Press Release

Balaji Industries
January 11, 2021
Ratings
Amount
Facilities / Instruments Rating1 Rating Action
(Rs. crore)
Rating continues to remain
CARE B-; Stable;
under ISSUER NOT
ISSUER NOT COOPERATING*
COOPERATING category and
Long Term Bank Facilities 5.50 (Single B Minus; Outlook:
Revised from CARE B+; Stable;
Stable
(Single B Plus; Outlook:
ISSUER NOT COOPERATING*)
Stable)
5.50
Total Facilities (Rs. Five Crore and
Fifty Lakhs Only)
Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

CARE had, vide its press release dated December 12, 2019, placed the rating(s) of Balaji Industries under the ‘issuer non-
cooperating’ category as BI had failed to provide information for monitoring of the rating. BI continues to be non-cooperative
despite repeated requests for submission of information through e-mails, phone calls and email dated November 11, 2020 to
November 18, 2020. In line with the extant SEBI guidelines, CARE has reviewed the rating on the basis of the public 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 revision in the ratings is on account of non- availability of requisite information for monitoring the ratings
Detailed description of the key rating drivers
At the time of last rating on December 12, 2019 the following were the rating strengths and weaknesses:

Key Rating Weaknesses

Limited track record with small scale of operations
The firm has a limited track record of around six years along with competitive intensity of pulses industry which resulted in
small scale of operations marked by the total operating income (TOI) of Rs.21.57 crore in FY18 (Prov.) with low net worth base
of Rs.1.03 crore as on March 31, 2018 as compared to other peers in the industry.

Leveraged capital structure and weak debt coverage indicators

The capital structure of the BI stood leveraged marked by overall gearing of 8.26x respectively as on March 31, 2018. However,
the overall gearing has improved year-on-year from 24.32x as on March 31, 2016 due to accretion of profits to reserves and
repayment to term loan leading to decrease in total debt.
Total debt/GCA of the firm also stood weak at 13.07x in FY18 (Prov.), though it has improved year-on-year, due to low gross
cash accruals backed by higher employee cost, power & fuel cost and other manufacturing expenses and higher outstanding
balance of working capital facilities as on March 31, 2018. The PBILDT interest coverage ratio deteriorated from 2.08x in FY17
to 1.69x in FY17 on account of increased interest cost.

Working capital intensive nature of operations

The firm is operating in working capital intensive nature of operations. The operating cycle of the firm stood high at 103 days

in FY18 due to the fact that the firm maintains an average inventory 60-90 days as the BI has to under goes various stages of
polishing gram as well as required to keep sufficient stock of finished gram to meet customers’ requirement on time. The firm
makes the payment to its suppliers within 60-90 days due to long term relationship. Furthermore, the firm receives the
payment from its customers within 60-90 days. To meet the above working capital gap, the reliance on working capital bank
borrowings is high. The average utilization of working capital of the firm remained about 90%-95% for the last 12 month ended
August 31, 2018.

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Highly fragmented industry with intense competition from large number of players
There is competitive nature of agro-product processing industry due to low entry barriers, high fragmentation and the presence
of a large number of players in the organized and unorganized sector. Further being an agriculture commodity, the pricing and
distribution of pulses are exposed to climatic and agriculture related risk as well as government policies.

Constitution as proprietary firm with inherent risk of withdrawal of capital

Constitution as a proprietary firm has the inherent risk of possibility of withdrawal of the proprietor’s capital at the time of
personal contingency which can adversely affect its capital structure. Furthermore, proprietary firms have restricted access to
external borrowings as credit worthiness of the proprietor would be key factors affecting credit decision for the lenders. The
proprietor has withdrawn capital of Rs.0.06 crore in FY18 (Prov.)

Key Rating Strengths

Experience of the proprietor for more than one decade in processing of pulses
The management team of BI led by Mr. D. V. Narayana (Proprietor) has more than one decade of experience in processing of
pulses business. Proprietor is a qualified ITI Diploma. The operations of the firm are also supported by experienced executive
team. Through their experience in this industry, they have established healthy relationship with large number of clients.

Increasing total operating income and satisfactory profitability margins during review period
The total operating income of the entity has shown an increasing trend during review period. The total operating income of
the entity has grown at a CAGR of more than 100% to Rs.21.57 crore in FY18 as compared to Rs.5.07 crore in FY16 due to
increase in demand for product from existing customers as well as addition of new customers.
BI has satisfactory PBILDT margins although fluctuated in the range of 5%-8% during review period due to movement in prices
of Bengal gram based upon demand and supply factors along with fluctuation in power and fuel cost, employee cost and other
operating overheads. Furthermore, the PAT margin of the firm improved and stood satisfactory in the range of 2%-2.5% during
FY17 and FY18 (Prov.) with increase in operating profit resulting in absorption of financial expenses.

Stable demand outlook of Pulses

Pulses are consumed in large quantity in India which provides favorable opportunity for the demand outlook of pulses and thus
the demand is expected to remain healthy over medium to long term. Based on the estimated population in 2020 and 2030,
and based on the last 10-year trend growth in global consumption, the demand for pulses for these two years would increase
to 75.9 million tonnes in 2020, and 81.9 in 2030, from the current level of a little over 70 million.

Analytical Approach: - Standalone

Applicable Criteria: -
Policy in respect of Non-cooperation by issuer
CARE’s Criteria on assigning Outlook to Credit Ratings
CARE’s Policy on Default Recognition
Financial ratios – Non-Financial Sector
Rating Methodology- Manufacturing sector

About the Firm

Mysore (Karnataka) based, Balaji Industries (BI) was established on May 10, 2012 and promoted by Mr. D. V. Narayana. The
firm is mainly engaged in processing of bengal fried gram and polishing gram.

Brief Financials (Rs crore) FY17 (A) FY18 (P)

Total operating income 17.53 21.57
PBILDT 0.97 1.60
PAT 0.40 0.49
Overall gearing (times) 19.15 8.26
Interest coverage (times) 2.08 1.69
A-Audited, P-Provisional
Status of non-cooperation with previous CRA: Not Applicable
Any other information: Not Applicable
Rating History (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- CARE B-; Stable; ISSUER NOT
- - - 5.50
Cash Credit COOPERATING*
*Issuer did not cooperate; based on best available information

Annexure-2: Rating History of last three years

Current Ratings Rating history

Name of the Date(s) & Date(s) & Date(s) &

Sr. Type Rating Date(s) &
Instrument/Bank Amount Rating(s) Rating(s) Rating(s)
No. Rating(s)
Facilities Outstanding assigned assigned assigned
assigned in
(Rs. crore) in 2020- in 2018- in 2017-
2019-2020
2021 2019 2018
1)CARE
1)CARE B+;
CARE B-; Stable; B+;
Stable; ISSUER
Fund-based - LT- ISSUER NOT Stable
1. LT 5.50 - NOT -
Cash Credit COOPERATING* (21-Sep-
COOPERATING*
18)
(12-Dec-19)

*Issuer did not cooperate; based on best available information

Annexure-3: Detailed explanation of covenants of the rated instruments/facilities: Not Applicable

Annexure 4: Complexity level of various instruments rated for this firm

Sr.
Name of the Instrument Complexity Level
No.
1. Fund-based - LT-Cash Credit 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
Mradul Mishra
Contact no. – +91-22-6837 4424
Email ID – [email protected]

Analyst Contact
Name – Mr. Prajwal M R
Contact no.- 080-46625547
Email ID- [email protected]

Business Development Contact

Name: Nitin Dalmia
Contact no. : 080-46625526
Email ID: [email protected]

About CARE Ratings:

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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
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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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