A large agro-commodity trading company with annual turnover of ₹1,200 crore approached a CRA expecting at least a BBB+ or A– rating. The promoters assumed that “size speaks for itself” — since their topline crossed ₹2,000 crore, they believed the rating would automatically be investment grade.
The formal rating, however, came in at BB, two notches below investment grade. The reasons:
The CRA highlighted that while turnover was high, cash flow strength and risk management were weak. The promoters were stunned; they had never studied CRA methodologies and equated revenue scale with rating strength.
After the disappointment, the promoters engaged us for a shadow rating. Our independent assessment mapped the company’s profile against CRA benchmarks and pinpointed the gaps. Under a 12-month retainership, we implemented key corrections:
Introduced a strategy to focus on higher-margin products (processed agro-goods vs. raw trading), lifting EBITDA margins from 3.5% to 5.2%.
Negotiated faster payment terms with buyers, implemented collateral-backed buyer financing, reducing receivable days from 120 to 85.
Introduced commodity hedging mechanisms to manage price volatility.
Expanded consortium from 2 to 5 banks, improving financial flexibility and bargaining power.
Established quarterly reporting packs that clearly demonstrated order book visibility, margin improvement, and liquidity management.
After 12 months, when the company reapplied, the CRA found marked improvements:
This time, the company secured a BBB+ rating, comfortably in the investment grade zone. They were able to raise ₹200 crore at 100 bps lower cost, directly improving bottom line by nearly ₹2 crore annually.
Turnover alone doesn’t guarantee a good rating. Our team clarified how CRAs really think — focusing on cash flows, margins, governance, and risk management. With targeted interventions, a company once rated BB successfully transformed into a strong BBB+ borrower.