| Fena Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 reaffirmed its 'CRISIL A/Stable/CRISIL A1' ratings on the bank facilities of Fena Private Limited (FPL). |
| Key Rating Drivers & Detailed Description |
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Strengths: * Established market position in the economy segment of detergents in northern and eastern states: The company continues to benefit from its strong flagship brand, Fena, in the eastern and northern parts of India, which generates more than 75% of revenue. With the price-sensitive middle and low-income groups as its main target segment, FPL has strong market penetration in rural areas and small towns, leading to growth in volume and brand value over the past five fiscals. Operating income has increased at a compound annual growth rate of 6.09% over the four fiscals through 2020, and was Rs 653.5 crore for fiscal 2020. * Strong financial risk profile: Networth was large at Rs 200 crore as on March 31, 2020, while total outside liabilities to adjusted networth ratio was nil on account of steady accretion to reserves and no external borrowings. Debt protection metrics were robust, with estimated interest coverage ratio of 74 times as on March 31, 2020. The promoters' conservative approach towards debt led to bank limit utilisation of 1.11% over the 12 months through July 2020; the company is able to meet working capital through internal accrual. The company has capital expenditure (capex) of Rs 15-20 crore over the medium term, which is expected to be funded entirely through internal accrual. Weaknesses: * Modest scale of operations amid intense competition: Fena, a detergent catering to the economy class, contributes nearly 85% to FPL's revenue. Dependence on a specific product makes growth vulnerable to any change in customers' preferences or habits. Moreover, Fena has a small market share of 2.5% in the detergent industry, which reflects the company's modest scale of operations. The company also faces intense competition from pan-India players such as Hindustan Unilever Ltd ('CRISIL AAA/Stable'), Procter & Gamble Hygiene and Healthcare Ltd, RSPL Ltd ('CRISIL AA-/Stable/CRISIL A1+'), and some regional brands. Hence, scale up of operations and sustenance of profitability will remain key rating sensitivity factors over the medium term. * Vulnerability to volatile raw material prices: Operating efficiency is constrained by fluctuations in raw material prices and lack of backward integration. Soda ash and linear alkyl benzene are key raw materials used in manufacturing of detergents. Due to fluctuations, operating margin has been at 2-7% over the seven fiscals through fiscal 2020. In fiscal 2020, margin was impacted by volatile prices and reduced to an estimated 2.03% from 7.3% in fiscal 2018. Profitability has also been impacted by increased promotional and marketing expenses in the last two fiscals through 2020. Sustenance of margin over the medium term is a key rating sensitivity factor. * Product concentration in revenue: FPL depends extensively on its Fena brand, which contributes to about 85% of its revenue. Dependence on a particular product renders growth vulnerable to any change in customer preferences or habits, thus impacting demand. |
| Liquidity Strong |
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Bank limit remained negligibly utilised at 1.11% for the 12 months through July 2020 because the company is able to meet working capital requirement through internal accrual. Cash accrual is expected to be over Rs 25 crore annually against nil term debt obligation, over the medium term. Current ratio was healthy at 3.15 times on March 31, 2020. Furthermore, unencumbered cash and bank balance and liquid investments were estimated to be high at Rs 95 crore. Constant building up of free reserves aids liquidity. Low gearing and moderate networth support financial flexibility and provide cushion in case of any adverse condition or downturn in the business. |
| Outlook: Stable |
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CRISIL believes FPL will continue to benefit from its established position in the economy segment of detergents in North and East India and its strong financial risk profile. |
| Rating Sensitivity factors |
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Upward factors * Sustained improvement in scale of operations by 10% and increase in operating profitability to more than 4.5%, with net cash accrual of over Rs 30 crore on a sustainable basis * Adjusted return on capital employed of more than 15% * Better working capital cycle Downward factors * Decline in scale of operations by 10% on sustainable basis * Fall in net cash accrual below Rs 20 crore on account of decline in revenue or operating profits * Large, debt-funded capex weakening capital structure |
| About the Company |
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Incorporated in 1976 and promoted by Mr Dalip Jolly and his brother, Mr Pradeep Jolly, New Delhi-based FPL manufactures fabric care, home care, and personal care products at its seven manufacturing facilities across India. The company makes detergent powder and cakes under its flagship brand, Fena. Other brands include Impact, Nip, Cop, and Famus. |
| Key Financial Indicators | ||||||||||||||||||||||||
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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 and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels. |
| 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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| For further information contact: | ||||||
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