ICRA has re-affirmed the LBBB (pronounced as L triple B) rating to the Rs.420.95 crore (increased from Rs. 418.29 crore) cash credit/term loan facility of Gokul Refoils & Solvent Limited (GRSL). ICRA has assigned a ‗Stable‘ outlook on the long term rating. ICRA has also reaffirmed the A2 (pronounced as A two) rating to the Rs. 1129.05 crore (reduced from Rs. 1131.71 crore) short term fund based/non fund based limits of of GRSL. ICRA has withdrawn the A2 (pronounced as A two) rating assigned to the Rs. 20.00 crore commercial paper programme of GRSL, at the request of the company, as there is no amount outstanding against the rated programme. The ratings reflect the moderate financial profile characterised by moderate profitability and comfortable gearing levels; established position of the company in the bulk segment of edible oil industry; long track record of the promoters in the edible oil industry and a diversified product portfolio with flexibility to change the product mix according to price trends and market. The rating also considers the favourable growth prospects for the edible oil market in India, locational advantage arising from the proximity to ports as well as oilseed growing belts, the integrated nature of operations at Gandhidham and Sidhpur units which provides the flexibility to reduce dependence on crude oil and stabilisation of the recently commenced Haldia plant which will provide an upside to the volumes.

The ratings are however constrained by the inherently low margins in this line of business as well as the volatility of the margins on account of pressure on realisations as was witnessed in FY10, moderate market position of the company in the relatively high margin retail segment, highly fragmented nature of industry which exposes GRSL to the competition from the unorganized players in the lower end of the products and large players, including multinationals in the branded segment. The ratings are also constrained by the vulnerability of the company‘s profitability to the duty differential between crude and refined oil and the climatic risks associated with procurement of indigenous oilseeds. ICRA notes that the group has significant capex plans for power and real estate sectors with GRSL having equity commitments towards power project and any weakening of financial risk profile on account of such large scale group capex plans would remain a key rating sensitivity.