| Swiss Singapore India Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL A / Stable / CRISIL A1 ' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of Swiss Singapore India Private Limited (SSIPL).
The ratings continue to reflect strong operational, managerial and financial linkages SSIPL receives from its parent, Aditya Birla Global Trading (Singapore) Pte. Ltd. (ABGT, earlier Swiss Singapore Overseas Enterprises PTE Ltd [SSOE]), along with established position in the domestic commodities trading business and adequate financial risk profile of SSIPL.
Operating income rose by around 40% (on-year) to about Rs 7,500 crore in fiscal 2023, buoyed by steady volume growth of 1.5% and steep rise in the price of coal (the major traded commodity). While traded volumes of coal declined marginally by 3%, it was compensated through increased trades of agricultural commodities and petrochemicals (resultant of the continued efforts of the company to diversify the traded portfolio). Earlier, a sharp increase in coal prices towards the latter half of fiscal 2022 led to a 47% rise in operating income to Rs 5,344 crore.
Operating profitability however declined sharply to about 0.1% in fiscal 2023 owing to the continuous fall in coal prices from the highs of September 2022, which led to inventory losses. With prices continuing to decline, profitability could remain below 1% for this fiscal. The aforementioned sharp increase in coal prices towards the latter half of fiscal 2022 led to an all-time-high operating margin of 4.1% in the fiscal.
Prudent working capital management and strong support from the parent, ABGT, continue to aid the financial risk profile despite low profitability. Furthermore, the company maintains comfortable liquidity and moderate utilization of fund-based bank limits (about 30% in fiscal 2023).
These strengths are partially offset by large working capital requirement and exposure to risks inherent in the commodities trading business, including high concentration in coal trading and changes in regulations. |
Analytical Approach
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Key Rating Drivers & Detailed Description Strengths Strong operational and financial linkages with parent SSIPL is a wholly owned subsidiary of ABGT and is a part of the Aditya Birla group. Strong relationship with the parent ensures reliable sourcing and marketing of commodities, and access to critical market intelligence. SSIPL is likely to receive funding support from the parent in case of exigencies.
Established market position The company has a strong foothold in the domestic commodities trading business comprising coal, petrochemical products and agricultural products, and has been in the business for almost a decade, post-acquisition of the trading business undertaking of BGH Exim Ltd. Coal remains the most traded commodity, contributing about 70% to revenue in fiscal 2023. SSIPL has also been increasing the trading of agricultural commodities such as wheat and rice in recent years, to diversify its portfolio.
Adequate financial risk profile Adjusted networth was around Rs 400 crore as on March 31, 2023, and external debt outstanding was only around Rs 45 crore. High credit period received from the parent led to total outside liabilities to adjusted networth (TOLANW) ratio being relatively high at 3.46 times as on March 31, 2023, from 3.12 times a year back. It will remain over 2 times in the near term owing to large payables (specifically to the parent), even as 75% of commodity purchases being from the parent provides some comfort. Sizeable inventory and receivables result in moderate working capital requirement. SSIPL has extended inter-corporate deposits (ICDs) of about Rs 150 crore as on March 31, 2023, to group entities. These are interest-bearing and repayable on demand. Any sizeable increase in ICDs will be a key monitorable.
Weaknesses Large working capital requirement Gross current assets are estimated at 80-85 days as on March 31, 2023, driven by sizeable inventory of ~60 days (against over 90 days a year ago). The high inventory level is more vulnerable to adverse fluctuations in commodity prices as witnessed in the past. However, the company has corrected the inventory holding period, which should remain less than 90 days over the medium term. With the company making about 75% of purchases from the parent, any increase in working capital requirement will be partially offset by stretch in payables thus ensuring low reliance on external debt.
Exposure to inherent risks, including vulnerability to government regulations The commodity trading business is susceptible to significant risks due to fluctuations in commodity prices and foreign exchange rates, besides operational risks. SSIPL enters into back-to-back selling arrangement for a large proportion of its traded cargo, which mitigates the risk to some extent. Furthermore, high concentration in coal trading exposes SSIPL to sharp fluctuations in coal prices, thereby impacting profitability. Government regulations also play a significant role as any change in duty structures or regulations on trade of any commodity could impact revenue and profitability. |
Liquidity: Adequate In the absence of any repayment obligation over the medium term, the entire cash accrual – projected at Rs 30-40 crore per annum -- will fund the nominal capital expenditure of Rs 1-2 crore in fiscal 2024 and part-fund the incremental working capital requirement. Fund-based bank limit utilisation was about 30% during the 12 months through March 2023. Unencumbered cash and equivalent stood at Rs 67 crore as on March 31, 2023. Also, the parent is likely to provide need-based support during any exigency. |
Outlook: Stable SSIPL will continue to benefit from its strong market position in the domestic commodities trading business and support from ABGT. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Established in April 2013, SSIPL is a wholly owned subsidiary of ABGT and trades in various commodities such as coal, iron ore, mill scale, agricultural products, tea and petrochemical products. In June 2013, SSIPL acquired the trading business undertaking of BGH Exim Ltd, the erstwhile Indian trading arm of the Aditya Birla group. In fiscal 2016, the company set up a subsidiary, SSLPL, to undertake clearing and forwarding activities for the group, which has since been merged with SSIPL. |
About the Group Incorporated in Singapore in 1978, ABGT (erstwhile SSOE) is a part of the Aditya Birla group and a leading bulk commodity trading solutions provider to clients across the globe. The company achieved annual turnover of around $7.31 billion in fiscal 2023. Its diversified portfolio comprises petroleum products, coal, sulphur, fertilisers, minerals and metals, agricultural products and tea. |
Key Financial Indicators
*Provisional |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with bank guarantee up to Rs 60 crore and standby letter of credit up to Rs 130 crore **Interchangeable with letter of credit |
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 | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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