| G.D. Foods Manufacturing (India) Private Limited | ||||||
| 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 ratings on the bank facilities of G.D. Foods Manufacturing (India) Pvt Ltd (GDF) continue to reflect the extensive experience of GDF's promoters, established brand and market position, healthy product diversity and funding support from promoters. These strengths are partially offset by intense competition in the packaged food industry and modest financial risk profile. |
| Analytical Approach |
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Unsecured loans of Rs 5.63 crore from promoters estimated as on March 31, 2019 have been treated as 75% equity and 25% debt as these loans bear an interest lower than the market rate, and interest is ploughed back into the business. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Established market position: GDF sells sauces, pickles, jams, and instant mixes under its Tops brand, which has strong recall. Around 90% of sales is derived through its network of super stockiest across 18 states, mainly in Northern India. The remaining is through institutional customers and e-retail platforms. * Healthy product diversity, supporting the sustainability of scale: The product profile of the company is well diversified. The company has been constantly adding new products to its products line in order to penetrate into the market. It has been benefitted in fiscal 2020 by the introduction of new products like choco flakes, Mustard Oil etc. and over the medium term, GDF has plans to introduce new products and variants which would help contribute to the revenue growth of the company. Revenues are estimated at Rs 250 crore for fiscal 2020. * Extensive experience and funding support of promoters: The three decade-long experience of promoters in the food products segment and their established relationship with customers and suppliers have enabled them to survive business cycles. Moreover, promoters have regularly extended equity and unsecured loans to support operations and help repay debt. Weaknesses: * Exposure to intense competition: The company has to compete with established brands such as Kissan, Maggi, MTR, and Heinz; and with unorganised players. This limits scale of operations and restricts ability to pass on any adverse movement in raw material prices to end-customers. * Moderate financial risk profile: Moderate financial risk profile, marked by average adjusted interest coverage and net cash accrual to adjusted debt ratios which were 2.3 times and 0.13 time, respectively, as on March 31, 2019. Total outside liabilities to tangible networth ratio was high at 2.43 times as on March 31, 2019. Networth, though remains comfortable at Rs 54 crore as on March 31, 2019, was lower than expectations on account of additional provision for doubtful debts created of Rs 3.44 crore. |
| Liquidity Adequate |
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Liquidity of the company is marked with high fund based bank limit utilisation averaged at 91.31% for the past 8 months ended Dec 2019. Despite improvement in operating margins, the net cash accruals are expected to remain tightly matched with the repayment obligation of the company for fiscal 2021 on account of the impact on business due to current macro-economic factors. However, with reducing term debt obligation and no major capex plans over the medium term, liquidity is expected to improve over the medium term. Current ratio remained moderate at 1.18 times for fiscal 2019 and is estimated at similar level for fiscal 2020. |
| Outlook: Negative |
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CRISIL believes that the current industry situation and macro-economic factors will continue to exert pressure on the business and liquidity profile of the company. |
| Rating Sensitivity factors |
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Upward factors * Increase in revenue by 15% and operating margin of over 9.5%. driven by diversification in product portfolio * Substantial equity infusion by promoters to support the liquidity. Downward factors: * Decline in scale of operations by 5% or operating margin of below 9.3%. * Higher-than-expected debt-funded capital expenditure further weakens liquidity. * Increase in working capital requirement with average fund based bank limit utilization of over 90%. |
| About the Company |
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Set up as a proprietorship firm in 1985 and reconstituted as a private limited company in 1997, GDF deals in packaged food products under the brand name 'Tops'. It has a diversified product profile and caters to 18 states through seven manufacturing units across Delhi, Rajasthan, Punjab, and Uttar Pradesh. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Status of non cooperation with previous CRA: |
| 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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| For further information contact: | ||||||
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