| Foods and Inns Limited | ||||||
| Ratings upgraded to 'CRISIL BBB/Stable/CRISIL A3+' | ||||||
| Rating Action | ||||||
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| 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 upgraded its ratings on the bank facilties of Foods And Inns Limited to 'CRISIL BBB/Stable/CRISIL A3+' from 'CRISIL BBB-/Positive/CRISIL A3'.
The upgrade in the ratings reflects the improvement in the overall credit risk profile supported by better working capital management and consequently improvement in liquidity profile with limited dependence on external borrowings. While debtors reduced to 55 days as on March 31, 2023 from 85 days a year ago, inventory levels moderated around 130-140 days. With majority of the working capital requirements being funded through equity infusion by promoters during fiscal 2023, bank limit utilization also reduced to an average of 72% for the past 6 months through April 2023, improving the liquidity cushion. Revenues of the company continue to grow steadily to around Rs. 975-980 crore in fiscal 2023 as compared to Rs. 618.6 crore in fiscal 2022, while operating margins continue to remain stable in the range of 9-10%.
The rating reflects the extensive experience of the promoter in the food processing business, established market position of the company, geographical diversification in revenue and healthy financial risk profile. These strengths are partially offset by susceptibility of its revenues and profitability to volatility in fruit prices and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoter The promoter Mr, Dalal has been in the food processing industry for more than four decades. This has provided him with deeper understanding of the market dynamics and have also established healthy relationships with customers and suppliers which will continue to support the business. The day-to-day operations are managed by an experienced professional management team.
Established market position in food processing industry FIL caters to a large number of customers which includes top beverage companies including Coco Cola, Pepsico, etc both in India and overseas market. The company generates around 45-50% of revenues from exports, primarily Europe and UK. This coupled with capacity expansion has led to growth in revenue to around Rs 980 crore in fiscal 2023, compared with Rs 618.5 crore in fiscal 2022. Revenue is expected to sustain its growth over the medium term backed by healthy demand of the products, product addition and capacity additions incurred during fiscal 2023. Diversity in geographic reach and clientele along with addition of new products should continue to support the business.
Healthy financial risk profile Networth and total outside liabilities to adjusted networth ratio were at around Rs 295-300 crore and 1.6-1.7 times, respectively, as on March 31, 2023. The capital structure has improved owing to reducing reliance external debt and creditors to support working capital requirement coupled with equity infusion in fiscal 2023. Further equity infusion is expected over the medium term and utilisation of same may alter the financial profile materially. Debt protection metrics were comfortable, as reflected in interest coverage and net cash accrual to total debt ratios of around 3.6-3.7 times and 0.17-0.18 time, respectively, in fiscal 2023 and are expected at similar levels over the medium term because of stable operating profits and moderate leverage
Weaknesses: Susceptibility of its revenues and profitability to volatility in fruit prices Tropical fruit processing units can operate only during the harvest season (May to July for mangoes). Furthermore, the yield varies year on year, making the company's revenues susceptible to availability of mangoes. Also, mango harvest is affected by weather conditions which in turns also impact prices and hence operating margin has been volatile in the range of 8-10% over the past four fiscals through fiscal 2023. The company has limited bargaining power - due to intense industry competition. Currently, mango pulp is the major revenue contributor (70-80%) of the company. However, the company is adding new products and expects revenues to increase from other products in medium term.
Large working capital requirement Operations are working capital intensive, as reflected in gross current assets (GCAs) of around 190-195 days as on March 31, 2023, driven by moderate receivables and large inventory of 55-56 days and 130-135 days, respectively. The company provides credit period of around 2 months to its customers while the inventory levels are high due to seasonal nature of raw materials. However, any delays in receiving payment from the customers can affect the liquidity of the company. The working capital requirement will remain large over the medium term |
Liquidity: Adequate Cash accrual, expected over Rs 49-55 crore per annum, will sufficiently cover yearly term debt obligation of Rs 14-19 crore over the medium term, and the surplus will cushion the liquidity. Bank limit utilisation has been reducing and is at 80% on average for the 12 months through April 2023 and 72% in the last 6 months ended April 2023. Cash and bank balance stood at around Rs. 16 crore as on March 31, 2023. CRISIL Ratings believes internal cash accruals, unutilised bank limits, and need based promoter support will be sufficient to fund the working capital requirements of the company over the medium term. |
Outlook: Stable CRISIL Ratings believes FIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward factors * Improvement in financial profile with TOLANW of less than 1.3 times * Significant increase in revenues while maintain operating margins leading to higher cash accruals
Downward factors * Increasing working capital requirement leading to stretch in liquidity |
About the Company FIL, a public-limited company incorporated in 1967, processes and markets fruit pulps, purees, concentrates and spray dried fruit and vegetable powders both into domestic and international markets. The company processes mango, guava, banana, and tomato pulp. The manufacturing unit is located in Andhra Pradesh, Gujarat and Maharashtra. The company is promoted by Mr. Dalal and is professionally managed.
It is listed at Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and Mr. Bhupendra Dalal is the current Chairman. |
Key Financial Indicators
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Status of non cooperation with previous CRA: Brickwork Ratings India Private Limited has assigned non-cooperative ratings on the bank facilities of FIL vide press release dated 29 Nov 2022 on account of non-cooperation by FIL to undertake the rating process. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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