CRISIL has assigned its ‘BB+/Stable/P4+’ ratings to the bank facilities of West Coast Frozen Foods Pvt Ltd (WCFFPL), part of the Aqua Alliance group (AAG). The ratings reflect the susceptibility of AAG’s farm and shrimp-processing business to changes in climatic conditions, force majeure events, adverse government regulations, competition from substitutes, and diversion of funds towards new initiatives of the group. These rating weaknesses are partially offset by the group’s healthy financial risk profile marked by adequate net worth and healthy net cash accruals, and the benefits that the group derives from its promoters’ strong track record in the aquaculture business.

For arriving at its ratings, CRISIL has combined the financials of WCFFPL, West Coast Water Base Pvt Ltd (WCWBPL), Alliance Foods Pvt Ltd (AFPL), Western Lotus Hatcheries (WLH), and Arabian Seafood Inc (ASI), collectively referred to as AAG. This is because of the significant level of operational and financial linkages, including fungible funds, among the group companies.

Outlook: Stable
CRISIL believes that AAG will maintain its current business and financial risk profile over the medium term, backed by its healthy operating efficiencies, increasing demand for its product; ‘Black Tiger’ variety of prawns and reasonable brand presence through ‘Cambay Tiger’ in the domestic market. The outlook may be revised to ‘Positive’ if the group demonstrates significant commercial success in its domestic retail initiatives, while generating increased revenues and net cash accruals from its traditional businesses: prawns exports, and feed and feed supplement trading. Conversely, the outlook may be revised to ‘Negative’ if AAG undertakes a large, debt-funded capital expenditure programme, leading to deterioration in its capital structure or debt protection indicators, or if the group’s sales volumes or margin declines considerably, resulting in a weaker financial risk profile.

About the Group
WCFFPL, incorporated in 2006-07 (refers to financial year, April 1 to March 31) by Mr. Kamlesh Gupta, processes and exports shrimps and prawns, predominantly the black tiger variety. The company has a strong presence through its Cambay Tiger brand in the black tiger prawns segment. The company has a processing capacity of 25 tonnes per day. WCFFPL exports mainly to the European markets of France and Germany, and to Japan and the US. The company also supplies products to its sister company, AFPL, which caters to high-class restaurant chains, super markets, and malls in cities across India.

WLH is a partnership firm with a prawn hatchery, WCWBPL is predominantly into trading of feeds and feed supplement, ASI is engaged in farming of shrimps and prawns, and AFPL is the group’s maiden venture into supply of farm bread shrimps and prawns, chiefly black tiger, in the domestic market.

WCFFPL reported a standalone net loss of Rs.0.76 million on net sales of Rs.36 million for 2008-09, against a net loss of Rs.0.5 million on net sales of Rs.1.4 million for 2007-08.