| ADF Foods 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 ratings on the bank loan facilities of ADF Foods Limited (ADF; part of the ADF Group) at ‘CRISIL A/Stable/CRISIL A1’.
The ratings continue to reflect the group’s established brands and position as an exporter of ethnic Indian food, and its strong financial risk and liquidity profile. There strengths are partially offset by susceptibility to volatility in raw material prices and intense competition in the processed food segment from domestic and international players. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of ADF; its subsidiaries – ADF Foods (India) Ltd, and ADF Foods (UK) Ltd; and stepdown subsidiaries – ADF Holdings (USA) Ltd and ADF Foods (USA) Ltd. This is because all these companies, collectively referred to as the ADF group, are in the same business and managed by common promoters and have fungible cash flows among them. Management has indicated the companies will continue to support each other whenever required.
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: Established brands and position as an exported of ethnic Indian food: The ADF group has diversified product profile and has various established brands which include Camel (Middle East); Soul; Aeroplane; Ashoka; PJ’s and Nate’s (USA); and Truly Indian (the UK). Group has been exporting pickles and chutneys, frozen snacks, frozen vegetables, Ready to eat Meal, etc. for over three decades. Group has established its brand presence across over 55 countries. . Company is focused on growing exports in North America, Europe, UK, Middle East, and APAC markets. With presence in different countries, there was no major impact on revenue profile of the group despite revenue disruption from US Subsidiary for H1FY23. Group has reported revenue of Rs 203.9 crore for H1 of FY 23.
Strong financial risk profile: ADF has strong financial risk profile, as reflected in strong networth, healthy capital structure and comfortable debt protection metrics. The company's networth is Rs.301 crore as on March 31, 2022. Driven by consistently healthy cash accrual, moderate reliance on external debt for funding working capital requirement. Capital structure continues to remain comfortable with gearing of 0.05 times as on March 31, 2022. Furthermore, the debt protection metrics are Comfortable, as reflected in interest coverage ratio of 41.86 times and net cash accrual to total debt ratio of 3.32 times during fiscal 2022. Financial risk profile is expected to remain strong over the medium term.
Weakness: Exposure to intense competition: The ADF Group is present in the processed and ethnic food segments. With bulk of revenue generated from exports (99%) the group has to compete not only with packaged food manufacturers in other Asian countries, but also with established domestic players such as ITC, MTR, Haldiram, Bikaji, etc. Sustenance of revenue growth, amidst intense competition, remains key monitorable.
Vulnerability to volatility in raw material prices: Key raw materials include agro-based products such as vegetables, mangoes, chillies, edible oil, salt, and sugar. As raw material prices largely depend on inflation, monsoon, and government policies, the group remains exposed to any sharp fluctuations. Operating margins were impacted in fiscal 2022 and H1 of fiscal 2023 on account of increase in the raw material prices as well as higher freight charges partly supported by price revision. Operating margins have declined to 13.3% for H1FY23 compared to 16.1% during H1FY22. T While operating margin is expected to improve it will remain key sensitivity factor. |
Liquidity: Strong Group has strong liquidity supported by low bank limit utilization, healthy net cash accruals and cash & cash equivalents. Group’s bank limit utilization has remained low and averaged at 17.43% over the 13 months ended August 2022. Group is expected to generate net cash accruals of over Rs 60 crore per fiscal and these will be more than adequate against expected repayments of Rs 2-4 crore per fiscal over the medium term. Group has cash and cash equivalents of over Rs 115 crore. Current ratio was 4.57 times as on 31st March 2022. CRISIL Ratings believes the group has sufficient accruals and cash & cash equivalents to finance its capex requirements and incremental working capital needs over the medium term |
Outlook: Stable CRISIL Ratings believes the ADF group will continue to benefit over the medium term, from its established market position and strong financial risk profile. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Group Incorporated in August 1990, ADF is a Mumbai-based company and is engaged in manufacturing and exporting a range of ethnic Indian edible items such as pickles, chutneys, pastes, sauces, ready-to-eat food, frozen and canned food to Europe, the US, Australia, and the Gulf. ADF Foods UK Limited & ADF Holding USA limited are in business of agency distribution of FMCG Products in USA & UK. |
Key Financial Indicators
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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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This Annexure has been updated on 24-Jan-2023 in line with the lender-wise facility details as on 01-Nov-2021 received from the rated entity
Criteria Details
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