| Euro India Fresh Foods Limited | ||||||
| 'CRISIL BB/Stable/CRISIL A4+' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BB/Stable/CRISIL A4+’ ratings to the bank facilities of Euro India Fresh Foods Limited (Euro).
The ratings reflect Euro's diversified product portfolio with established brand presence and above average financial risk profile. These strength are partially offset by its susceptibility of the operating margin to volatility in agro commodity prices, modest scale of operations and exposure to competition from large & established player and working capital intensive nature of operations. |
Key Rating Drivers & Detailed Description Strengths:
Euro manufactures products such as potato chips, fried extruded snacks, namkeen, mineral water, and core filling snacks thus limiting its dependence on any particular product category. The company sells its products under the brand Euro. Development of brand names is a prevalent best practice in the industry for distinguishing one's product. It has established a well-penetrated distribution network across 4 states majorly in Maharashtra and Gujarat.
Above average financial risk profile is reflected in healthy networth of Rs 61.68 crore and low total outside liabilities to adjusted networth (TOLANW) ratio of 0.82 times as on March 31, 2021. The debt protection metrics have been at comfortable levels with adjusted interest coverage of 2.55 times and net cash accruals to adjusted debt (NCAAD) of 0.12 time in fiscal 2021. The financial risk profile is expected to remain at similar levels over medium term.
Weaknesses:
Euro is highly dependent on the domestic production of potatoes and other agro commodities. Domestic production, in turn, is dependent on area under cultivation, monsoon, prices of other crops, the minimum support price (MSP), and other incentives offered by the Government of India (GoI). All the above factors determine the final prices of crop. To overcome seasonality and price volatility risks, Euro procures and stores raw materials for the rest of the year during peak season when products are available at affordable prices. This partially offsets the price volatility risk, however, it leads to high working capital intensity.
Although there is a large market and demand for potato chips and other snack items, Euro faces strong competition from other established brands such as Lays, Kurkure, Parle wafers, Balaji wafers, Uncle Chips, Haldiram and, Bingo. Furthermore, Euro is a modest player compared with the manufacturers of these brands and is accordingly, vulnerable to competitive pressures it faces from the bigger players.
Intensive nature of working capital operations is reflected in gross current assets (GCA) days at 268 days driven by high inventory of 224 days and receivables of 59 days as on March 31, 2021. Furthermore, due to its business need, it needs to hold large inventory including packing material due to which inventory is expected to remain at high levels. Moderation in inventory levels resulting in improvement in working capital efficiency will remain key rating sensitivity factor. |
Liquidity: Stretched Liquidity is stretched as reflected in bank limit utilization being average at 98% in the past 6 months through September 2021. Net cash accruals are expected to be around Rs 4-5 crore in fiscal 2022 and fiscal 2023 sufficient against repayment obligations of around Rs 1.1-1.8 crore over medium term. Current ratio is healthy at 1.75 times on March 31, 2021. The company has capex plans of around Rs 10-12 crore which will be partially funded through debt and balance through internal funds. |
Outlook: Stable CRISIL Ratings believe Euro will continue to benefit from diversified product portfolio with established brand presence. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Euro, incorporated in fiscal 2009, manufactures potato chips, fried extruded snacks, salted snacks (namkeen), mineral water, and core filling snacks, at its plant in Surat (Gujarat) marketed under the brand ‘Euro’. The company is promoted by Mr. Manhar Sanspara and his family members. The company is listed on NSE. |
Key Financial Indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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This Annexure has been updated on 04-Feb-2022 in line with the lender-wise facility details as on 04-Feb-2022 received from the rated entity.
Criteria Details
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