Rating Rationale

Rating Rationale

April 04, 2023 | Mumbai

Apex Frozen Foods Limited

Rating reaffirmed at 'CRISIL A2+'

Rating Action

Total Bank Loan Facilities Rated	Rs.209.73 Crore
Short Term Rating	CRISIL A2+ (Reaffirmed)

Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.

1 crore = 10 million

Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its rating of ‘CRISIL A2+’ on the bank facilities of Apex Frozen Foods Limited (AFFL).

The ratings continues to reflect AFFL’s established market position, healthy operating efficiency, strong financial risk profile and the extensive experience of its promoters. These strengths are partially offset by susceptibility to risks inherent in the aquaculture business and to fluctuations in foreign exchange (forex) rates

Key Rating Drivers & Detailed Description

Strengths:

Established market position, and healthy operating efficiency

The promoters’ experience of over three decades in the seafood business and healthy relationship with suppliers and customers should continue to support the business. Further, advantages from integrated operations - with own hatcheries and farming, processing unit, cold storage, and logistics - should continue to support the business. Operating margin has also remained above-average supported by backward integration, better capacity utilisation and ability to deliver value-added products. With the expected incremental contribution from RTE from fiscal 2024, operating margins and sales are expected to improve further in the medium term.

Strong financial risk profile:

Financial risk profile is likely to remain healthy over the medium term. Networth and gearing are comfortable at Rs 475.43 crore and 0.35 time, respectively, as on March 31, 2022. With no major debt funded capex plans and healthy accretion to reserves, capital structure will continue comfortable in the medium term. Debt protection metrics are robust, with interest coverage and net cash accrual to total debt ratios estimated over 6 times and 0.21 time, respectively, in fiscal 2023.

Weaknesses:

Susceptibility to risks inherent in the aquaculture business:

The Indian seafood industry has been growing significantly in the past few years, led by increasing share of aquaculture. However, susceptibility to outbreak of diseases, adverse climatic conditions, natural calamities, and regulatory changes, which may significantly impact the credit risk profile of players such as AFFL persists.

Vulnerability to fluctuations in forex rates:

Revenue is entirely derived from exports, and since only a part of the forex exposure is hedged, any sharp fluctuation in forex rates may significantly impinge the realizations and profitability margin.

Liquidity: Strong

Bank limit utilisation is moderate at around 74.73 percent for the past twelve months ended November 2022. Cash accrual are expected to be over Rs 60 which are sufficient against term debt obligation of Rs 3 over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio are healthy at 2.39 times on March 31, 2022.

Rating Sensitivity factors

Upward factors

* Improvement in business risk profile reflecting revenue growth of above Rs. 1200 crores with healthy margins and efficient working capital management

* Substantial improvement in financial risk profile with gearing reducing below 0.25 time and while maintaining strong liquidity

Downward factors

* Significant decline in revenue and profitability or stretch in working capital cycle weakening the financial risk profile and liquidity

* Large debt-funded capital expenditure impacting the capital structure with gearing increasing to over 0.8 time.

About the Company

AFFL, based in Kakinada (Andhra Pradesh), was set up as a partnership firm in 1996, converted into a private limited company in 2012, and reconstituted as a public limited company in 2017. It processes and exports shrimps, mainly the vannamei variety. It was listed on the Bombay Stock Exchange and National Stock Exchange of India on September 4, 2017.

For the 9 months ended December 2022, AFFL reported a profit after tax of Rs 39.89 crore on revenue of Rs 864.79 crore as against Rs 33.71 crore and Rs 717.71 crore, respectively, in the corresponding period of the previous fiscal.

Key Financial Indicators

As on / for the period ended March 31		2022	2021
Operating income	Rs crore	914.52	818.48
Reported profit after tax	Rs crore	41.08	32.74
PAT margins	%	4.49	4.00
Adjusted Debt/Adjusted Net worth	Times	0.35	0.38
Interest coverage	Times	5.29	5.41

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN	Name of instrument	Date of allotment	Coupon rate (%)	Maturity date	Issue size (Rs crore)	Complexity levels	Rating assigned with outlook
NA	Export Funding	NA	NA	NA	202.23	NA	CRISIL A2+
NA	Non-Fund Based Limit	NA	NA	NA	7.5	NA	CRISIL A2+

Annexure - Rating History for last 3 Years

	Current			2023 (History)		2022		2021		2020		Start of 2020
Instrument	Type	Outstanding Amount	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating	Rating
Fund Based Facilities	ST	202.23	CRISIL A2+		--	05-01-22	CRISIL A2+ / CRISIL A-/Stable		--	09-11-20	CRISIL A2+ / CRISIL A-/Stable	CRISIL A2+ / CRISIL A-/Stable
			--		--		--		--	07-10-20	CRISIL A2+ / CRISIL A-/Stable	--
			--		--		--		--	22-07-20	CRISIL A2+ / CRISIL A-/Stable	--
Non-Fund Based Facilities	ST	7.5	CRISIL A2+		--	05-01-22	CRISIL A2+		--	09-11-20	CRISIL A2+	CRISIL A2+
			--		--		--		--	07-10-20	CRISIL A2+	--
			--		--		--		--	22-07-20	CRISIL A2+	--

All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility	Amount (Rs.Crore)	Name of Lender	Rating
Export Funding	202.23	Bank of India	CRISIL A2+
Non-Fund Based Limit	7.5	Bank of India	CRISIL A2+

This Annexure has been updated on 04-Apr-2023 in line with the lender-wise facility details as on 05-Jan-2022 received from the rated entity

Criteria Details

Links to related criteria

CRISILs Approach to Financial Ratios

Rating criteria for manufaturing and service sector companies

CRISILs Bank Loan Ratings - process, scale and default recognition

Rating Criteria for Fast Moving Consumer Goods Industry

CRISILs Criteria for rating short term debt

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