Rating Rationale

Brickwork Ratings Upgrades Ratings to ‘BWR BBB’ & Reaffirms ‘BWR A3’ for the Bank Loan Facilities aggregating ₹ 237.54 Cr of Sree Murali Mohana Boiled Raw Rice Mill Pvt. Ltd, , AP.

On a review, Brickwork Ratings (BWR) has upgraded/reaffirmed the following Ratings1 for the enhanced Bank Loan Facilities of ₹ 237.54 Cr (enhancement from ₹ 187.96 Cr) to Sree Murali Mohana Boiled Raw Rice Mill Pvt. Ltd. (‘SMBR’ or ‘the Company’), as under:

Amount Facility Tenure Previous Rating Revised Rating (₹ Cr) Term Loan 3.10

Auto Loan 2.24 BWR BBB- BWR BBB Long (BWR Triple B (BWR Triple B) Corporate Loan 2.00 Term Minus) BG 0.19 (Outlook – Stable) (Outlook – Stable)

OCC* 120.00 Short BWR A3 BWR A3 PC/FBP/ FUBD* 230.00 Term (BWR A Three) (BWR A Three) (INR Two Hundred & Thirty Seven Crores and Fifty Total 237.54 Four Lakh only)

* Note: Total availment under OCC/ PC/FBP/FUBD not to exceed ₹ 230 Cr and availment under OCC should not exceed ₹ 120 Cr

The rating has, inter alia, factored the Company’s long track record in the industry, financial performance for FY14, substantial increase in export sales and growing trend in operating income. However, Government policy interventions for Rice Industry, low capacity utilisation, high financing cost, moderate gearing and stretched working capital of the Company are the rating constraints.

BWR has essentially relied upon the audited financial results of SMBR up to FY14, projected financials, clarifications/information provided by the Company.

Sree Murali Mohana Boiled & Raw Rice Mill Pvt. Ltd. (SMBR) was set up in 1983 as a partnership firm by Mr. Chinta Panduranga Reddy with the acquisition of a small rice mill. It was reconstituted as a private limited company in 2002.

1 Please refer to www.brickworkratings.com for definition of the Ratings

www.brickworkratings.com 1 17 Jun 2014

It is engaged in milling, processing, and selling of boiled rice, raw rice, bran and husk in . It is situated at Komaripalem, , , A. P. SMBR is one of the leading rice mills in the non-basmati market in A. P. with quality rice production and efficient marketing.

Mr. Chinta Panduranga Reddy and Chinta Veera Raghava Reddy are the promoters. Mr. Chinta Pandu Ranga Reddy, Chairman is having more than three decades of experience in the rice milling industry. Mr. Ch.Veera Raghava Reddy, Executive Director, is the son of Mr. Ch. Panduranga Reddy. He joined in the rice mill in 1998 as a partner and has successfully introduced new systems to improve Company’s productivity and performance.

The Company’s total revenue has grown to ₹ 692.46 Cr in FY14 from ₹ 413.85 Cr in FY13 and ₹ 209.21 Cr in FY12. Export sales during FY14 increased significantly and contributed ₹ 456 Cr towards the turnover from ₹ 186 Cr in FY13.

The Company’s operating revenue has witnessed a huge improvement to ₹ 689.45 Cr in FY14 from ₹ 413.85 Cr in FY13, mainly due to increase in export sales in FY14. PAT increased slightly to ₹ 6.73 Cr in FY14 from ₹ 5.54 Cr in FY13. The Company sells its rice under “Bell” and “Primex” brand names. SMBR’s equity stood at ₹ 12.00 Cr in FY14.

The Company has a long track record of operating in the rice industry. Its growth is well supported by promoters experience and distribution network in AP. SMBR has good presence in the major rice cultivating areas for rice procurement and its “Bell” and “Primex” brand names are well reputed, Being an agro based Industry, it is exposed to the risks of vagaries of nature and to changes in the Government policies for Rice Industry. In addition, the Company’s ability to ensure sustainable growth by optimising capacity utilisation and improving margins and improving working capital management, are also major challenges and key rating sensitivities.

Analyst Contact Relationship Contact

[email protected] [email protected]

Phone Media Contact

1-860-425-2742 [email protected]

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.

www.brickworkratings.com 2 17 Jun 2014