Rating Rationale Brickwork Ratings has Upgraded ratings to ‘BWR A-’ & ‘BWR A2+’ for the long term & short term Bank Loan facilities of ₹165.88 Cr for Darjeeling Organic Tea Estates Private Limited (Enhanced from ₹ 83.58 Cr). Brickwork Ratings has upgraded the Ratings1 of Darjeeling Organic Tea Estates Private Limited’s (DOTEPL or the ‘Company’) fund based long term and short term bank loan facilities of ₹165.88 Cr at BWR A- (Outlook: Stable) / A2+ sanctioned by UCO and Allahabad Bank. Present Previous Previous Rating Facility Amount Rating Tenure Present Rating (Dated: January, ( ₹ Cr) ( ₹ Cr) 2015) Fund Based : Upgraded BWR A- BWR BBB 66.00 56.00 Cash Credits (Pronounced BWR (Pronounced Long Single A Minus) Triple B) Fund Based : Term 99.58 27.28 Term Loans (Outlook – Stable) (Outlook – Stable) Upgraded BWR A2+ BWR A3 Non Fund Based : Short 0.30 0.30 (Pronounced BWR A (Pronounced BWR Bank Guarantee Term Two Plus) A Three) INR One Hundred Sixty Five Crores and Eighty Total 165.88* 83.58 Eight Lakhs only * Details of the Bank Facilities are attached in annexure BWR has principally relied upon the audited results up to FY15 and projected financials of FY16 and FY17, publicly available information and information/clarifications provided by the Company’s management. The rating has factored, inter alia, primarily the extensive experience of the promoters in the line of business for more than three decades, support from reputed foreign investors, strategic locational advantage of the Tea Estates (Geography Indication of Darjeeling tea), established relationship with its customers, strong net worth, growth registered in the turnover and comfortable profitability margin. However, the rating is constrained by the time taken for the estates to yield to full potential, time for rejuvenating the soil of recently acquired plantations to make them suitable for organic farming practiced in the estates, working capital intensive nature of business, competition from other players in the state and the delays in realization of receivables. 1 Please refer to www.brickworkratings.com for definition of the Ratings www.brickworkratings.com 1 8 Oct 2015 Background: Darjeeling Organic Tea Estates Private Limited (DOTEPL) was incorporated on January 13, 2009 to carry out tea planation and in order to consolidate the Darjeeling tea business under one umbrella. It is vertically well integrated (From raising seedlings, cultivation, green leaf processing into tea and indirectly exporting) and horizontally integrated in terms of acquiring sick units in Darjeeling. The Company has 14 estates in Darjeeling and recently in August 2015, the Company has acquired one tea estate in Sivasagar, Assam. The Company is a leader in producing of Darjeeling Biodynamic Organic Tea, is focusing on ‘organic’ nature of their production, high-end variety of products. The Company is second largest producer with a range of more than 35 varieties of high end specialty Darjeeling Organic Teas and the single largest Darjeeling tea producing company , controlling ~12% of Darjeeling Tea production. These teas fetch high prices in the world market. As of March 31, 2015, the Company has production capacity of 10 Lakhs Kg/Annum. It has more than 6000 employees working in the tea gardens. It is indirectly exporting to Europe (Germany, UK, Netherlands, France, Austria, Kazakhstan etc.), Japan and USA under its own brand name “Ambootia”. It has well reputed customers’ from all over the world (consisting of distributors of tea and high end gourmet store chains). Management Profile: The ownership stake is concentrated within the family with the promoters holding 57% and 43% foreign holding. The management is handled by experienced promoters, Mr. Sanjay Bansal and his wife Ms. Reena Bansal. Mr. Bansal has over three decades of experience dealing in tea. He is also the Chairman & Managing Director of the Company. Currently; He is a member of the Indian Government’s Board of Trade, for recommending Trade Policies of India. Ms. Reena Bansal is actively involved since over a decade in the adoption and development of Organic & Bio Dynamic Agricultural practices at the Tea Estates of the Group. Group Companies: There are four companies collectively called as Ambootia group. Darjeeling Organic Tea Estates Private Limited (15 Estates) and Bhumya Tea Co Private Limited (1 Estate) are into cultivation, processing and trading of Tea. The other two, Ambootia Tea Exports Private Limited and Bush Tea Co Private Limited are only into trading of tea. Financial Performance: For FY15, the Company has recorded turnover of ₹ 83.10 Cr against ₹75.01 Cr in FY14 registering a 10.71% growth over the previous year. However, the Company’s PAT was around ₹24.94 Cr in FY15 as compared to ₹23.68 Cr in FY14. As on FY15, the Company has comfortable debt equity ratio coupled with strong net worth of ₹360.14 Cr after excluding revaluation reserves. www.brickworkratings.com 2 8 Oct 2015 Receivables and inventory levels are high at 140 days and 217 days respectably as on FY15, reflecting the nature of the business, but the same time causing stretched working capital position for the Company. Also, interest coverage remained strong at around 2.89 times (improving Y-o-Y) and net cash accrual to total debt stands at 0.25 times in FY15. Rating Outlook: The rating reflects the position of the Company in the Tea plantation industry. Going forward, the ability of the Company to profitably scale up its operation, enjoy benefit from the newly acquired gardens by achieving the projected turnover and retaining profitability levels and efficiently manage its receivables and working capital will be the 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 3 8 Oct 2015 Darjeeling Organic Tea Estates Private Limited Bank & Loan wise break up Annexure Type of Facility UCO Bank Allahabad Bank (₹ in Cr) (23-2-15) (10-8-15) Cash Credit 56.00 10.00 Term Loan I 2.35 30.82 Term Loan II 5.39 37.50 Term Loan III 2.40 - Fund Term Loan IV 4.16 - Based Term Loan V 1.48 - Term Loan VI 7.00 - Term Loan VII 1.48 - Term Loan VIII 7.00 - Long Term Total 87.26 78.32 Non Fund Bank Guarantee 0.30 - Based Short Term Total 0.30 - Total (Short & Long) 87.56 78.32 In case of Term loans, outstanding as on September 9, 2015 are shown above, except for Term loan II of Allahabad Bank, not disbursed fully. www.brickworkratings.com 4 8 Oct 2015 .