Global Entrade. February 19, 2018

Transcription

1 Rating Facilities Amount Long-term Bank Facility Total Details of facilities in Annexure-1 Global Entrade February 19, (Rupees Twelve crore only) Rating 1 CARE BB; (Double B; Outlook: ) Rating Action Assigned Detailed Rationale & Key Rating Drivers The rating assigned to the bank facilities of Global Entrade (GE) is constrained by its constitution as a partnership firm, short track record of operations, small scale of operation with low profitability margins, high working capital intensive nature of business and fragmented and competitive nature of industry. However, the aforesaid constraints are partially offset by its experienced partners, cold storage equipped with modern technology, strategic locational advantage of cold storage facility and comfortable leverage ratios with satisfactory debt coverage indicators. The ability of the firm to grow its scale of operation and profitability margins and ability to manage its working capital effectively would be the key rating sensitivities. Detailed description of the key rating drivers Key Rating Strengths Experienced partners The day to day activities of the firm is looked after by Mr. Ravi Gulgulia (aged, 39 years), having about two decades of experience in the cold storage industry. He is supported by other two partners Mr. Shiwaji PD. Jaiswal (aged, 44 years) and Mr. Ganesh Sharma (aged, 45 years) along with a team of experienced professionals who have rich experience in the similar line of business. Cold storage equipped with advanced technology Global Entrade is one of the largest temperature controlled logistics service providers in North eastern part of India equipped with advanced technologies like refrigeration, material handling systems and palletisation, online warehouse management software and Individual Quick Freezing (IQF). The refrigeration has been designed keeping in mind the latest standards. Semi-hermetic screw compressors have been provided by BITZER and air-cooled condensers have been provided by Guntner, both are word leaders in refrigeration industry. The entire system has been automated using Cartel Instruments. The compressed wooden pallets are 100% food grade and are sourced from Mapac Technologies. The design on the pallets help for better air circulation and the deep reach truck have been imported from Jungheinrich INC, USA. Warehouse Management System (WMS) plays a vital role in controlling the movement and storage of different grades and varieties of food products within the cold storage and process the associated transactions including shipping, receiving, put away and picking. A WMS monitors the progress of products through warehouse. The cold storage is also 1 Complete definitions of the ratings assigned are available at and in other CARE publications. 1 CARE Ratings Limited

2 equipped with GPS enabled for real time tracking and data logger for temperature monitoring. The warehouse facility is also equipped with sorting, grading, and washing of fruits and vegetables for better realization of their production. I.Q.F is also installed which preserve and store raw fruit and vegetables in farm fresh condition. Each piece of produce is frozen individually using technique of fluidization resulting in freezing of fruit and vegetables only in 10 to 12 minutes which otherwise takes an average time of 3 to 4 hours. The firm has both refrigerated and non-refrigerated vehicles for movement of goods to different destinations within the entire North-Eastern region thereby supporting with last mile connectivity for both inward and outward movement of different food products. The refer vehicles are equipped with GPS enabled for real time tracking and data logger for temperature monitoring. Strategic locational advantage of the cold storage facility Global Entrade s cold storage facility is situated in Kamrup district of Assam which is one of the major agricultural growing areas in North East India and neighboring states. The state attracts investments on processing and packaging sector, backed by abundant water, fast growing logistics and transportation infrastructure. The favorable location of the storage unit, in close proximity to the leading agro food growing areas provides it with a wide catchment making it suitable for farmers in terms of transportation and connectivity. The facility is located on NH-27 (recently named as AH-1, Asian Highway) which transverses the entire width of Assam and further connects to states like Nagaland, Arunachal Pradesh, Barak Valley, Tripura and Mizoram. The facility is also connected to Bangladesh via Tripura and soon it will be connected with other countries such as Myanmar, Thailand and China through AH-1. The nearest railway station is Digaru which makes easy movement of bulk foods if required. As the facility is strategically located, in near future, the cold storage will be acting as the first available cold storage for considerable movement of goods to mainland India and vice-versa which will be helpful in future for all imports from neighboring countries to India. Comfortable leverage ratios with satisfactory debt coverage indicators Capital structure of the firm remained comfortable marked by nil debt equity ratio and overall gearing ratio of 0.31x as on March 31, Moreover, the debt coverage indicators also remained satisfactory as marked by satisfactory total debt to GCA ratio of 2.63x and comfortable interest coverage ratio of 3.06x in FY17. Key Rating Weaknesses Constitution as a partnership firm Global Entrade, being a partnership firm, is exposed to inherent risk of the partner s capital being withdrawn at time of personal contingency and firm being dissolved upon the death/insolvency of the partners. Furthermore, partnership entities have restricted access to external borrowing as credit worthiness of partner would be the key factors affecting credit decision for the lenders. Short track record of operations The firm was established in the year 2006, however the firm has started commercial production from January 2016 and thus has short track record of operations. Small scale of operations with low profitability margins The firm has reported total operating income of Rs crore with a net profit of Rs.0.24 crore in FY17. However, the GCA remains adequate at Rs.1.74 crore in FY17. This apart, the firm has achieved Rs crore in 9MFY18. Furthermore, the net worth base was also low at Rs crore as on March 31, The small size restricts the financial flexibility of the firm in times of stress and deprives it from benefits of economies of scale. The PBILDT margin remained adequate marked by 22.78% during FY17. However, the PAT margin remained low marked by 2.08% in FY17. 2 CARE Ratings Limited

3 Working capital intensive nature of business GE is engaged in providing cold chain facilities and accordingly its operation is working capital intensive by nature. The same is reflected by the higher working capital requirement for the firm and the average utilization for the same remained at about 88% during the last 12 months ended January, Fragmented and competitive nature of the industry GE s storage facility is located in Kamrup district which is in close proximity to hubs for fruits and vegetable cultivating region of Assam. Owing to the advantage of close proximity to raw material sources, large number of small units is engaged in storage business in the region. This has resulted in intense competition which is also fuelled by low entry barriers. Given that the processing activity does not involve much of technical expertise or high investment, the entry barriers are low Analytical approach: Standalone Criteria on assigning Outlook to Ratings Financial ratios Non-Financial Sector CARE s Policy on Default Recognition About the Firm Global Entrade (GE) is established as a partnership firm in However, the firm started commercial operation from January The cold storage unit is located at No. 60 Tetelia Geon Panchayat, Vill-Tetelia, Sonarpur Circle, Kamrup, Assam with a storage capacity of 5000 metric tonnes (5000 pallets of one metric tonne each). The cold storage unit is built with state of art technology and has certifications from FSSAI (Food Safety and Standard Act, 2006), NCCD (National Centre for Cold Chain Development, Govt. Of India), ISO (TUV-SUD) and ISO (TUV-SUD). The entity primarily is engaged in storing and trading of various types of fruits and vegetables and also engages in transportation of fruits across the city using their refrigeration vehicles with a capacity ranging from 2.5 to 9 tonnes each. The firm also provides value added services such as washing, grinding, sorting, and packing for their customers. Mr. Ravi Gulgulia (aged, 39 years), having about two decades of experience in the cold storage industry, looks after the day to day operations of the firm. He is supported by other two partners Mr. Shiwaji PD. Jaiswal (aged, 44 years) and Mr. Ganesh Sharma (aged, 45 years) along with a team of experienced professionals who have rich experience in the similar line of business. Mr. Ravi Gulgulia (aged, 39 years), having about two decades of experience in the cold storage industry, looks after the day to day operations of the firm. He is supported by other two partners Mr. Shiwaji PD. Jaiswal (aged, 44 years) and Mr. Ganesh Sharma (aged, 45 years) along with a team of experienced professionals who have rich experience in the similar line of business. Brief Financials FY16 (A) FY17 (A) Total operating income PBILDT PAT Overall gearing (times) Interest coverage (times) A: Audited Status of non-cooperation with previous CRA: Not Applicable Any other information: Not applicable Rating History (Last three years): Please refer Annexure-2 3 CARE Ratings Limited

4 CARE has classified instruments rated by it on the basis of complexity. This classification is available at Investors/market intermediaries/regulators or others are welcome to write to for any clarifications. Analyst Contact: Name: Soumen Das Tel: Mobile: **For detailed Rationale Report and subscription information, please contact us at About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. Annexure-1: Details of Instruments/Facilities Name of the Instrument Fund-based - LT-Term Loan Fund-based - LT-Cash Fund-based - LT-Buyers Date of Issuance Annexure-2: Rating History of last three years Coupon Rate Maturity Date Size of the Issue Rating assigned along with Rating Outlook CARE BB; CARE BB; CARE BB; Sr. No. Name of the Instrument/Bank Facilities 1. Fund-based - LT-Term Loan 2. Fund-based - LT-Cash 3. Fund-based - LT-Buyers Type Current Ratings Amount Outstanding Rating LT 3.50 CARE BB; LT 5.00 CARE BB; LT 3.50 CARE BB; Rating history CARE Ratings Limited

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