ICRA Reaffirms Ratings for Shree Hans Rice and General Mills

Strategic Insights -

Shree Hans Rice and General Mills (SHRGM) has a high working capital intensity, and the competitive nature of the industry exerts pressure on operating margins. The firm's weak financial profile, reflected in high gearing and weak coverage metrics, also raises concerns. However, the experienced management and proximity to major rice-growing areas are positive factors. The ratings also take into account the favorable demand prospects for the rice industry in India, which is the second-largest producer and consumer of rice in the world.

Key Takeaways:

  • ICRA has reaffirmed its long-term rating of [ICRA]B+ and short-term rating of [ICRA]A4 on SHRGM's fund-based limits of Rs. 72.00 crore.
  • The ratings continue to take into account SHRGM's high working capital intensity and the competitive nature of the industry.
  • The firm's weak financial profile, reflected in high gearing (9.13 times as on March 31, 2015) and weak coverage metrics, raises concerns.
  • The experienced management and proximity to major rice-growing areas are positive factors that favor the ratings.
  • ICRA has also taken into account the favorable demand prospects for the rice industry in India.

Statistics:

  • Rs. 72.00 crore: SHRGM's fund-based limits.
  • 9.13: SHRGM's gearing as on March 31, 2015.
  • Rs. 183.09 crore: SHRGM's operating income in FY 2014-15.
  • Rs. 1.85 crore: SHRGM's net profit in FY 2014-15.
  • 63%: Share of exports in SHRGM's sales in FY 2014-15.
  • 12 tonnes per hour: SHRGM's milling and sorting capacity.

Sources:

  • ICRA Limited(http://www.icra.in/)
  • ICRA - Credit Rating Agency(Omitted for brevity - full reference in original source)