Rationale

 The reaffirmation of 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.