Press Release

Bhagawati Estate Warehouse (Kolaras) May 07, 2021 Ratings Facilities / Amount Rating1 Rating Action Instruments (Rs. crore) CARE B-; Stable; Rating continues to remain under Long Term Bank ISSUER NOT COOPERATING* ISSUER NOT COOPERATING category 0.77 Facilities (Single B Minus; Outlook: Stable and Revised from CARE B; Stable; ISSUER NOT COOPERATING*) (Single B; Outlook: Stable) CARE B-; Stable / CARE A4; Rating continues to remain under Long Term / Short ISSUER NOT COOPERATING* ISSUER NOT COOPERATING category Term Bank 4.00 (Single B Minus; Outlook: Stable/ and Revised from CARE B; Stable / Facilities A Four CARE A4; (Single B; Outlook: Stable / ISSUER NOT COOPERATING*) A Four) CARE A4; Short Term Bank ISSUER NOT COOPERATING* Rating continues to remain under 2.45 Facilities (A Four ISSUER NOT COOPERATING category ISSUER NOT COOPERATING*) 7.22 Total Facilities (Rs. Seven Crore and Twenty-Two Lakhs Only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers CARE had, vide its press release dated March 02, 2020, placed the rating of Bhagawati Estate Warehouse Kolaras (BEWK) under the ‘issuer non-cooperating’ category as BEWK had failed to provide information for monitoring of the rating as agreed to in its rating agreement. BEWK continues to be non-cooperative despite repeated requests for submission of information through emails, phone calls and a letter dated January 12, 2021, February 03, 2021 and April 27, 2021. In line with the extant SEBI guidelines, CARE has reviewed the ratings on the basis of the best available information which however, in CARE’s opinion is not sufficient to arrive at a fair rating.

Users of this rating (including investors, lenders and the public at large) are hence requested to exercise caution while using the above rating. The ratings assigned to the bank facilities of BEWK have been revised on account of non-availability of requisite information for carrying out rating exercise.

Detailed description of the key rating drivers At the time of last rating on March 02, 2020, the following were the rating strengths and weaknesses.

Key Rating Weakness Significant decline in Total Operating Income (TOI) TOI for FY18 stood at Rs.1.54 crore registering decline by 54.12% y-o-y mainly on account of lower revenue realized from trading activities. Apart from the poor sentiment in the global commodity markets and volatility in some commodities like chick pea, pulses, made matters worse.

Leveraged solvency position, weak debt coverage indicators The capital structure of BEWK remained highly leveraged by an overall gearing of 8.44 times as on March 31, 2017, however, improved as against 4.01 times as on March 31, 2017 owing to higher utilisation of working capital bank borrowings and infusion of term loan and lower accretion of profits to reserves. Debt coverage indicators also remained weak marked by total debt to GCA of 60.03 times as on March 31, 2018 as against 40.85 times as on March 31, 2017 owing to increase in total debt and decline in net worth along with moderate interest coverage ratio of 1.44 times in FY18 as against 1.41 times in FY17 improved marginally due to marginal decline in interest expenses.

1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications *Issuer did not cooperate; Based on best available information 1 CARE Ratings Limited

Press Release

Risk pertaining to warehouse receipt funding and constitution as proprietorship business BEWK is engaged in offering finance against warehouse receipt to farmers. Under this arrangement goods are stored in the warehouse of BEWK against which finance is arranged by way of warehousing receipt funding by BEWK. BEWK would be liable to repay the finance obtained from banks against pledge of warehouse receipts in case of non-receipt of payments from the owners of underlying goods on due dates. As prices of agro commodities are volatile and in the event of sharp corrections in the prices of underlying goods the chances of defaults may increase substantially which may have adverse impact on the cash flows of BEWK. BEWK being a proprietorship firm is exposed to inherent risk of proprietor’s capital being withdrawn at time of personal contingency, and firm being dissolved upon the death/insolvency of proprietor. Moreover, proprietorship firms have restricted access to external borrowing as credit worthiness of proprietor would be key factor affecting credit decision for lenders

Key Rating Strengths Wide experience of the promoters through established presence of the group in various business segments within Madhya Pradesh Mrs Lata Singh, proprietor of BEWK holds experience of more than 8 years and looks after the administrative aspects of the business. She is also supported by Mr Vikram Singh Kirar in the day-to-day operations who has experience of over a decade in the agri warehousing, agro commodity trading and warehouse receipts funding business. BEWK has other associate concerns namely Bhagawati Development Services Private Limited and Bhagawati Cools Private Limited which are engaged in similar line of business and also have distributorship of Indo Farm tractors and Mahindra and Mahindra (M&M) tractors respectively in Madhya Pradesh. Another associate, Bhagawati Estate Warehouse, Ashoknagar is a proprietorship firm owned by Mr Vikram Singh, is also engaged in warehousing and trading of agro commodities. The group is also engaged into dealership of Mahindra & Mahindra (M&M) vehicles and servicing of auto parts in four districts of Madhya Pradesh (MP), namely, Shahdol, Mandla, Dindori and Anuppur through other entity named Bhagawati India Motorizer Private Limited.

Improvement in Profitability Margins PBILDT Margin improved significantly by 2277 bps on account of lower cost of traded goods sales and remained at 47.46% in FY18 as compared to 24.69% in FY17. Moreover, PAT margin also improved by 164 bps owing to higher PBILDT margin and remained at 4.62% in FY18 as compared to 2.98% in FY17, although both declined at absolute level.

Analytical Approach: Standalone

Applicable criteria Policy in respect of Non-Cooperation by issuer Criteria on assigning ‘outlook’ and ‘credit watch’ to credit ratings CARE’s Policy on Default Recognition Rating Methodology – Wholesale Trading Financial ratios – Non-Financial Sector Criteria for Short Term Instruments

About the firm Bhagawati Estate Warehouse (Kolaras) (BEWK) was formed as a proprietorship firm in January 2009 by Mrs. Lata Singh to undertake business of warehousing and trading of agro-commodities like potatoes, wheat, pea, chickpea and lentil. BEWK has two associate concerns namely Bhagawati Development Services Private Limited and Bhagawati Cools Private Limited which are engaged in similar line of business and also have distributorship of Indo Farm tractors and Mahindra and Mahindra (M&M) tractors respectively in Madhya Pradesh. Brief Financials (Rs. Crore) FY17( A) FY18(A) Total operating income 3.35 1.54 PBILDT 0.83 0.73 PAT 0.10 0.07 Overall gearing (times) 4.01 8.44 Interest coverage (times) 1.41 1.44 A: Audited

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

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

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Annexure-1: Details of Instruments/Facilities Size of the Name of the Date of Coupon Maturity Rating assigned along with Issue Instrument Issuance Rate Date Rating Outlook (Rs. crore) Fund-based - LT-Term CARE B-; Stable; ISSUER NOT - - March 2019 0.77 Loan COOPERATING* Fund-based - LT/ ST- CARE B-; Stable / CARE A4; - - - 4.00 Cash Credit ISSUER NOT COOPERATING* Fund-based - ST-Bank CARE A4; ISSUER NOT - - - 2.45 Overdraft COOPERATING* *Issuer did not cooperate; Based on best available information

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 2020- 2019-2020 2018-2019 2022 2021 1)CARE B; Stable 1)CARE B; (14-Mar-19) CARE B-; Stable; Stable; ISSUER 2)CARE B; Fund-based - LT- ISSUER NOT NOT 1. LT 0.77 - - Stable; ISSUER Term Loan COOPERATING* COOPERATING* NOT (02-Mar-20) COOPERATING*

(01-Mar-19) 1)CARE B; Stable 1)CARE B; Stable / CARE A4 CARE B-; Stable / / CARE A4; (14-Mar-19) CARE A4; ISSUER Fund-based - LT/ ISSUER NOT 2)CARE B; Stable 2. LT/ST 4.00 NOT - - ST-Cash Credit COOPERATING* / CARE A4; COOPERATING* (02-Mar-20) ISSUER NOT

COOPERATING* (01-Mar-19) 1)CARE A4 1)CARE A4; CARE A4; ISSUER (14-Mar-19) ISSUER NOT Fund-based - ST- NOT 2)CARE A4; 3. ST 2.45 - - COOPERATING* Bank Overdraft COOPERATING* ISSUER NOT (02-Mar-20) COOPERATING*

(01-Mar-19) *Issuer did not cooperate; Based on best available information

Annexure-3: Complexity Level of various instruments rated for this firm Sr. No. Name of the Instrument Complexity Level 1. Fund-based - LT-Term Loan Simple 2. Fund-based - LT/ ST-Cash Credit Simple 3. Fund-based - ST-Bank Overdraft Simple

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

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Contact us Media Contact Name: Mradul Mishra Contact no.: (022) 6837 4424 Email ID: [email protected]

Analyst Contact Name: Ms. Shachee Vyas Contact no.: (079) 40265665 Email ID: [email protected]

Relationship Contact Name: Mr. Deepak Prajapati Contact no.: (079) 40265656 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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