Rating Rationale
September 17, 2024 | Mumbai
Prime Fresh Limited
Rating upgraded to 'CRISIL BBB/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.10 Crore
Long Term RatingCRISIL BBB/Stable (Upgraded from 'CRISIL BBB-/Stable')
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 upgraded its rating on the long-term bank facilities of Prime Fresh Ltd (PFL) to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Stable’.

 

The upgrade factors in the steady improvement in PFL’s business risk profile backed by compound annual growth rate of 27% in revenue over the five years through fiscal 2024 and on-year growth of 50% to Rs 142.94 crore in fiscal 2024. The growth was witnessed in both, the services segment (20% of revenue) and the fruits and vegetables (F&V) segment (80% of revenue). With the expansion in the customer and supplier network for F&V and steady revenue in the services business, the company’s revenue is expected to grow over 30% over the medium term. The operating margin has been rangebound in the past and inched up from 6.06% in fiscal 2020 to 6.6% in fiscal 2024, and is expected at a similar level in fiscal 2025 and over the medium term. The working capital requirement remain large and will be monitorable.

 

The financial risk profile is comfortable, reflected in networth of Rs 61.46 crore, nil gearing and total outside liabilities to adjusted networth (TOLANW) ratio of 0.11 time as of March 31, 2024. Debt protection metrics were robust as indicated by interest coverage and net cash accrual to total debt (NCATD) ratio of 23.77 times and 158%, respectively, for fiscal 2024. The financial risk profile is expected to remain comfortable over the medium term in the absence of large, debt-funded capex or reliance on external working capital borrowings.

 

The rating continues to reflect the extensive experience of the promoters in the F&V industry supported by the company’s strong distribution segment, and its comfortable financial risk profile. These strengths are partially offset by susceptibility to climatic conditions and to the performance of the agricultural sector, and large working capital requirement.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters in F&V industry supported by strong distribution segment: The promoters have experience of over two decades in the agricultural products procurement and distribution business. This has given them a keen understanding of the market dynamics and enabled them to establish relationships with suppliers and customers.

 

The company has a built a network of over 1.1 lakh farmers, over 85 agriculture markets and over 2,400 trade partners across India for its procurement. The customers are spread across the country in more than 80 districts and over 15 states. This lowers PFL’s reliance on any particular customer for sales and reduces debtor risk, and has resulted in continued order flow from customers and favourable terms from suppliers. Additionally, inventory risk is well managed as the company only procures F&V that meet quality norms and inventory is against orders in hand. The revenue rose 50% to Rs 143 crore in fiscal 2024 from Rs 95 crore in fiscal 2023 and is expected to grow at a similar pace over the medium term.

 

  • Comfortable financial risk profile: The company increased its networth to Rs 61.46 crore as on March 31, 2024, from Rs 29.92 crore a year earlier by raising capital of Rs 24.7 crore and supported by steady accretion to reserve. With lower reliance on external debt for working capital, its gearing remained nil and TOLANW ratio was 0.11 time as on March 31, 2024. Debt protection metrics were robust, as reflected in interest coverage and NCATD ratio of 23.77 times and 158%, respectively, for fiscal 2024. The financial risk profile is expected to remain comfortable in the absence of large, debt-funded capex or reliance on external working capital borrowings.

 

Weaknesses:

  • Susceptibility to climatic conditions and performance of the agricultural sector: The crop yield of agricultural commodities depends on adequate and timely monsoon. Thus, the company is exposed to the risk of limited availability of its key raw material during a weak monsoon. Also, production may be impacted by pests or crop infection, leading to higher unpredictability in production and pricing of agricultural commodities and derived products.

 

  • Large working capital requirement: PGL had gross current assets (GCAs) of 147 days as on March 31, 2024, driven by receivables and inventory of 112 days and 17 days, respectively. The GCAs are expected to remain at 145-150 days over the medium term on account of receivables of 110-115 days due to the nature of the business. Though the working capital cycle remains largely supported by limited inventory of 17-20 days, control over receivables remains critical and needs to be seen. As the company scales up operations, its working capital management remains monitorable.

Liquidity: Adequate

Cash accrual is expected at Rs 9-10 crore per fiscal over the medium term against no term debt obligation. Average utilisation of bank lines was moderate at 42% during the 12 months through May 2024. The current ratio was healthy at 8.16 times as on March 31, 2024. Liquid investment of Rs 6.75 crore as on March 31, 2024, enhances the liquidity.

Outlook: Stable

CRISIL Ratings believes PFL will continue to benefit from its promoters' extensive experience and its healthy financial risk profile.

Rating sensitivity factors

Upward factors

  • Substantial increase in revenue with steady operating margin leading to net cash accrual of more than Rs 20 crore
  • Sustained financial risk profile with improvement in the working capital cycle

 

Downward factors

  • Sharp fall in operating margin or decline in revenue leading to fall in net cash accrual to Rs 5 crore
  • Stretch in the working capital cycle with GCAs (net of cash and bank balance/fixed deposits) increasing to 200 days

About the Company

PFL is an integrated agriculture value chain institution in the domestic and international agricultural trade. PFL has been engaged in procurement and distribution of F&V. Its core competency lies in sourcing, handling, sorting, grading, warehousing, ripening, packing, branding, delivery of F&V, and manpower management.

Key Financial Indicators

As on / for the period ended March 31

 

2024

2023

Operating income

Rs crore

142.98

95.26

Reported profit after tax

Rs crore

6.79

4.94

PAT margins

%

4.75

5.19

Adjusted Debt/Adjusted Net worth

Times

0.00

0.15

Interest coverage

Times

23.77

22.74

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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. Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 6.48 NA CRISIL BBB/Stable
NA Proposed Fund-Based Bank Limits NA NA NA 3.38 NA CRISIL BBB/Stable
NA Term Loan NA NA 31-Mar-25 0.14 NA CRISIL BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 10.0 CRISIL BBB/Stable   -- 03-07-23 CRISIL BBB-/Stable 31-01-22 CRISIL B /Stable(Issuer Not Cooperating)*   -- CRISIL BB+ /Stable(Issuer Not Cooperating)*
      --   -- 31-03-23 Withdrawn (Issuer Not Cooperating)*   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 6.48 Axis Bank Limited CRISIL BBB/Stable
Proposed Fund-Based Bank Limits 3.38 Not Applicable CRISIL BBB/Stable
Term Loan 0.14 Axis Bank Limited CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
Rating Criteria for Fast Moving Consumer Goods Industry

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