA

10

NA

CRISIL A2+

NA

Cash Credit

NA

NA

NA

15

NA

CRISIL A-/Positive

NA

Inventory Funding Facility

NA

NA

NA

30

NA

CRISIL A-/Positive
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 ST/LT 55.0 CRISIL A2+ / CRISIL A-/Positive   -- 17-08-21 CRISIL A2+ / CRISIL A-/Stable 29-12-20 CRISIL A2+ / CRISIL A-/Negative 01-10-19 CRISIL A2+ / CRISIL A-/Negative CRISIL A2+ / CRISIL A-/Negative
      --   --   -- 04-11-20 CRISIL A2+ / CRISIL A-/Negative 20-09-19 CRISIL A2+ / CRISIL A-/Negative --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 15 HDFC Bank Limited CRISIL A-/Positive
Inventory Funding Facility 30 HDFC Bank Limited CRISIL A-/Positive
Pre Shipment Credit 10 HDFC Bank Limited CRISIL A2+

This Annexure has been updated on 30-Sep-2022 in line with the lender-wise facility details as on 04-Jul-2022 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Criteria for Consolidation
Understanding CRISILs Ratings and Rating Scales

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