Press Release

Kirorimal Kashiram Marketing and Agencies Private Limited August 09, 2021 Ratings Amount Facilities/Instruments Ratings Rating Action (Rs. crore) CARE BB-; Stable Revised from CARE BB+; Long Term Bank Facilities 49.50 (Double B Minus; Stable (Double B Plus; Outlook: Stable) Outlook: Stable) 49.50 Total Bank Facilities (Rs. Forty-Nine Crore and Fifty Lakhs Only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The revision in rating assigned to the bank facilities of Kirorimal Kashiram Marketing and Agencies Private Limited (KKRAM), takes into account the deterioration in capital structure owing to expected debt funded capital expenditure. KKRAM also witnessed moderation in accruals during FY21 due to covid-related lockdowns. The rating continues to be constrained by the stretched liquidity profile, and weak debt service coverage indicators. The rating, however, derives comfort from the experienced promoter team, the company’s long track record with a well-established brand presence and distribution network.

Rating Sensitivities Positive factors  Improvement in capital structure and debt coverage indicators  Sustained increase in scale of operation along with sustained improvement in PBILDT margin beyond 5% Negative factors  Further weakening of the financial risk profile, especially capital structure and debt coverage indicators

Detailed description of the key rating drivers Key rating weaknesses Leveraged capital structure KKRAM dependence on working capital borrowings to fund the inventory purchase and other -term operational financial needs increases the overall gearing level. Rice procurement being seasonal, the company maintains substantial inventory of raw material to ensure seamless processing and sale throughout the year. Additional loans borrowed towards capex and increased working capital requirement resulted in deterioration in the overall gearing from 2.58x as on March 31, 2020 to 2.76x as on March 31, 2021. Interest coverage (PBILDT/Interest) was marginal at 1.01x in FY21 as against 1.31x in FY20. The company is executing a project to set up a rice mill in Sonepat, Haryana at a cost Rs 17 crore. As on July 12, 2021 the company has incurred Rs. 9 crore funded by debt of Rs. 3.35 crore and remaining through own sources. Further debt, to be drawn for the purpose of the capex is expected to deteriorate the capital structure and coverage indicators.

Moderation in scale of operations during FY21 The total operating income declined by 15% from Rs. 281 cr in FY20 to Rs 240 cr in FY21(Prov) due to a drop-in export sale and a decline in domestic sales. The fall was sharper in the domestic sales as compared to exports as covid related lockdown had an impact on demand from hotels and marriages. Domestic sales and export sales accounted for 69% (PY: 70%) and 31% (PY: 30%) of the company’s total income respectively in FY21. The company’s domestic sales have declined by 15% in FY21 as against the previous year. During Q1FY22, the company reported a total revenue of Rs. 77.79 cr.

Highly Fragmented and competitive industry with price volatility The basmati rice market in is pegged at 2.5 million tonnes annually, about 40% of this volume is catered through packaged basmati rice segment. The 60% which is 1.5 million tonnes is still sold in loose unbranded packs. The trading of agro products is a highly competitive sector with low entry barriers, large presence of unorganized players, wholesalers across India and commoditized nature of product. Therefore, the profitability margins of the players remain low and volatile. Travel restrictions / lockdown guidelines have impacted demand, especially in the HoReCa and marriage segments. Higher demand for Indian rice from North America and European regions coupled with good climatic conditions are supporting the growth of the market. The top players hold majority of the market share- KRBL Ltd, Kohinoor Foods Ltd, , LT Foods, etc. The

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Press Release most dominant market for basmati rice is Middle East. Over 70% of the total product of India goes to the Middle East and the rest of the markets are in single digits.

Key rating Strengths Vast experience of promoter The promoter family has over 60 years of experience in the rice trading industry. Mr Arun Aggrawal, Managing Director who has over three decades of experience in rice trading business manages the operations of the rice mills and the trading activities in Chennai. He is assisted by his brother, Mr Rash Behari Aggrawal. His son, Mr Jatin Aggrawal takes care of the operations of the rice mill and rice trading in New . He also oversees the export orders received by the company.

Established brand presence and business network The Company is mainly engaged in trading of basmati rice under three brands ‘Double Deer’, ‘Postman’, ‘Bullet’ mostly through wholesale sales primarily to South Indian states. The company’s brand ‘Double Deer’ has presence in both the retail and institutional segment while the brand ‘Postman’ has stronger presence in Kerala. KKRM exports basmati rice to countries like USA, Canada, UAE, Saudi Arabia Iran, Israel, Singapore, South Africa etc which together formed 31% of total revenue in FY21 (FY20: 30%).

Liquidity-Stretched KKRAM’s liquidity is stretched with accruals being lower than debt obligations. The company is expected to rely on additional funding or improved working capital management to maintain its liquidity. The company has moderate cash balance of Rs.0.19 crore as of Mar’21. The bank limits are utilized to the extent of 99.47% during 12 months ended Jun’21. Working capital cycle remained high at 144 days in FY21 as against 129 days in FY20 mainly due to high inventory levels as the procurement is during Jan to March’21.

Analytical approach: Standalone Applicable Criteria Criteria on assigning Outlook and credit watch to Credit Ratings CARE's Policy on Default Recognition Liquidity analysis of Non-financial sector entities Criteria for Short-term instruments Financial ratios – Non-Financial Sector Rating Methodology for Manufacturing Sector

About the Company Kirorimal Kashiram Marketing and Agencies Private Limited (KKRAM) was incorporated in 1995. The company is primarily engaged in trading of basmati rice and trading of pulses to a smaller extent. KKRAM sells rice under three brand names ‘Double Deer’, ‘Postman’ and ‘Bullet’. The company has two rice mills in Chennai and a leased unit in Delhi. The Company also has storage facility of around 4000 MT. The day-to-day operations of the company are managed by Mr. Arun Kumar Aggarwal who is assisted by his son, Mr. Jatin Aggarwal. . Brief Financials (Rs. crore) FY20 (A) FY21 (P) Total operating income 280.56 239.36 PBILDT 11.26 10.11 PAT 0.86 0.44* Overall gearing (times) 2.58 2.76 Interest coverage (times) 1.31 1.01 A: Audited, P: Provisional *tax assumed at 25%

Status of non-cooperation with previous CRA: Nil

Any other information: NA

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

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in Annexure-3

Complexity level of various instruments rated for this company: Annexure 4

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Annexure-1: Details of Instruments/Facilities Size of the Rating assigned Name of the Date of Coupon Maturity Issue along with Rating Instrument Issuance Rate Date (Rs. crore) Outlook Fund-based - LT-Cash CARE BB-; Stable - - - 49.50 Credit

Annexure-2: Rating History of last three years Current Ratings Rating history Date(s) & Date(s) & Name of the Type Rating Date(s) & Date(s) & Sr. Amount Rating(s) Rating(s) Instrument/Bank Rating(s) Rating(s) No. Outstanding assigned assigned Facilities assigned in assigned in (Rs. crore) in 2021- in 2018- 2020-2021 2019-2020 2022 2019 1)CARE BB+; 1)CARE Stable CARE 1)CARE BB+; BB+; (26-Feb-21) Fund-based - LT- BB-; Stable Stable 1. LT 49.50 - 2)CARE BB+; Cash Credit Stable (16-Sep-19) (28-Sep- Stable 18) (14-Sep-20)

1)CARE 1)Withdrawn 1)CARE A4+ A4+ Fund-based - ST- 2. ST - - - (14-Sep-20) (16-Sep-19) (28-Sep- PC/Bill Discounting 18)

1)CARE BB+; Fund-based - LT- 1)Withdrawn Stable 3. Proposed fund LT - - - - (16-Sep-19) (28-Sep- based limits 18)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities- NA

Annexure 4: Complexity level of various instruments rated for this company Sr. No. Name of the Instrument Complexity Level 1. Fund-based - LT-Cash Credit Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

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Contact us Media Contact Mradul Mishra Contact no. – +91-22-6754 3573 Email ID – [email protected]

Analyst Contact Name: Mr. Jaganathan A Contact no.: 044 2850 1000 Email ID: [email protected]

Relationship Contact Name: Mr. V Pradeep Kumar Contact no.: 044 2850 1001 Email ID: [email protected]

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 Credit 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 the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. 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. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, 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. CARE is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE’s rating. Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

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