| Devi Fisheries Limited | ||||||
| Ratings upgraded to 'CRISIL A/Stable/CRISIL A1' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has upgraded its ratings on the bank loan facilities of Devi Fisheries Limited (DFL; part of the Devi Fisheries Group) to 'CRISIL A/Stable/CRISIL A1' from 'CRISIL A-/Positive/CRISIL A2+'. |
| Analytical Approach |
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The Financials of the group companies Satya Seafoods Pvt Limited (SSFPL), Devi Aquatech Pvt Ltd (DAPL), Devi Aquafeed Pvt Ltd (DAFPL) have been consolidated with DFL together referred as Devi Fisheries Group because all the three entities are 100% subsidiaries of DFL, are managed by common management team, and are in aligned business. |
| Key Rating Drivers & Detailed Description |
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Strengths * Established market position in the seafood industry, backed by promoter's extensive experience The Group is promoted by Mr. Y.Surya Rao who has experience of over three decades in shrimp exports. Under his stewardship, the group has developed healthy relationship with its suppliers and customers. US is major geography contributing to 82-88% of revenues for last three years ended FY18 while Belgium and Vietnam continue to the next largest geographies served reflecting the established market presence further strengthened by established customer base with whom the Group has been associated for more 2 decade. * Longstanding customer relationship The group has built a large client base with no major customer concentration in revenues. It has longstanding relationship with its key customers and has been associated with them for more than 2 decades. Further adherence to customer specifications and demand while maintaining high quality standards has been instrumental in repeat orders over the years. * Strong financial risk The group's financial profile is marked by healthy net worth, conservative capital structure and strong debt protection metrics. The group has healthy net worth of Rs.302 Crore as on March 31, 2018. Despite capital expenditure (capex) of around Rs 158 crores in fiscal 2017 & 2018, gearing has been sub-1 levels during the period, on account of strong accretions and hence limited reliance on external debt. Improving operating profitability has resulted in healthy debt protection metrics with interest coverage ratio and net cash accruals to total debt at around 10 times and 0.36 time respectively in fiscal 2018. The absence of any debt funded capex programme and steady cash accretions, will ensure gearing remains well below 0.5times over the long term. Weakness * Geographical concentration in revenue The group has been generating around 87-88% of the revenues from exports to the US; US is the largest consumer of shrimp globally. Any unfavorable change in the US government policy like imposing of higher anti-dumping duty could significantly impact the company's operations. * Susceptibility to risks inherent in the seafood industry and exposure to government regulations The seafood processing industry is highly fragmented, marked by the presence of several small players and a few large players. Competition from neighboring countries such as Thailand, Malaysia, and Indonesia, and countries in the Middle East persists. Furthermore, the industry is susceptible to the outbreak of diseases, adverse climatic conditions, and natural calamities which can impact the quality of the shrimp exported and given the high quality sensitiveness that is inherent in the industry, any dip in quality standards can hamper the volumes of entity. Moreover, unfavorable change in the government policy in export destinations could impact the Group's revenues and profitability. Imposition of higher anti-dumping duties from US geography which is the highest importer of Indian shrimps can impact realizations. * Volatility in shrimp prices and foreign exchange (forex) rates Volumes though have grown at 30% to 565980 MT in FY18 from FY17; realizations grew only by 4% during the period reflecting muted realizations after posting considerable growth of 14% in FY16.Any significant change in the realization despite the volume growth over medium term can impact the operating margin of the Group. The Group derives majority of its revenue from exports. Therefore, the Group is exposed to risks related to volatility in foreign exchange; this affects its realizations and, in turn, its cash accruals. The Group occasionally uses forward cover to hedge its risk. It also enjoys some degree of natural hedge. However, the operating margins will remain susceptible to adverse forex movements going forward. |
| Outlook: Stable |
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CRISIL believes that the Devi Fisheries group will continue to benefit from the extensive industry experience of its promoters, healthy operating capability, and longstanding customer relationship. The outlook may be revised to 'Positive' if the new processing plant ramps up as expected leading to substantial growth in revenue, while sustaining healthy profitability level and efficient working capital management. The outlook may be revised to 'Negative' if disease outbreak in shrimps or adverse government regulations or any large debt-funded capital expenditure or stretch in working capital cycle weakens credit risk profile. |
| About the Company |
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Incorporated in 1997 by Mr. Y Surya Rao and Mr. Ch. Rajagopal Chodary as a closely held public limited company in Visakhapatnam (Andhra Pradesh), DFL processes and exports seafoods. The day-to-day operations are managed by its Managing Director Mr. Y Surya Rao. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Status of non cooperation with previous CRA |
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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) | |||||||||||||||||||||||||||||||||||
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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| Links to related criteria |
| CRISILs Bank Loan Ratings - process, scale and default recognition |
| CRISILs Bank Loan Ratings |
| For further information contact: | ||||||
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