CRISIL has upgraded the rating on the bank facilities of Sharat Industries Limited (SIL) to 'CRISIL BBB-/Stable/CRISIL A3'
from 'CRISIL BB+/Stable/CRISIL A4+'.
The rating upgrade reflects CRISIL's belief that SIL's business risk profile shall continue to improve over the medium term, marked by sustained growth in revenue and stability in operating profitability. The turnover grew by around 33 percent in fiscal 2019 to Rs.196 crore, supported by better capacity utilisation due to de-bottlenecking in production capacities, with addition of adequate cold storage facilities.
The company has reported turnover of around Rs.107 crore for the first half of fiscal 2020 as against Rs.75 crore for the first half of the previous fiscal. Aided by the improvement in turnover, operating profitability has improved to 7 percent for the period. Over the medium term, the improvement in turnover is expected to be supported by healthy capacity utilisation, while operating profitability is expected to be sustained at around 7 percent. Improvement in turnover and profitability is expected to result in healthy cash accrual of around Rs.8-10 crore per annum over the medium term.
CRISIL ratings on the bank facilities of SIL reflect SIL's established market position in the seafood exports industry and it's above average financial risk profile. These strengths are partially offset by susceptibility of operating margin to volatility in input prices and foreign exchange rates and exposure to regulatory changes in export destinations.