November 22, 2012
Mumbai
Satvik Enterprises Limited
Ratings Reaffirmed
Total Bank Loan Facilities Rated
Rs.460 Million
Long-Term Rating
CRISIL BBB-/Stable (Reaffirmed)
Short-Term Rating
CRISIL A3 (Reaffirmed)
(Refer to Annexure 1 for details on facilities)
CRISIL’s ratings on the bank facilities of Satvik Enterprises Ltd (SEL; part of the Satvik group) continue to
reflect the Satvik group’s prudent inventory and receivables management, moderate financial risk profile,
marked by healthy debt protection metrics, and the benefits that the group derives from its promoters’
extensive experience in the ferroalloy trading business. These rating strengths are partially offset by the
Satvik group’s leveraged capital structure and its susceptibility to economic cycles.
For arriving at its ratings, CRISIL has combined the business and financial risk profiles of SEL, Satvik Ferro
Ltd, and Vamancore Pte Ltd (VPL), together referred to as the Satvik group. This is because the entities are
under a common management and in similar lines of business. Also, SEL has provided guarantee for VPL’s
bank facilities.
Outlook: Stable
CRISIL believes that the Satvik group will continue to benefit over the medium term from its promoters’
extensive experience in the commodity trading industry and its prudent working capital management. The
outlook may be revised to ‘Positive’ in case the group reports a significant and sustained improvement in its
capital structure accompanied with consistent growth in the revenues. Conversely, the outlook may be
revised to ‘Negative’ if there is a drop in profitability or if revenues are impacted further due to the weak
economic scenario.
Update
During 2011-12 the revenues of the Satvik group were impacted by the recessionary situation in Europe
(major sales contributor) and this restricted the sales growth to less than 5 per cent. While the group booked
revenues of about Rs.3.7 billion in 2011-12, it has a target of Rs.3.9 billion for the current year, thus
anticipating growth of over 5 per cent. Strong demand revival in the second quarter of 2012-13 compensated
for a weaker first quarter, with the group having booked sales of about Rs.1.7 billion during the first six
months of 2012-13. The profitability has been consistently low, at around 1.5 per cent, due to the trading
nature of the business. For 2012-13, the operating margin is expected to be sustained at a similar level.
Strong inventory, debtor and foreign exchange (forex) management, coupled with recent equity infusion,
have resulted in a moderate financial risk profile for the company. Although the company trades in
ferroalloys, which have shown large volatility in prices, about 95 per cent of its sales are order-backed, thus
negating any impact of price fluctuation of ferroalloys. Furthermore, the company maintains very low
inventory, which was at about 6 days of sales as on March 31, 2012. Around 70 per cent of letter-of-creditbacked sales and hedging of nearly 75 per cent of forex exposure have resulted in high risk coverage of 11.3
times as on March 31, 2012. Equity infusion in 2011-12 led to growth in net worth to around Rs.200 million
as on March 31, 2012. With growth in the net worth, the total outside liabilities to tangible net worth ratio
has also reduced to 3.57 times as on March 31, 2012 from 4.42 times as on March 31, 2011. The capital
structure is expected to improve gradually with prudent working capital management. The average bank limit
utilisation has been about 90 per cent over the six months ended September 2012 and the books remain free
of long-term debt.
SEL, on a standalone basis, reported a profit after tax (PAT) of Rs.16.9 million on net sales of Rs.3.5 billion
for 2011-12. The company reported a PAT of Rs.18.2 million on net sales of Rs.3.6 billion for 2010-11.
About the Group
Incorporated in 1997 by Mr. Vikash Agarwal as a closely held public limited company, SEL (formerly, Satvik
Transway Ltd) trades ferroalloys, including ferrosilicon, ferromanganese, and silico manganese. Exports
constituted more than 95 per cent of the Satvik group’s total sales in 2011-12 (refers to financial year, April
1 to March 31).
Mr. Vikash Agarwal had, in 2008, also incorporated SFL, which is engaged in a similar line of business. Mr.
Rohitash Agarwal (father of Mr. Vikash Agarwal) and Mr. Deepak Agarwal (brother of Mr. Vikash Agarwal)
incorporated VPL in Singapore in 2008.
Annexure 1 - Details of various bank facilities
Current facilities
Previous facilities
Facility
Amount
(Rs.
Million)
Rating
Facility
Amount
(Rs.
Million)
Rating
Bank Guarantee
10
CRISIL A3
Bank Guarantee
10
CRISIL A3
Bill Discounting
160
CRISIL A3
Bill Discounting
160
CRISIL A3
Cash Credit*
50
CRISIL
/Stable
Cash Credit*
50
CRISIL
/Stable
Letter of Credit
60
CRISIL A3
Letter of Credit
60
CRISIL A3
Packing Credit
180
CRISIL A3
Packing Credit
180
CRISIL A3
Total
460
--
Total
460
--
BBB-
BBB-
*Fully interchangeable with packing credit
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Management
CRISIL Limited
Tel: +91-22- 3342 1886
E-mail:
shweta.ramchandani@crisil.com
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November 22, 2012
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