RATING RATIONALE 29 December 2020

Sri Gayathri Modern Raw & Boiled Rice Mill Private Limited

Brickwork Ratings Reaffirms the ratings for the Bank Loan Facilities of ₹ 19.00 Crores of ​Sri
Gayathri Modern Raw & Boiled Rice Mill Private Limited

Particulars:
Amount (₹ Cr) Rating*
Facility** Tenure
Previous Present November 2019 Present

Long BWR BB/Stable BWR BB/Stable

Fund Based 16.00 19.00
Term [Reaffirmed] [Reaffirmed]

Total 16.00 19.00 INR Nineteen Crores Only

*Please refer to BWR website ​www.brickworkratings.com/​ for definition of the ratings
** Details of Bank facilities is provided in Annexure-I

Rating Action/Outlook
The reaffirmation of ratings reflects the strength from the company's established presence in the
rice industry, experienced promoters, moderate debt protection metrics and locational
advantage. The rating, however, is constrained by the decline in revenue, low profitability
margins, working capital intensive nature of operations, exposure to agro climatic risks and risk
associated with family owned businesses.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR
expects that ​Sri Gayathri Modern Raw & Boiled Rice Mill Private Limited business risk profile
will be maintained over the medium term. The outlook may be revised to Negative if the revenue
and the profit margins declines from the projected numbers and the working capital cycle is
stretched pressurizing the liquidity position.

KEY RATING DRIVERS

Credit Strengths:

● The Directors to the company Mr Durga Prasad Chowdary Merla and Mr. Surya
Prabhakar Chowdary Merla have more than 25 years of experience in the same line of
business.

● Moderate Debt protection metrics with Interest service coverage ratio at 1.36 times and
Debt service coverage ratio at 1.38 times in FY 2020.
● Low gearing levels of 1.31 times in FY 2020 with the Tangible Net Worth at Rs. 12.20
Crs and Total debt of Rs. 16.03 Crs as on March 31, 2020.

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 ● The company’s rice milling unit is located in the Yanam, a paddy growing belt of
Puducherry , which ensures easy availability of paddy directly from farmers, making
operations cost-effective.

Credit Risks:

● The Indian rice industry is fragmented with low entry barriers and requires huge working
capital.
● The nature of operations are working capital intensive and on account of lower capacity
utilization during the year FY 2020 the scale of operations has declined to Rs.61.92 Crs
in FY 2020 from Rs 74.56 Crs in FY 2019. However the company is able to increase the
production from April 2020. Based on the provisional financials of H1FY 2021, the
company has achieved a revenue of Rs 63.89 Crs, which is equivalent to the total revenue
earned during the year FY 2020.
● The operating profit margin declined from 4.67% in FY2019 to 3.78% in FY 2020
● Highly fragmented industry and Inherent risk associated with rice milling.
● The company faces stiff competition from other unorganised players which limits its
pricing flexibility and bargaining power with customers.
● The availability of paddy is dependent on climatic conditions prevailing during the season.
Hence, the company is exposed to the risk of fluctuation in availability and prices of
raw-materials.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For arriving at its ratings, BWR has considered the standalone performance of ​Sri Gayathri
Modern Raw & Boiled Rice Mill Private Limited​. BWR has applied its rating methodology as
detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)

RATING SENSITIVITIES
Going forward, the ability of the company to improve its scale of operations by improving its
revenue and profitability margins and efficiently manage industry risk would remain the key
rating sensitivities​.

Positive: The rating outlook may be revised to 'Positive' in case the revenues and profit show
sustained improvement with an improvement in the overall credit metrics will be positive for the
ratings.
Negative: ​The rating outlook may be revised to 'Negative' in case revenues of the company
substantially deteriorates from current level. Rating may also be adversely affected in case of
adequate deterioration in gearing and coverage ratios.

LIQUIDITY POSITION- Stretched

The company has a stretched liquidity profile, driven by low Cash and Cash equivalents of Rs.
0.61 Crs in FY 2020 and low Net cash accruals of Rs. 0.66 Crs in FY 2020. However the
company does not have any major debt obligations. Conversion cycle days of the company is

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high at 150 days in FY20 which is due high inventory days of 104 days in FY20. The Current
ratio of the company is at 1.65 times in FY 2020 and the average bank credit limit utilization rate
is 96%

COMPANY PROFILE
Sri Gayathri Modern Raw & Boiled Rice Mill Private Limited (SGMRBRMPL) was
incorporated in the year 1984, located at Yanam, Puducherry. The company is engaged in
processing of paddy into boiled rice, raw rice, rice bran, broken rice and husk. The company has
an installed capacity of 2880 Quintals per day with an average utilization of around 40 to 50
percent. The company sells different varieties of rice such as BPT, Jaya (Boiled rice), Swarna,
surekha and sold under the brand name - ‘Gayathri Rich Rice’.

Mr. Merla Durgaprasad Chowdary and ​Merla Surya Prabhakara Chowdary are currently the
directors of the company.

KEY FINANCIAL INDICATORS ​(in ₹ Cr)

Key Parameters Units FY19 FY20
Result Type Audited Audited
Net Sales Rs In Crores 74.56 61.92
EBITDA Rs In Crores 3.48 2.34
PAT Rs In Crores 0.0003 (0.07)
Tangible Net-worth Rs In Crores 12.27 12.20
Total Debt/Tangible Net-worth In Times 1.56 1.31
Current Ratio In Times 1.96 1.65

KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED: NA

NON-COOPERATION WITH PREVIOUS RATING AGENCY IF ANY : NA

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RATING HISTORY: [Including Withdrawal and Suspended rating for the last there
years]

Current Rating Rating History

Facilities
Tenure Amount
Rating Nov 2019 Dec 2018 Nov 2017
(₹ Cr)

BWR
Long BWR BB/Stable BWR BWR
Fund Based 19.00 BB/Stable
Term (Reaffirmed) BB/Stable BB/Stable

Total 19.00 INR Nineteen Crores Only

COMPLEXITY LEVELS OF THE INSTRUMENTS

For more information, visit ​www.brickworkratings.com/download/ComplexityLevels.pdf

Hyperlink/Reference to applicable Criteria

● General Criteria
● Approach to Financial Ratios
● Manufacturing Companies

Analytical Contacts

Kaushik Srikanth Parvathavardhini Natarajan

Analyst- Ratings Associate Director - Ratings
+914424663326 +914424663326
kaushik.s@brickworkratings.com parvathavardhini.n.@brickworkratings.com

1-860-425-2742 I media@brickworkratings.com

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 Sri Gayathri Modern Raw & Boiled Rice Mill Private Limited

ANNEXURE I
Details of Bank Facilities rated by BWR
Name of the Bank Type of Long Term Short Term Total
Facilities (₹ Cr) (₹ Cr) (₹ Cr​)
Indian Bank Cash Credit 16.00 - 16.00
Indian Bank Covid Loan 3.00 - 3.00
TOTAL 19.00
Total Rupees Nineteen Crores only.

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