Rationale
The assigned ratings
factor in Sakuma Exports Limited's (SKL) established operational track record
and its promoter's extensive experience of almost two decades in
agricultural-commodities trading business. SKL is among the leading exporters
of sugar from India and is expected to benefit from the favourable demand
outlook for sugar exports from India over the medium term, supported by steady
global sugar demand due to some moderation in sugar production in Brazil. The
ratings also factor in SKL's risk mitigation policies with respect to commodity
price fluctuations, foreign exchange fluctuations, credit risk, and its
diversified customer and supplier base. The company's financial profile remains
healthy, with sizeable net worth (Rs. 349.1 crore as on March 31, 2021) and low
debt levels. This has translated into low gearing levels and healthy coverage
metrics. Despite some likely increase in working capital debt, going forward,
SKL's capital structure and coverage metrics are expected to remain healthy.
However, the ratings are constrained by moderation is SKL's scale of operations
in recent years (operating income declined to Rs. 1,328.4 crores in FY2021 from
Rs. 4,363.1 crore in FY2019) because of discontinuance of edible oil trading,
lower availability of working capital bank lines and adverse impact of the
pandemic. Despite the same, the company has been able to scale up its revenue
in recent quarters and is expected to report good growth in the current fiscal.
However, the company's product concentration has remained very high in recent
years, with sugar accounting for almost the entire revenue. While the traded product
mix is expected to diversify to some extent with increase in international
trade (primarily through overseas subsidiaries), contribution of sugar in the
traded product portfolio is expected to remain high, exposing SKL to the
inherent cyclicality of the sugar industry. Additionally, the company's
operating margins remain thin owing to the trading nature of operations.
Further, being involved in agricultural commodities, the company's operations
remain susceptible to the changes in Government policies, global demand-supply
situations as well as the vagaries of agro-climatic conditions. The Stable
outlook reflects ICRA's expectation that SKL will continue to benefit from of
the company's established operational track record, established relationships
with its customers and vendors and steady demand outlook for sugar exports from
India.
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