Chennai Rice Industries India Private Limited

June 24, 2022

Ratings
Instrument / Amount Ratings Rating Complexity
Facility (Rs. crore) Action Indicator
Long Term 125.44 IVR BBB-/ Stable (IVR Rating Simple
Bank Facilities triple B minus with revised
Stable outlook) from IVR
BB+/
Stable
Short Term 4.56 IVR A3 (IVR A three) Rating Simple
Bank Facilities (includes proposed revised
facility of Rs. 4.49 from A4+
crore)
Total 130.00
(INR One
hundred and
thirty crore only)
Details of Facilities are in Annexure 1

Detailed Rationale
The revision in the ratings assigned to the bank facilities of Chennai Rice Industries India
Private Limited (CRIIPL) considers significant improvement in the company’s topline in
FY2022 (provisional) over the FY2021, leading to a rise in the profits and cash accrual during
the fiscal. Moreover, the equity infusion during FY22 (provisional) of Rs. 15.82 crore led to an
improvement in the capital structure of the company. Further, the ratings continue to derive
comfort from the extensive experience of its promoters in the rice milling industry, established
brand name of its products and stable demand prospects of rice. However, these rating
strengths continues to remain constrained due to the company’s exposure to agro-climatic risk
and geographical concentration risk, vulnerability to changes in government policies and
working capital intensive nature of its operations.

Key Rating Sensitivities:

Upward Factors
• Significant improvement in scale of operation with improvement in profitability and debt
protection metrics on a sustained basis
• Improvement in the capital structure and coverage indictors

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 • Improvement in operating cycle with improvement in liquidity

Downward Factors
• Dip in operating income and/or profitability on a sustained basis.
• Deterioration in the capital structure and/or coverage indicators
• Deterioration in working capital cycle and liquidity profile of the company

List of Key Rating Drivers with Detailed Description

Key Rating Strengths

• Significant growth in the topline during FY2022 (provisional)

The topline and profitability of the company have shown a significant improvement in FY2022
(provisional), which has consequently led to an increase in profits and GCA. The company’s
total operating income (TOI) increased to Rs. 333.86 crore in FY2022 (provisional) from Rs.
248.00 crore in FY2021 depicting an increase of ~35% on a y-o-y basis. Consequently, the
EBDITA and PAT also increased to Rs. 18.24 crore. and Rs. 4.55 crore respectively in FY2022
(provisional) from Rs. 16.59 crore and Rs. 3.62 crore, respectively in FY2021. Infomerics
expects the recent addition in production capacity of the company is likely to further increase
the scale of operations which might result in higher profit and cash accruals of the company,
going forward.
• Improvement in the capital structure during FY2022 (provisional)
The company’s net worth stood at Rs. 62.86 crore as on March 31, 2022 (provisional)
increasing from Rs. 42.47 crore as on March 31, 2021, primarily on account of equity infusion
of Rs. 15.82 crore. This led to an improvement in capital structure of the company as depicted
by a gearing and TOL/TNW of 1.80 times (1.98 times in FY2021) and 2.17 times ( 2.61 times
in FY2021). With the expected increase in the scale of operations, the working capital
requirements is likely to increase, which will increase the working capital borrowings and
consequently result in an increase in the gearing levels in FY2023 as compared to FY2022
(provisional), and improve, gradually.

• Extensive experience of the promoters in rice milling industry

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The promoter of the company Mr. M.S Tamilselvan, (the chairman and the director) have two
decades of extensive experience in the rice-milling industry which has helped the company to
maintain strong relationship with its customers as well as with its suppliers. Further, having
more than five years of operational track record has also helped the company to establish
strong market position.
• Established brand
With a long track record of operations, the company has established its brands, "Chennai
pattinam" and “Chennai Rice " in the market. “Chennai Rice” is the flagship brand of the
company.
• Stable demand prospects for rice
The demand prospects for rice industry are expected to remain stable as rice is a staple food
grain and India is the world’s second largest producer and one of the top exporters in global
rice trade. Rice is one of India's most important food crops, feeding the population of India, as
well as a key generator of employment.

Key Rating Weaknesses

• Exposure to agro-climatic risk and exposure to geographical concentration risk

Cultivation of paddy, the primary raw material, depends on monsoon and availability of
irrigation. Hence, CRIIPL is susceptible to any shortage or price fluctuation during
unfavourable climatic conditions. Further, The Company generates all its revenues from the
state of Tamil Nadu which indicates a high degree of revenue concentration risk. However,
high demand of rice in the state imparts some comfort.
• Thin profit Margins
The rice-milling industry is characterised by intense competition due to limited value addition,
and consequent low entry barriers, limiting the pricing flexibility of players like CRIIPL. As a
result, the profit margins remained thin with operating margin of 5.46% and PAT of 1.36%
respectively in FY22 (Prov).
• Vulnerability to changes in Government policies
The rice milling industry is regulated in terms of paddy prices, export/import of rice, and the
release mechanism. Thus, the company remains exposed to changes in Government policies

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in relation to stipulation of MSP for procurement of paddy from farmers and revision of policies
on export, etc
• Working capital intensive nature of operations
The operations of the company is working capital intensive as reflected in its operating cycle
of 127 days as in FY22 (Prov) (163 days in FY21). This is because of high Inventory days of
105 days in FY22 (Prov) (135 days in FY21). The company has to maintain high level of
inventory in view of seasonal nature of paddy.

Analytical Approach: Standalone

Applicable Criteria:
Rating Methodology for Manufacturing companies
Financial Ratios & Interpretation (Non- Financial Sector)

Liquidity – Adequate

The liquidity of the company is expected to remain adequate in the near to medium term in
view of its expected adequate cash accruals vis-à-vis its debt repayment obligations in FY23-
FY25. However, the liquidity position of the company is constrained due to its working capital-
intensive nature of operations which has led to high reliance on working capital limits and
moderate capital structure leaving low gearing headroom. The bank limit utilization of its fund
based facility of Rs 65.00 crore, remain high at an average of ~99% over the 12 months ended
March 2022.

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About the Company

Chennai Rice Industries India Private Limited (CRIIPL, Erstwhile: Chennai Gate Rice
Industries (P) Ltd.) was incorporated in March-2013 and were first introduced to the local
market as a small business that operated as a wholesale shop in the grain market. Thereafter,
they started the business of milling, processing, and marketing of branded rice after two
decades of the retail and wholesale business. CRIIPL sells its products under the brand name
“Chennai Rice " and "Chennai Pattinam". Chennai Gate Rice Industries (P) Ltd is managed
by a professional management team under the guidance of Mr. M.S.TamilSelvan, (Director)
Mr. R.Rajkumar, (Director) Mr. B.Sangameshwaran and Mrs. S.Vanitha (Director). The
company commenced its operations from October 2014.

Financials (Standalone):

(Rs. crore)

For the year ended* / As on 31-March-21 31-March-22

(Audited) (Prov)
Total Operating Income 248.00 333.86
EBITDA 16.59 18.24
PAT 3.62 4.55
Total Debt 84.22 113.04
Tangible Net-worth 42.27 62.86
EBITDA Margin (%) 6.69 5.46
PAT Margin (%) 1.46 1.36
Overall Gearing Ratio (x) 1.98 1.80
*Classification as per Infomerics’ standards

Status of non-cooperation with previous CRA: Brickwork Ratings moved the rating to INC
category vide press release dated March 19, 2022 on failure to submit information and NDS.

Any other information: Nil

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 Rating History for last three years:
Sr. Name of Current Ratings (Year 2022- Rating History for the past 3 years
No. Instrument/Facili 23)
ties Type Amount Rating Date(s) & Date(s Date(s) &
outstandin Rating(s) ) & Rating(s)
g (Rs. assigned in Ratin assigned
Crore) 2021-22 g(s) in 2019-
assig 20
ned in
2020-
21

Dec May
29, 19,
2021 2021
1. Term Loan Long 35.53 IVR IVR IVR
Term BBB-/ BB+/ BB+/ - -
Stable Stable Stable
2. Proposed Term Long IVR IVR
Loan Term - - BB+/ BB+/ - -
Stable Stable
3. Covid Loan Long IVR
Term 2.63 BBB-/ - - - -
Stable
4. Cash credit and Long IVR IVR
warehousing unit Term - - BB+/ BB+/ - -
Stable Stable
5. Cash Credit Long IVR
Term 40.00 BBB-/ - - - -
Stable
6. Cash Credit Long IVR
(WHR)* Term 25.00 BBB-/ - - - -
Stable
7. FLC Long IVR
Term 22.26 BBB-/ - - - -
Stable
8. Bank Guarantee Short 0.07 IVR A3 IVR IVR
- -
Term A4+ A4+
9 Proposed Bank Short 4.51 IVR A3 IVR IVR
Guarantee Term A4+ A4+ - -
*fully interchangeable from CC (WHR) to CC

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Name and Contact Details of the Rating Analyst:
Name: Ms. Sapna Bagaria Name: Mr. Sandeep Khaitan
Tel: 033-4803 3621 Tel: 033-4803 3621
Email: sapna.bagaria@infomerics.com Email: sandeep.khaitan@infomerics.com

About Infomerics Ratings:

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For more information visit www.infomerics.com

Disclaimer: Infomerics ratings are based on information provided by the issuer on an ‘as is where is’ basis.
Infomerics credit ratings are an opinion on the credit risk of the issue / issuer and not a recommendation to buy,
hold or sell securities. Infomerics reserves the right to change, suspend or withdraw the credit ratings at any point
in time. Infomerics ratings are opinions on financial statements based on information provided by the management
and information obtained from sources believed by it to be accurate and reliable. The credit quality ratings are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any
security. We, however, do not guarantee the accuracy, adequacy or completeness of any information, which we
accepted and presumed to be free from misstatement, whether due to error or fraud. We are 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 us have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. In case of partnership/proprietary concerns/Association of Persons (AOPs), the rating
assigned by Infomerics is based on the capital deployed by the partners/proprietor/ AOPs and the financial strength
of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans
brought in by the partners/proprietor/ AOPs in addition to the financial performance and other relevant factors.

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Annexure 1: Details of Facilities
Name of Facility Date of Coupon Maturity Size of Rating
Issuanc Rate/ Date Facility Assigned/
e IRR (Rs. Crore) Outlook
Covid Loan FY23 2.63 IVR BBB-/ Stable
- -
Term Loan 1 - - FY25 0.16 IVR BBB-/ Stable

Term Loan 2 - - FY25 0.48 IVR BBB-/ Stable

Term Loan 3 - - FY25 0.25 IVR BBB-/ Stable
Term Loan 4 - - FY26 0.55 IVR BBB-/ Stable
Term Loan 5 - - FY30 9.75 IVR BBB-/ Stable
Term Loan 6 - - FY30 24.34 IVR BBB-/ Stable
Cash Credit - - - 40.00 IVR BBB-/ Stable
Cash Credit (WHR)* 25.00 IVR BBB-/ Stable
- - -
FLC - - - 22.26 IVR BBB-/ Stable
Bank Guarantee - - - 0.07 IVR A3

Proposed Bank IVR A3

- - - 4.51
Guarantee
*fully interchangeable from CC (WHR) to CC
Annexure 2: List of companies considered for consolidated analysis: Not Applicable.

Annexure 3: Facility wise lender details

https://www.infomerics.com/admin/prfiles/Len-Chennai-Rice-june22.pdf

Annexure 4: Detailed explanation of covenants of the rated instrument/facilities: Not

Applicable

Note on complexity levels of the rated instrument: Infomerics has classified instruments
rated by it on the basis of complexity and a note thereon is available at www.infomerics.com.