Rating Rationale

Rating Rationale

May 12, 2025 | Mumbai

ADF Foods Limited

Ratings reaffirmed at 'Crisil A/Positive/Crisil A1'; Rated amount enhanced for Bank Debt

Rating Action

Total Bank Loan Facilities Rated	Rs.145 Crore (Enhanced from Rs.110 Crore)
Long Term Rating	Crisil A/Positive (Reaffirmed)
Short Term Rating	Crisil A1 (Reaffirmed)

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 A/Positive/Crisil A1’ ratings on the bank loan facilities of ADF Foods Ltd (ADF; part of the ADF group).

The ratings and ‘Positive’ outlook continue to reflect expected improvement in the group’s business risk profile, as indicated by sustained growth in revenue and steady rise in the operating margin. Revenue has grown to Rs 523 crore in fiscal 2024, from Rs 452 crore in fiscal 2023, and is expected to be Rs 580-600 crore in fiscal 2025, driven by healthy demand, regular addition of new products (sweets and ready-to-eat segment), extensive promotional activities and expansion of the distribution network. With the greenfield project in Surat expected to commence operations in fiscal 2026, the revenue is expected to improve further over the medium term.

Despite branding expenses, the operating margin is likely to remain at 18% over the medium term, backed by continuous price hikes and energy conservation initiatives undertaken by the group. Sustained growth in revenue and operating margin will be monitorable over the medium term. The financial profile and liquidity continue to remain strong.

The ratings continue to reflect the established position of the group as an exporter of Indian packaged food, well-known brands and healthy operating efficiency. The ratings also factor in the strong financial risk profile and adequate liquidity of the group. These strengths are partially offset by susceptibility to volatility in raw material prices and intense competition in the processed food segment.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of ADF; its subsidiaries - ADF Foods (India) Ltd and ADF Foods (UK) Ltd, and step-down subsidiaries, ADF Holdings (USA) Ltd, ADF Foods (USA) Ltd and Telluric Foods (India) Ltd and its subsidiaries. The subsidiaries are strategically important and have a significant degree of operational integration with ADF.

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 in the packaged foods business: The ADF group has a diversified product profile and established brands, such as Ashoka, Truly Indian, Camel, Aeroplane and Soul. The group has been exporting pickles, chutneys, frozen snacks, frozen vegetables and ready-to-eat meals for over three decades. With a diversified presence across 55 countries, the company is focused on growing its exports to North America, Europe, UK, the Middle East and APAC regions. Over the years it has diversified its product profile, established a strong customer base and distribution network ensuring steady order flow, increased capacities and new products. This has led revenue to increase to Rs 580-600 crore in fiscal 2025 from Rs 245 crore in fiscal 2019. Overall revenue is likely to grow at a steady rate over the medium term, in line with demand and capacity enhancements along with continuous research and the addition of new products.

Healthy operating margin: The group has maintained healthy operating margin of over 17.5% during the seven fiscals through March 2024, and 20.78% in fiscal 2024. Operating efficiency should remain robust, driven by healthy economies of scale and in-house manufacturing capabilities, which also provide competitive advantage over peers. Return on capital employed ratio stood at 25.61% for fiscal 2024 and is estimated to be range-bound at 20-22% over the medium term.

Strong financial risk profile: The group's strong financial risk profile is supported by healthy estimated networth of Rs 459 crore and comfortable gearing and total outside liabilities to adjusted networth (TOLANW) ratio of 0.02 time and 0.26 time, respectively, as on March 31, 2025. These metrics are expected to remain at similar levels over the medium term, despite debt-funded capital expenditure (capex) and low reliance on working capital debt. The debt protection metrics are strong, aided by comfortable profitability and low reliance on external debt. Interest coverage ratio is expected to be around 46 times in fiscal 2025 (50 times in fiscal 2024). The financial risk profile is expected to remain strong, despite debt-funded capex over the medium term, due to comfortable profitability.

Weaknesses:

Exposure to intense competition: With exports contributing to 95% of revenue, the ADF group competes not only with packaged food manufacturers in other Asian countries, but also with established domestic players such as ITC, MTR, Haldiram’s and Bikaji. Sustenance of revenue growth, amid intense competition, is a key monitorable.
Vulnerability to volatility in raw material prices: Key raw materials include agricultural products, such as vegetables, mangoes, chillis, edible oil, salt and sugar. Raw material prices depend on inflation, timely and adequate monsoon, and government policies. The group makes calibrated price adjustments after factoring in the market dynamics and competitive positioning. Improvement in operating margin is a key rating sensitivity factor.

Liquidity: Strong

The bank limit was sparsely utilised over the 12 months through March 2025. Expected net cash accrual of Rs 90-110 crore per fiscal will adequately cover yearly debt obligation of Rs 2.5-5 crore over the medium term, for debt is likely to be availed for capex. The group has cash and equivalent including mutual funds of around Rs 135 crore as on September 30, 2024. It has capex plans of Rs 80-85 crore over the medium term. The group has sufficient accrual and cash and equivalent to meet its capex and working capital requirement over the medium term.

Outlook: Positive

The business risk profile of the ADF group will improve over the medium term, with the addition of new products and capacity expansion.

Rating Sensitivity Factors

Upward factors:

Steady revenue growth along with healthy operating margin, resulting in cash accrual above Rs 85 crore.
Efficient working capital management and sustenance of financial risk profile.

Downward factors:

Decline in revenue or operating margin below 17%, resulting in lower net cash accrual.
Any large, debt-funded capex or acquisition, dividend payout or stretched working capital cycle, weakening the financial risk profile and liquidity.

About the Group

Incorporated in August 1990, ADF manufactures and exports a range of ethnic Indian food items such as pickles, chutneys, pastes, sauces, ready-to-eat food, frozen and canned food to Europe, US, Australia and the Gulf. ADF Foods UK Ltd and ADF Holdings USA Ltd are engaged in agency distribution of fast-moving consumer goods in the US and the UK. Mr Bimal Thakkar and his family members are the promoters.

The company has its corporate office in Mumbai, Maharashtra. The manufacturing units are located at Nadiad, Gujarat, and Nasik, Maharashtra. The company is listed on the Bombay Stock Exchange and the National Stock Exchange.

Key Financial Indicators

As on/for the period ended March 31	Unit	Apr- Dec 2024	2024	2023
Operating income	Rs crore	430.51	523.12	452.40
Reported profit after tax (PAT)	Rs crore	52.81	73.79	55.86
PAT margin	%	12.27	14.11	12.35
Adjusted debt/adjusted networth	Times	-	0	0
Interest coverage	Times	45.07	49.64	34.55

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	Bank Guarantee	NA	NA	NA	5.27	NA	Crisil A1
NA	Export Packing Credit	NA	NA	NA	100.00	NA	Crisil A/Positive
NA	Letter of Credit	NA	NA	NA	4.73	NA	Crisil A1
NA	Long Term Loan	NA	NA	29-Feb-32	35.00	NA	Crisil A/Positive

Annexure – List of Entities Consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
ADF Foods (India) Ltd	Full	Same business and common promoters
ADF Foods Ltd	Full	Same business and common promoters
ADF Foods UK Ltd	Full	Same business and common promoters
ADF Holdings USA Ltd	Full	Same business and common promoters
Telluric Foods (India) Ltd and its subsidiaries	Full	Same business and common promoters
Vibrant Foods New Jersey LLC	Full	Same business and common promoters

Annexure - Rating History for last 3 Years

	Current			2025 (History)		2024		2023		2022		Start of 2022
Instrument	Type	Outstanding Amount	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating	Rating
Fund Based Facilities	LT	135.0	Crisil A/Positive		--	28-08-24	Crisil A/Positive	24-01-23	Crisil A/Stable		--	Crisil A1 / Crisil A/Stable
			--		--	12-04-24	Crisil A/Stable		--		--	--
Non-Fund Based Facilities	ST	10.0	Crisil A1		--	28-08-24	Crisil A1	24-01-23	Crisil A1		--	Crisil A1
			--		--	12-04-24	Crisil A1		--		--	--

All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility	Amount (Rs.Crore)	Name of Lender	Rating
Bank Guarantee	0.27	State Bank of India	Crisil A1
Bank Guarantee	3.9	HDFC Bank Limited	Crisil A1
Bank Guarantee	1.1	ICICI Bank Limited	Crisil A1
Export Packing Credit	6.9	HDFC Bank Limited	Crisil A/Positive
Export Packing Credit	31.1	HDFC Bank Limited	Crisil A/Positive
Export Packing Credit	27	State Bank of India	Crisil A/Positive
Export Packing Credit	35	ICICI Bank Limited	Crisil A/Positive
Letter of Credit	0.83	State Bank of India	Crisil A1
Letter of Credit	3.9	State Bank of India	Crisil A1
Long Term Loan	35	HDFC Bank Limited	Crisil A/Positive

Criteria Details

Links to related criteria

Basics of Ratings (including default recognition, assessing information adequacy)

Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

Criteria for consolidation

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