| Godfrey Phillips India Limited | ||||||
| Ratings reaffirmed at 'CRISIL AA+/Stable/CRISIL A1+' | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| 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 'CRISIL AA+/Stable/CRISIL A1+' ratings on the bank facilities and commercial paper of Godfrey Phillips India Ltd (GPIL).
Operating income grew by around 23% to Rs. 4,395 crores in fiscal 2024 from Rs. 3,564 crores in fiscal 2023, driven by healthy growth in cigarettes segment and sale of unmanufactured tobacco. Operating profitability, however, moderated to 20% in fiscal 2024 as against 23.1% in the previous fiscal mainly due to an increase in tobacco prices, increase in share of unmanufactured tobacco and marketing expenses. Revenue growth is expected to remain healthy over the medium term while the operating margin remains steady at over 20%.
The financial risk profile is expected to remain strong due to nil repayment obligation, healthy debt protection metrics and superior liquidity; cash surplus was over Rs 2300 crore as on March 31, 2024.
CRISIL Ratings has taken note of the ongoing dispute among members of the K.K. Modi family. The matter has not impacted the business operations of GPIL as per the management articulation. CRISIL Ratings will continue to monitor the developments and any impact on business operations and liquidity will be key monitorable.
The ratings continue to reflect healthy market position of GPIL in the Indian cigarette industry and strong financial risk profile. These strengths are partially offset by exposure to risks related to geographical concentration in revenue, intense competition, and unfavorable regulatory changes. |
Analytical Approach CRISIL Ratings has considered the standalone financial and business risk profiles of GPIL because operations of wholly-owned subsidiaries—International Tobacco Company Ltd, Godfrey Phillips Middle East DMCC (Under closure) and investment companies—do not have any material bearing on its financials. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
|
Liquidity: Superior In the absence of any repayment obligation, the entire cash accrual -- projected at Rs 600-650 crore per annum for fiscals 2025 and 2026 – will be used to meet the capital expenditure (capex) and working capital requirements. Cash and cash equivalents were strong at over Rs 2,300 crore as on March 31, 2024. Utilisation of the fund-based bank limit was negligible during the 12 months through July 2024.
ESG profile CRISIL Ratings believes the environment, social and governance (ESG) profile of GPIL supports its already strong credit risk profile.
The tobacco sector has a high environmental impact because of its raw material sourcing strategies and waste-intensive processes. It also has a high social impact owing to health hazards associated with the use of tobacco, including smoking addiction and underage consumption, as well as risk of government intervention by way of restriction on sales, regulation of marketing practices and higher tax.
The company’s strong focus on addressing some of these ESG risks supports its already strong credit risk profile.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. CRISIL Ratings believes the company’s continuous commitment to embedding sustainability principles across the organization and its value chain will partly offset the inherent impact of the tobacco sector on environment and social aspects. |
Outlook: Stable GPIL will continue to benefit from its healthy market position and strong financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company GPIL is an associate of the KK Modi group of companies and Philip Morris Global Brands Inc (Philip Morris; a subsidiary of Altria Group Inc [rated ‘BBB/Stable/A-2’ by S&P Global Ratings]). The KK Modi group owns 47.48% equity shares of the company, and Philip Morris owns 25.1%. GPIL primarily manufactures cigarettes. It has diversified into segments such as confectionary, and retail. It has retail stores, named 24SEVEN (TFS), in the National Capital Region, Hyderabad and Chandigarh from which it has announced to exit in May 2024. |
Key Financial Indicators
*Provisional ^net of lease liabilities |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Fund-based facility; interchangeable with other fund-based facilities $Interchangeable with other fund-based/non-fund-based facilities #Fund-based facility; interchangeable with other fund-based and 50% one way interchangeable with non-fund-based facilities %Interchangeable with other non-fund-based facilities @Interchangeable with letter of credit |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||||||||||||||||||||||||||
|
Criteria Details
|