By Rating Rationale
Brickwork Ratings assigns 'BWR A-' for the Proposed Bank Credit Facilities aggregating ? 350 Cr of Indian Sugar Exim Corporation Ltd
Brickwork Ratings (BWR) has assigned the following Rating1 for the Proposed Bank Loan
Facilities to Indian Sugar Exim Corporation Ltd. (ISECL or the 'Company').
Facility | Existing Limits (? Cr) | Proposed Limits (? Cr) | Tenure | Rating | |
PCFC/PSCFC (Fund-Based) | 70.00 | 350.00 | Long Term | BWR A- (BWR A Minus) Outlook: Stable | |
FBD/FBP* (Fund-Based) | (70.00) | 350.00 | Long Term | BWR A- (BWR A Minus) Outlook: Stable | |
EPC* (Fund-Based) | (70.00) | 350.00 | Long Term | BWR A- (BWR A Minus) Outlook: Stable | |
Bank Guarantee* (Non-Fund Based) | (10.00) | 350.00 | Long Term | BWR A- (BWR A Minus) Outlook: Stable | |
Total | 350.00 (INR Three Hundred & Fifty Crores only) |
Note: Proposed limit includes existing bank facilities from ICICI Bank
* FBD/FBP, EPC & BG are the sub limit under PCFC/PSCFC
BWR has principally relied upon the audited financial statements of FY11 to FY13, publicly available information and information/clarification provided by the Company's management.
The ratings factor, inter alia, the recognition of the company by Govt of India as a notified export agency, low financial risk profile backed by adequate net worth, absence of any long term debt obligations and low transaction risk based on LC backed payment mechanism. The rating is, however, constrained by large export volumes planned as against past track record and non- lucrative sugar prices in global market amid competition from other exporting countries.
Further, approvals from DGFT depend on the demand-supply gap and Indian trade policy for export of sugar.
Indian Sugar Exim Corporation Ltd (ISECL) an ISO 9001 company was set up in 1969 for export and import of sugar and other by-products of the sugar industry. The corporation was promoted by the National Federation of Co-operative Sugar Factories Limited, the apex organization of all
1 Please refer to www.brickworkratings.comfor definition of the Rating
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cooperative sugar factories in India and the Indian Sugar Mills Association - the apex organization of all private and public sector sugar factories in India.
It is a Company which has no capital and is limited by guarantee as prescribed under Section 12 (2) (b) in the Companies Act. It is the State Trading Enterprise (STE) nominated by the Government of India under the Foreign Trade Policy for export of preferential quota sugar to the European Union Nations and the United States of America.
ISECL is managed by a committee of members comprising chairpersons of different private and public sugar mills in India who are elected annually. Shri Kallappa Baburao Awade, an agriculturist, is currently the Director and the Chairman and Shri M. Srinivasan, an industrialist is the Vice-Chairman along with twenty executive vice-chairpersons. Day-to-day operations are managed by professionals employed by the Company.
Business Profile
ISECL, nominated as a State Trading Enterprise by Government of India for exports and imports of sugar and its by-products, aides the private and small sugar millers in India to export sugar to various countries - mainly European Union and United States. The company avails export orders through international bidding process and arranges a local exporter for the same by floating tender for supplies. All export orders are backed by Letters of Credit (LC) of prime banks, arranged by importers.
Exports of preferential quotas to EU and US - 10000 metric tons each through ISECL - are subject to quantitative ceiling notified by Directorate General of Foreign Trade (DGFT) from time to time. For SY13-14 (Sugar Year October 2013 - September 2014) the DGFT has notified allocation of 10000 MT to EU under CXL quota.
Revenues of the company stood at Rs 64.48 Cr during FY13 as compared to Rs 85.88 Cr during FY12. The total sugar exports during FY13 stood at 15229 metric tons as against 19871 metric tons during FY12. The operating margins stood at 11.29% during FY13 as against 18.40% during FY12 but net margins were 34.42% during FY13 as against 29.20% during FY12. The company avails packing credit and export bills discounting facilities from their banker for specific transactions, and there was no outstanding as on 31st March 2013.
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The company is backed by high net worth of Rs 233 Cr as at March 2013 with no long term debts. However, the company has an outstanding litigation with Standard Chartered Bank in respect of certain derivative transactions. The amount in question is Rs. 50.74 Cr, and the litigation dates back to November 2009. BWR notes that at this level, this amounts to ~21% of the Company's net worth.
The rating outlook is stable. Business growth depends on domestic and international situation with regards to sugar availability, demand-supply gaps, price differentials and Government policies. Ability of the company to procure orders on favorable terms remains the key rating sensitivity.
Analyst Contact | Relationship Contact |
analyst@brickworkratings.com | bd@brickworkratings.com |
Phone | Media Contact |
1-860-425-2742 | media@brickworkratings.com |
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