| HMA Agro Industries Limited | ||||
| Rating outlook revised to 'Negative'; Rating Reaffirmed | ||||
| 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 revised its outlook on the long-term bank facilities of HMA Agro Industries Ltd (HMA; part of HMA group) to ‘Negative’ from ‘Stable’ while reaffirming the rating at 'CRISIL A-'.
The revision in outlook reflects CRISIL Rating’s belief that the business risk profile of HMA will moderate over the medium term on account of lower-than-expected operating profitability. Amidst increase in freight cost and prices of livestock, compounded with limited ability of the group to completely pass on the same due to fragmented nature of the industry, the operating profitability of HMA turned negative in last quarter of fiscal 2024. While it partly improved in the subsequent quarter, at 1.8-1.9%, it was lower than CRISIL Rating’s earlier estimates. Going forward, CRISIL Ratings believes that the operating profitability of the group will improve gradually, however, at 2.5-3% it will continue to remain lower than 5-5.5% expected for full fiscal 2025. Resultantly, net cash accruals are likely to half at around Rs 100-120 crore, as against over Rs 200 crore estimated previously for fiscal 2025. That said, more than expected decline in the operating profitability is likely to further weaken the business risk profile of the group and hence will be closely monitored.
The rating continues to factor in the group’s healthy financial risk profile due to moderate dependence on external debt. As a result, leverage and debt protection metrics continue to remain comfortable. Liquidity, on the other hand, shall turn slightly weaker on account of decline in net cash accruals, however, will remain supported by no sizeable term debt repayments, cushion available in bank lines and access to unencumbered reserves.
The rating continues to reflect the group’s established market position and its healthy financial risk profile. These strengths are partly offset by low operating profitability. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of HMA and its wholly owned subsidiary, United Farm Products Pvt Ltd (UFPPL). These companies, together referred to as the HMA group, have common management and operational and financial linkages.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. . |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Strong HMA is expected to generate net cash accrual of Rs 100-120 crore, which will be sufficient to meet annual debt obligation of ~Rs 13-15 crore over the medium term. Cash and cash equivalent have been ~Rs 110 crore as on March 31, 2024, which will further aid the liquidity requirements of the group. HMA also has access to fund-based working limits of Rs 480 crore, where average utilisation has been ~53% during the 12 months through June 2024. CRISIL Ratings expects internal accrual, cash and cash equivalent and unutilized bank lines to be sufficient to meet the debt obligation as well as incremental working capital requirement. |
Outlook: Negative CRISIL Ratings believes HMA business risk profile will moderate over the medium term on account of lower-than-expected operating profitability. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Group HMA: Incorporated in 2008, HMA processes and exports frozen buffalo meat. Its facility is in Aligarh, Uttar Pradesh. Late Mr Haji Mohammed Ashiq Qureshi was the founder and Mr Gulzeb, Mr Gulzar and Mr Wazib Ahmed are the directors.
UFPPL: Set up in 2018, UFPPL has an integrated and export-oriented buffalo meat processing plant as well as an animal slaughterhouse in Haryana. The company commenced operations in January 2023 and is a wholly owned subsidiary of HMA. UFPPL aims to export to the European market but is vulnerable to changes in government regulations |
Key Financial Indicators(standalone)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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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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