| Marico Limited | ||||||
| Ratings 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 reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities of Marico Ltd (Marico).
The ratings continue to reflect the leading position of Marico across product categories, its improving revenue diversity, healthy operating efficiency, and robust financial risk profile. These strengths are partially offset by exposure to intense competition in the fast-moving consumer goods (FMCG) sector and susceptibility to volatility in raw material prices.
After three quarters of revenue decline due to pricing corrections in key domestic portfolios, Marico is expected to report modest revenue growth in Q4 of fiscal 2024 led by a sequential pickup in core domestic portfolios of Parachute coconut oil and Saffola edible oils, in addition to accelerated growth across the foods and digital first portfolios as well as continued momentum in the international markets. The operating margin is expected to move above 19% in fiscal 2024 with softer input costs and favourable product portfolio mix. The company has additionally initiated steps towards reviving the profitability of its General Trade channel partners to help accelerate volume growth across categories.
The financial risk profile has been healthy, with cash surplus of over Rs 1,800 crore as of September 2023, gearing of 0.19 time and largely unutilised working capital lines. Surplus cash may partly be used to enhance in-house capacities and support new product and category launches, besides possible mid-sized acquisitions, and payout of dividend. In line with company's dividend policy, Marico India has declared interim dividend of Rs. 3/share in Oct 2023 and Rs. 6.5/share in Feb 2024. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Marico and all its direct and wholly owned subsidiaries, collectively referred to as Marico, as they are all involved in the same business.
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:
Marico has been able to maintain the market share of its brand, Saffola, in the super premium refined edible oils in consumer packs segment despite the unprecedented volatility in global edible oil prices. Marico is also the market leader in the value-added hair oils category, with a 27% value market share as on December 31, 2023, with brands such as Nihar Naturals, Parachute Advansed and Hair & Care maintaining their stronghold. The market share remained steady across key product categories such as coconut oil, value-added hair oils and super premium refined edible oil in consumer packs during fiscal 2024.
Contribution of coconut oil and refined edible oil portfolio in the India business reduced to 60% in fiscal 2023 from 72% in fiscal 2012 and may further drop on account of the company’s portfolio diversification efforts.
Revenue from overseas operations has sustained its momentum owing to established market position, as indicated by the company’s presence in the coconut oil and value-added hair oils segments and relatively newer portfolios of shampoos, skin care and baby care in Bangladesh, the hair care and male grooming segments in the Middle East and North Africa, the male grooming and ethnic foods segment in Southeast Asia, and the ethnic hair care and healthcare segments in South Africa. Healthy and broad-based growth in key markets helped sustain the share of international business to total revenue at 23-25% over the past three fiscals.
Although the company is focusing on organic growth, it will keep an eye on opportunities with respect to acquisitions. However, due to strong liquidity, moderate-sized acquisitions can be accommodated without significant impact on the key credit metrics. Any sizeable, debt-funded acquisition will remain a key monitorable.
Weaknesses:
Despite significant variation in raw material prices over the past three fiscals, operating margin has sustained at 18-20%, supported by the market leadership in major segments. Focus on cost efficiency and the company’s continued price leadership should help mitigate the impact of volatility in raw material prices on profitability. |
Liquidity: Superior Liquidity should remain robust, supported by cash surplus of over Rs 1,800 crore as on September 30, 2023, and minimally utilised bank limit. Further, net cash accrual is expected to be healthy at over Rs 400 crore annually. Cash equivalents are largely invested in debt mutual funds and bank deposits. |
Outlook: Stable The business risk profile of Marico should remain strong, supported by its established market position in various product categories. Financial risk profile is also likely to remain healthy, aided by strong cash accrual and a comfortable capital structure. |
Rating Sensitivity factors Downward factors
The Environment, Social, and Governance (ESG) profile of Marico supports its already strong credit risk profile.
The FMCG sector has a moderate environmental and social impact, driven by its raw material sourcing strategies, waste intensive processes, and direct impact on the health and well-being of customers.
Key ESG highlights
There is growing importance of ESG among investors and lenders. The continuous commitment of Marico to embed sustainability principles across the organisation and its value chain will play a key role in enhancing stakeholder confidence. |
About the Company Marico, incorporated in 1988, is a prominent FMCG company, with diverse product portfolio including coconut oil, hair oils, premium refined edible oils in consumer packs, premium hair care, foods and male grooming in India. The company also has presence in the hair care, healthcare and male grooming segments in Bangladesh, the Middle East, North Africa, Southeast Asia, and South Africa. The promoter group, Mr Harsh Mariwala and his family members, owns about 60% stake in Marico.
For the nine months ended December 31, 2022, Marico reported a profit after tax (PAT) of Rs 1,017 crore (Rs 998 crore in the corresponding period of the previous fiscal), on net revenue of Rs 7,524 crore (Rs 7,351 crore). |
Key Financial Indicators (CRISIL Ratings-adjusted financials)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*FC / Derivative/ CEL **Working Capital Demand Loan |
Annexure – List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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