| ADF Foods Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank loan facilities of ADF Foods Limited (ADF; part of the ADF Group) at ‘CRISIL A/Stable/CRISIL A1’.
CRISIL Ratings had on August 27, 2021, upgraded its ratings on the bank loan facilities of ADF to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Stable/CRISIL A2+’.
The ratings continue to reflect the group’s established brands and position as an exporter of ethnic Indian food, and its strong financial risk profile and liquidity. There strengths are partially offset by susceptibility to volatility in raw material prices and intense competition in the processed food segment from domestic and international players. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of ADF; its subsidiaries – ADF Foods (India) Ltd, and ADF Foods (UK) Ltd; and stepdown subsidiaries – ADF Holdings (USA) Ltd and ADF Foods (USA) Ltd. This is because all these companies, collectively referred to as the ADF group, are in the same business and managed by common promoters, and have fungible cash flows among them. Management has indicated the companies will continue to support each other whenever required.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: * Established brands and position as an exported of ethnic Indian food: The ADF group has been exporting pickles and chutneys, etc. for over three decades. Over the years, the group has diversified its product portfolio, and established its brand presence across over 50 countries. Key brands are Camel (Middle-East); Soul; Aeroplane; Ashoka; PJ’s and Nate’s (USA); and Truly Indian (the UK). The group mainly caters to the US, Europe, Australia, the Gulf, and other parts of Asia.
* Strong financial risk profile: Financial risk profile of the group is marked by a strong networth of Rs 252.17 crore as on March 31, 2021 and a healthy capital structure, reflected in gearing and total outside liabilities to tangible networth (TOLTNW) ratio of sub-1 time, historically. TOLTNW ratio was 0.2 time as on March 31, 2021. Debt-protection metrics are robust, with interest cover of 62.2 times in fiscal 2021.
Weaknesses: * Exposure to intense competition: The ADF Group is present in the processed and ethnic food segments. With bulk of revenue generated from exports, the group has to compete not only with packaged food manufacturers in Pakistan and Malaysia, but also with established domestic players such as ITC, MTR and Pachranga. Sustenance of revenue growth, amidst intense competition, remains key monitorable.
* Vulnerability to volatility in raw material prices: Key raw materials include agro-based products such as vegetables, mangoes, chillies, edible oil, salt, and sugar. As raw material prices largely depend on inflation, monsoon, and government policies, the group remains exposed to any sharp fluctuations. Though the prices for the raw materials like mangoes and vegetables are volatile, however, margin is supported with group revising it prices thus passing on any sharp volatility. This supports the margins. |
Liquidity: Strong Group has strong liquidity supported by cushion in bank lines, healthy net cash accruals against minimal repayments and healthy cash & bank balance and other liquid funds. Bank limit utilization has remained low and averaged at 22% over the 12 months ended June-2021. Group is expected to generate net cash accruals of Rs 55-75 crore per fiscal and these will be more than adequate against expected repayments of Rs 2-4 crore per fiscal over the medium term. Group has cash and cash equivalents of Rs 81.8 crore – of which Rs 77.6 crore is unencumbered and Rs 4.2 crore is encumbered. Current ratio was 5.33 times as on 31st March 2021. CRISIL Ratings believes the group has sufficient accruals and cash & cash equivalents to finance its capex requirements and incremental working capital needs over the medium term. |
Outlook: Stable CRISIL Ratings believes the ADF group will continue to benefit over the medium term, from its established market position and strong financial risk profile. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
|
About the Company Incorporated in August 1990, ADF is a Mumbai-based company and is engaged in manufacturing and exporting a range of ethnic Indian edible items such as pickles, chutneys, pastes, sauces, ready-to-eat food, frozen and canned food to Europe, the US, Australia, and the Gulf. |
Key Financial Indicators (Consolidated)
|
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
|
Annexure - List of Entities Consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 02-Nov-2021 in line with the lender-wise facility details as on 01-Nov-2021 received from the rated entity.
Criteria Details
|