Brief Rationale

Pachimatla Manoj Kumar April 27, 2020 Ratings Facilities Amount (Rs. crore) Ratings1 Rating Action CARE B+; Stable Long –term Bank Facilities 9.90 Assigned (Single B Plus; Outlook Stable) 9.90 Total Facilities (Rupees Nine crore and ninety lakhs only) Details of facilities in Annexure-1 Detailed Rationale & Key Rating Drivers The rating assigned to the bank facilities of Pachimatla Manoj Kumar (PCS) primarily tempered by the Project implementation and business stabilization risk, Geographic and customer concentration risk, highly competitive and fragmented nature of business, Constitution of the entity as a proprietorship with inherent risk of withdrawal of capital. However, the rating derives for Experience of promoter for more than two decades in agricultural industry. Financial closure achieved for the project, Location advantage of the plant and Stable outlook of warehousing industry.

Key Rating Sensitivities Positive Factors Completion of project, stabilise the operations and generate the profits as envisaged Negative Factors Delay in project may lead to time and cost overrun. Key Rating Weaknesses Project implementation Risk and business stabilization risk The proprietor of the firm has planned to construct warehouse at Nagireddypally, Dist. With estimated total cost of Rs. 13.96 crore which is to be funded through bank term loan of Rs. 9.99 crore and unsecured loan of Rs. 1.60 crore and the remaining cost of Rs. 2.37 crore from proprietor’s fund and as on date 65% of the project completed, therefore, the ability of the firm to complete the project without any cost or time over run will remain critical from credit perspective.

Geographic and customer concentration risk The client profile of PMKis limited to the state of , exposing the firm to geographical concentration risk. The two godowns of the firm are located in Telangana and concentrated in and area surrounding .

Highly competitive and fragmented nature of business The firm is engaged into the business of providing godown facilities on lease basis to the farmers where the profitability margins comparing to other industry will be low. Apart from that there are numerous organized and unorganized players entering into the market which makes the industry competitive nature.

Proprietorship nature of constitution with risk of withdrawal of capital The firm being a proprietorship firm is exposed to inherent risk of capital withdrawal by proprietor due its nature of constitution. Any substantial withdrawals from capital account would impact the net worth and thereby the gearing levels.

Key Rating Strengths Experience of Partners for more than a decade in agricultural industry Pachimatla Manoj Kumar was established in the year 2020 promoted by Mr. Manoj Kumar Pachimatla (Proprietor). The proprietor of the firm is having more than two decades of experience in agricultural and poultry business. Through his vast experience in agricultural business, the proprietor is able to establish healthy relationship with farmers and local traders.

Financial closure achieved for the project PMK has achieved financial closure for the project. The estimated total project cost for setting up the unit is Rs.13.96 crore which is to be financed through a term loan (sanctioned on December 2019) of Rs. 9.90 crore, Unsecured loans of Rs. 1.60 crore and the balance Rs. 2.37 crore through proprietor’s own contribution. Of the total project cost, the firm has incurred Rs.9.69 crores towards laying the godowns and railway siding works.

1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications 1 Credit Analysis & Research Limited

Brief Rationale

Location advantage of the property The property location of the firm is located in Nalgonda district, which is a horticultural crop growing area and the promoter has good network with farmers and traders. There is abundant availability of inputs such as food grains and other materials in the proposed area of the district.

Stable outlook of warehousing industry Warehousing Market in states that the demand for good quality state-of-the-art warehouses will be a major requirement in the country given the growing logistics industry. The evolution from storage godowns to multipurpose logistic center is highly desired. Warehouses form a crucial supply chain element which is key to both customer satisfaction and cost reduction. Warehouses today serve as a stocking point as well as consolidation centers for multiple sourcing locations which provide cross docking facilities to retail distributors, sorting centers for customer deliveries, and assembly facilities for final packaging and bundling. The organized sector has a minor market share, but claims a major portion of the revenue. The warehouse market is subjected to stringent regulations and policies regarding licensing, performance, and accountability. The current fragmented state of the sector coupled with growth in the overall economy provides tremendous potential for the warehousing sector to flourish.

Analytical approach: Standalone

Applicable criteria CARE’s Criteria on assigning ‘Outlook’ and ‘Credit watch’ to Credit Ratings CARE’s Policy on Default Recognition Financial ratios: Non-Financial sector Rating Methodology – Project Stage Companies

About the Firm Telangana based Pachimatla Manoj Kumar (PMK) is individual who has undertaken a project for construction of warehouse till now Mr. Manoj Kumar Pachimatla used to support his father business which is into poultry farming and has more than 20 years of experience in filed. The firm is planning to provide the ware house on lease to Food Corporation of India (FCI) and Cotton Corporation of India (CCI). The property is built on total land area of 6 acres and comprises of 3 godowns with a storage capacity of around 16500MT for food crops like rice, wheat etc. The construction of the godowns were proposed to be completed in June 2020 and the leasing operations were likely to be commenced from July 1st week of FY 2020.

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not applicable

Rating History for last three years: Please refer Annexure-2

Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Rating assigned Instrument Issuance Rate Date Issue along with Rating (Rs. crore) Outlook Fund-based - LT-Term - - March-2031 9.90 CARE B+; Stable Loan

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) (Rs. crore) assigned in assigned in assigned in assigned in 2020-2021 2019-2020 2018-2019 2017-2018 1. Fund-based - LT-Term LT 9.90 CARE B+; - - - - Loan Stable

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Brief Rationale

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