Rating Rationale
May 17, 2021 | Mumbai
Lite Bite Foods Private Limited
'CRISIL BBB / Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.253 Crore
Long Term RatingCRISIL BBB/Stable (Assigned)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its ‘CRISIL BBB/Stable’ ratings to the bank facilities of Lite Bite Foods Private Limited (LBFPL; part of the LBF group).

 

The rating reflect LBF group’s strong financial and operational support from parent¸ established position with strong brands and wide geographical reach. These strengths are partially offset by weak operating efficiencies, high fixed cost structure and susceptibility to economic cycles, exposure to intense competition and highly leveraged capital structure.

Analytical Approach

CRISIL Ratings has factored in the support to LBF group from the parent, Gyan Enterprises Pvt Ltd (GEPL) by applying the parent notch-up criteria.

 

Further, CRISIL has also consolidated LBFPL with its wholly owned subsidiaries, Lite Bite Travel Foods Private Limited (LBTF), Lite Bite Foods Tres Private Limited (LBFT), Burger Foods and Hospitality Private Limited (BGH), Urban Foods Private Limited (UFP), Burman Holdings (BH), LBF Inc (LBFI) and LBF International (LBFIN)for arriving at LBFPL’s rating, referred to as the LBF group. This is because all subsidiaries are in similar business as the parent and also have significant control and support from LBFPL.

 

Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong financial and operational support from parent: LBFPL benefits financially, operationally, and in form of managerial support from the parent.  LBFPL is promoted by Mr. Amit Burman and GEPL hold 99.3 % stake in LBFPL. The ratings factor in the significant value of GEPL’s highly liquid holding in Dabur India Limited (DIL, rated CRISIL AAA/Stable/CRISIL A1+) of 11.44%. GEPL has not pledged DIL’s shares held by it. GEPL and its group has historically provided support to LBFPL in form of unsecured loans and equity infusions (Rs ~300 cr in last three years till FY21)  and will continue to support over medium term.

 

  • Established position with strong brands and wide geographical reach: LBF group's flagship brand, Punjab Grill, TRES, You Mee, Street foods by Punjab grill, are recognized home-grown restaurant brands in India. The other brands such as The Artful Baker Zambar, Hahn’s Kitchen, Asia seven express, Baker Street, have also a strong market position in the respective categories. The company is present in major metros and large cities as well as abroad in US and UAE, with over 130 restaurants.  The extensive experience of the promoters in the restaurant business and the established market presence will help the company maintain its strong competitive position in its target segments.

 

Weakness:

  • Weak operating efficiencies: LBFPL has weak operating efficiencies, marked by low return on capital employed (RoCE). RoCE is expected to remain weak on account of high operating leverage, low capacity utilization, sluggish demand and high capital expenditure.

 

  • High fixed cost structure and susceptibility to economic cycles: Any economic downturn adversely affects the restaurant industry. Typically, fine-dining premium restaurants are more affected during a slowdown than quick-service restaurants or fast-food chains, as indicated by LBFPL’s subdued revenue growth in the past, and modest operating margin. It has adopted multiple cost saving strategies amidst the pandemic related disruption, including salary reduction, renegotiation of leases, control on overheads etc. These efforts are likely to cushion the losses in fiscal 2021, however operating margins and overall profitability is likely to remain subdued in current fiscal.

  • Exposure to intense competition: The restaurant industry in India is highly fragmented, with unorganized players having significant market share. Thus, LBFPL faces intense competition and needs to continuously innovate in terms of menu and decor, to match the fast-changing customer preferences.

 

  • Highly leveraged capital structure:  The LBF group has average financial profile marked by high total outside liabilities to total tangible networth (TOL/TNW) over past fiscals. TOL/TNW was -5.17 times as on 31st March 2020. Continues losses on account of high depreciation and finance costs have resulted in negative net worth.

Liquidity: Adequate

Bank limit utilization is moderate at around ~90 percent for the past twelve months ended January 2021. The LBF group has poor liquidity on a standalone basis however, continuous support from GEPL and ability of management to bring in funds from associate concerns have resulted in heathy liquidity position. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. Current ratio are low at 0.36 times on March 31, 2020

Outlook Stable

CRISIL Ratings believe LBFPL will continue to benefit from the established presence in the restaurant industry.

Rating Sensitivity factors

Upward factor

  • Increased revenue contribution from dark/cloud kitchens
  • Continued support from parent entity in retiring debt obligations and meeting operational losses.
  • Sustained improvement in scale of operation by 35% and sustenance of operating margin, leading to higher cash accruals
  • Improved capital structure leading to improved financial risk profile

 

Downward factor

  • Deterioration in operating profitability leading to decline in NCA by over 20%
  • Delay in equity infusion or contraction of unsecured loans for meeting repayment obligations
  • Large debt-funded capital expenditure weakens capital structure
  • Witnesses a substantial increase in its working capital requirements thus weakening its liquidity & financial profile.
  • Any significant change in strategy of parent which could impact the business risk profile of LBFPL.

About the Company

LBFPL was incorporated in 2002. It is engaged in the business of hospitality services, operating restaurant, food outlets and café’s across various location all over India. The company managed over 130 outlets and operates 22 owned & 9 managed brands under its umbrella some of prominent brands are Punjab Grill, TRES, You Mee, The Artful Baker, Zambar, Hahn’s Kitchen, Street foods by Punjab grill, Asia seven express, Baker Street. Lite Bite Travel Foods Private Limited (LBTF), Lite Bite Foods Tres Private Limited (LBFT), Burger Foods and Hospitality Private Limited (BGH), Urban Foods Private Limited (UFP), Burman Holdings (BH), LBF Inc (LBFI) and LBF International (LBFIN) also manages restaurant outlets.   It is promoted by Mr. Amit Burman and majority owned subsidiary of GEPL with 99.30 % stake.

About the Parent

GEPL was incorporated in 1979 and promoted by Mr. Amit Burman. It is engaged in the business of investment in capital markets and act as investment arm to providing funding & advances to its group entities which are currently involved in diverse business segments. Mr. Amit Burman holds 11.44% stake through Gyan Enterprises Pvt Ltd in Dabur India Ltd.

Key Financial Indicators

As on / for the period ended March 31

 

2020

2019

Operating income

Rs crore

478.72

424.04

Reported profit after tax

Rs crore

-210.17

-110.22

PAT margins

%

-43.9

-26

Adjusted Debt/Adjusted Net worth

Times

-3.24

-4.02

Interest coverage

Times

0.62

1.34

 

Any other information: Not applicable

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)

ISIN

Name of instrument

Date of Allotment

Coupon Rate (%)

Maturity Date

Issue Size (Rs Cr)

Complexity Levels

Rating Assigned with Outlook

NA

Rupee Term Loan

NA

NA

Mar-23

168

NA

CRISIL BBB/Stable

NA

Long Term Bank Facility

NA

NA

NA

85

NA

CRISIL BBB/Stable

 

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Lite Bite Foods Private Limited

Full

Operational and financial linkages

Lite Bite Travel Foods Private Limited

Full

Lite Bite Foods Tres Private Limited

Full

Burger Foods and Hospitality Private Limited

Full

Burman Holdings

Full

Urban Foods Private Limited

Full

LBF Inc

Full

LBF International

Full

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 253.0 CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Long Term Bank Facility 85 CRISIL BBB/Stable - - -
Rupee Term Loan 168 CRISIL BBB/Stable - - -
Total 253 - Total 0 -
Criteria Details
Links to related criteria
Criteria for rating holding companies (including debt backed by pledge of shares)
CRISILs Bank Loan Ratings
Understanding CRISILs Ratings and Rating Scales
The Rating Process
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
CRISILs Criteria for Consolidation

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