| Tirth Agro Technology Private Limited | ||||||
| Rating outlook revised to 'Positive'; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of Tirth Agro Technology Private Limited (TATPL) to 'Positive' from 'Stable’ and reaffirmed the ratings at 'CRISIL A/CRISIL A1'.
The revision in outlook reflects TATPL strong market position while continuous improvement in financial risk profile. Company estimated revenue of Rs 1387 crore in FY22 against Rs 1353 crore in FY21. TATPL is a market leader in agri implants segment, being first among the companies to introduce new agri product and having significant market share in rotary tillers, sugarcane harvester. Company was the first domestic manufacturer of sugarcane harvester and the recently introduced cotton picker, potato harvester. TATPL is the world’s largest manufacturer of rotary tillers. Also exports of TATPL is expected to be more than 20% and resulting in sustenance of margin. Subsequently, company estimated revenue of Rs 517 crore during 4MFY23 against Rs 404 crore during 4MFY22 and expecting healthy revenue growth over the medium term. Operating margin was at 12.5% in FY22 and expected to remain over 12% over the medium term. Operations were managed with gross current assets (GCA) of 183 days as on March 31, 2022 and expecting to remain over 170 days over the medium term.
The action also reflects strengthening of adjusted networth of more than Rs 490 crore as on March 31, 2022 (against Rs 410 crore in previous fiscal) and no major increase overall debt levels. The gearing was 0.56 times as on March 31, 2022 (against 0.61 times as on March 31, 2021) and expecting to improve in absence of large debt funded capex over the medium term. The debt protection metrics were robust too, with interest coverage of 8.19 times and NCA/AD of 44% in FY22. Liquidity of company also supported by healthy financial flexibility and maintenance of unencumbered liquid funds throughout year.
The ratings reflect the company’s established market position in the tractor-drawn rotary tillers segment, its sound operating efficiency, and healthy financial risk profile. These strengths are partially offset by susceptibility to cyclicality in the agricultural industry and working capital-intensive operations. |
Key Rating Drivers & Detailed Description Strengths:
The promoter's extensive industry experience is reflected in the company’s healthy growth backed by continuous expansion of capacity, integrated manufacturing facility, and strong distribution network. The company enjoys strong market position globally in the rotary tillers segment of the domestic as well as overseas farming implements industry through its established brand, Shaktiman, and has a widespread distribution network with over 900 dealers & distributors and exports to over 90 countries. Furthermore, company also has diversified product portfolio including sugar cane harvester, boom sprayer, cotton picker, etc which is approved by the Dept. of Scientific & Industrial Research (DSIR). The growth has also been supported by increasing demand for farm mechanisation. CRISIL Ratings believes TATPL's established position in the rotary tiller segment, continued focus on product addition, and strong marketing network will help it maintain its healthy scale of operations.
The operating efficiency is backed by increase in scale of operations, shifting of majority of the process and component manufacturing in-house, and continuous investment in modernisation of plant. Over the years, the company has expanded its product portfolio and now generates around 35% of revenue from products other than rotavators. CRISIL Ratings believes TATPL will maintain its healthy operating efficiency which will help sustain operating margin over the medium term.
The financial risk profile is supported by healthy adjusted networth of Rs 490 crore and comfortable gearing of 0.56 time as on March 31, 2022. Its debt protection measures were healthy with interest coverage and NCA/AD (net cash accruals to adjusted debt) of 8.2 times and 44% for the fiscal 2022. Despite expected availment of reimbursement capex amounting Rs 40 crore in Q2FY23, the financial risk profile of company expected to be strengthened backed by healthy accretion of profit into networth and scheduled repayment of term loan.
Weaknesses:
The Indian farming equipment industry is affected by multiple factors, such as monsoon, crop prices, and availability of finance. Rainfall plays a significant role in a farmer's decision to buy agricultural-related equipment. CRISIL Ratings believes TATPL's business risk profile will remain susceptible to the inherent risks associated with the agricultural industry.
The company’s large working capital requirement is indicated by gross current assets (GCA) of over 183 days as on March 31, 2022 increasing from around 146 days as on March 31, 2021. The stable turnover and build-up of inventory adversely affected the GCA levels in fiscal year 2022. However, the debtor of company was controlled around 45-60 days. CRISIL Ratings believes TATPL's operations will remain moderately working capital intensive over the medium term. |
Liquidity: Adequate Liquidity profile is marked by healthy cash accruals, moderate limit utilization and healthy financial flexibility. Net cash accruals are expected to be over Rs 130-180 crore which shall be sufficient against term debt obligation of Rs 25-40 crore over the medium term. Bank limit utilisation is moderate at around 44 percent for the past twelve months ended June 2022. The restrained incremental working capital requirements, despite the scale up, and healthy accruals ensured that limit utilization remains moderate. Current ratios are healthy at 1.91 times on March 31, 2022. Company also received support from promoters in form of unsecured loans amounting to Rs 12.11 crore as on March 31, 2022. Healthy cash and bank balance of around Rs 27 crore as on March 31, 2022. Low gearing and healthy net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Positive CRISIL Ratings expects TATPL’s business risk profile would strengthen over the medium term on the back of its strong market position and diversified revenue stream, while maintaining robust financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Set up by Mr Ashwin Gohil in 2000, TATPL manufactures and sells tractor-driven rotary tillers, harvester, and other agricultural implements under its Shaktiman brand. Its facilities are in Rajkot (Gujarat). |
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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This Annexure has been updated on 07-Sep-22 in line with the lender-wise facility details as on 07-Sep-22 received from the rated entity.
Criteria Details
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