Rating Rationale
September 16, 2024 | Mumbai
Foods and Inns Limited
Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+'
 
Rating Action
Total Bank Loan Facilities RatedRs.234.78 Crore
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
Short Term RatingCRISIL A3+ (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 ratings on the bank loan facilities of Foods and Inns Limited (FIL) at 'CRISIL BBB/Stable/CRISIL A3+'.

 

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 35-40% of revenues from exports, primarily Europe and UK. This coupled with capacity expansion has led to healthy revenue of around Rs 980-1000 crore for the past two fiscals through fiscal 2024. Revenues are expected to remain healthy over the medium term backed by healthy demand of the products, product addition and capacity additions incurred during fiscal 2024. Diversity in geographic reach and clientele along with addition of new products should continue to support the business.

 

  • Healthy financial profile: Networth and total outside liabilities to adjusted networth ratio were at Rs 387 crore and 1.6 times, respectively, as on March 31, 2024. The capital structure has improved and is further expected to improve owing to equity infusion incurred in fiscal 2024 and Q1 fiscal 2025 leading to reducing reliance on external debt and creditors to support working capital requirement.  Capital structure is expected to improve over the medium term. Debt protection metrics were moderate, as reflected in interest coverage and net cash accrual to total debt ratios of around 2.7 times and 0.11-time, respectively, in fiscal 2024 ( as compared to 3.7 and 0.18 times as year ago). Improvement in debt protection metrics with reduced reliance on external debt will remain a key monitorable over the medium term.

 

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 8-11% over the past four fiscals through fiscal 2023. The operating margins have improved in fiscal 2024 to 13% due to income from PLI scheme, net off which the margins would have been around 10.5-11%.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 233 days as on March 31, 2024, driven by moderate receivables and large inventory of 66 days and 156 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. Inventory levels got stretched as on March 2024 due to year end scenario and is expected to reduce over the medium term.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

Bank limit utilisation is at 87% for the past twelve months ended April 2024. Cash accrual are expected to be over Rs 40-50 crore which are sufficient against term debt obligation of around Rs 20-21 crore over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio are moderate at 1.28 times on March 31, 2024. High cash and bank balance of around Rs. 52 crore as on March 31, 2024 of which around Rs. 20 crore is unencumbered.

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 working capital cycle and financial profile with interest coverage of more than 2.8 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
  • Decline in revenues or operating margins leading to net cash accrual of less than Rs. 30 crore

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

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

997

981

Reported profit after tax

Rs crore

37

47

PAT margins

%

3.7

4.8

Adjusted Debt/Adjusted Net worth

Times

1.2

1.1

Interest coverage

Times

2.7

3.7

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:
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 the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Cash Credit NA NA NA 46 NA CRISIL BBB/Stable
NA Export Packing Credit NA NA NA 48 NA CRISIL BBB/Stable
NA Foreign Exchange Forward NA NA NA 1.5 NA CRISIL A3+
NA Letter of Credit NA NA NA 10 NA CRISIL A3+
NA Letter of credit & Bank Guarantee NA NA NA 21 NA CRISIL A3+
NA Packing Credit NA NA NA 81 NA CRISIL BBB/Stable
NA Term Loan NA NA 29-Feb-28 20.76 NA CRISIL BBB/Stable
NA Term Loan NA NA 31-Oct-27 6.52 NA CRISIL BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 203.78 CRISIL A3+ / CRISIL BBB/Stable   -- 03-07-23 CRISIL A3+ / CRISIL BBB/Stable 15-12-22 CRISIL BBB-/Positive   -- Withdrawn
      --   -- 02-01-23 CRISIL BBB-/Positive / CRISIL A3   --   -- --
Non-Fund Based Facilities ST 31.0 CRISIL A3+   -- 03-07-23 CRISIL A3+   --   -- Withdrawn
      --   -- 02-01-23 CRISIL A3   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 46 Union Bank of India CRISIL BBB/Stable
Export Packing Credit 48 State Bank of India CRISIL BBB/Stable
Foreign Exchange Forward 1.5 State Bank of India CRISIL A3+
Letter of Credit 10 HDFC Bank Limited CRISIL A3+
Letter of credit & Bank Guarantee 21 Union Bank of India CRISIL A3+
Packing Credit 30 Union Bank of India CRISIL BBB/Stable
Packing Credit 51 HDFC Bank Limited CRISIL BBB/Stable
Term Loan 20.76 State Bank of India CRISIL BBB/Stable
Term Loan 6.52 HDFC Bank Limited CRISIL BBB/Stable
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

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