Rating Rationale
July 05, 2019 | Mumbai
Apex Frozen Foods Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.114.77 Crore
Long Term Rating CRISIL A-/Stable (Reaffirmed)
Short Term Rating CRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL's ratings on the bank facilities of Apex Frozen Foods Limited (AFFL) continue to reflect the extensive experience of the promoters, and the company's healthy operating efficiency and strong financial risk profile. These strengths are partially offset by susceptibility to risks inherent in the aquaculture business and to fluctuations in foreign exchange (forex) rates.

Key Rating Drivers & Detailed Description
* Extensive experience of the promoters
Benefits from the promoters' experience of three decades, and their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business.
* Healthy operating efficiency
Advantages from integrated operations - with own hatcheries and farming, processing unit, cold storage, and logistics - should also continue to support business risk profile. Moreover, working capital cycle is efficient, with gross current assets, debtors, and inventory remaining comfortable at 110, 39, and 49 days, respectively, as on March 31, 2019.
* Strong financial risk profile
Financial risk profile is likely to remain healthy over the medium term. Networth was comfortable and gearing low at Rs 355 crore and 0.29 time, respectively, as on March 31, 2019. Debt protection metrics have been robust, too, with interest coverage and net cash accrual to total debt ratios of 13.7 times and 0.7 time, respectively, in fiscal 2019.
* Susceptibility to risks inherent in the aquaculture business
The Indian seafood industry has been witnessing significant growth in the past few years, led by increasing share of aquaculture. However, susceptibility to outbreak of diseases, adverse climatic conditions, natural calamities, and regulatory changes'which may significantly impact the credit risk profile of players such as AFFL'persists.
* Vulnerability to fluctuations in forex rates
Revenue is entirely derived from exports, and since only about 20% of foreign currency exposure is hedged, any sharp fluctuation in forex rates may significantly impinge on realisations and profitability.

Liquidity is expected to remain adequate over the medium term. Cash accrual - projected at Rs 80-100 crore per annum over the medium term - should comfortably cover yearly maturing debt of Rs 5-6 crore. Bank limit utilisation averaged 91% in the 12 months through January 2019. Expected enhancement of Rs 20 crore in bank limit will, likely, be used to support working capital.

Outlook: Stable

CRISIL believes AFFL will continue to benefit from the extensive experience of its promoters. The outlook may be revised to 'Positive' if better utilisation of enhanced capacity, leading to a substantial and sustained increase in revenue and profitability, and diversification in geographic and customer profiles strengthen key credit metrics. The outlook may be revised to 'Negative' if disease outbreak in shrimps, adverse government regulations, stretch in working capital cycle, or any large debt-funded capital expenditure weakens financial risk profile. 

About the Company

AFFL, based in Kakinada (Andhra Pradesh), was set up as a partnership firm in 1996, converted into a private limited company in 2012, and reconstituted as a public limited company in 2017. It processes and exports shrimps, mainly the Vannamei variety. It was listed on the Bombay Stock Exchange and National Stock Exchange of India on September 04, 2017. Mr K Satyanarayana Murthy and  Mr. Subrahmanya Chowdary are the promoters.

Key Financial Indicators
Particulars Unit 2019* 2018
Revenue Rs crore 874.7 998.6
Profit After Tax (PAT) Rs crore 60.8 69.98
PAT Margin % 6.95 7
Adjusted debt/adjusted networth Times 0.29 0.28
Interest coverage Times 13.7 14.9

Status of non cooperation with previous CRA
AFFL has not cooperated with ICRA, which has classified it as issuer not cooperative vide release dated December 28, 2018. The reason provided by ICRA is non-furnishing of information by AFFL for monitoring of ratings.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. 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.Cr) Rating assigned with outlook
NA Export funding* NA NA NA 30 CRISIL A2+
NA Export funding^ NA NA NA 70 CRISIL A2+
NA Foreign currency term loan NA NA Sept-2020 5.17 CRISIL A-/Stable
NA Proposed long-term bank loan facility NA NA NA 2.1 CRISIL A-/Stable
NA Non-fund-based limit@ NA NA NA 7.5 CRISIL A2+
*Interchangeable between packing credit in foreign currency, export packing credit, foreign bill discounting, and letter of credit
^Interchangeable between packing credit in foreign currency, export packing credit, foreign bill purchase, and standby working capital limit
@Includes letter of credit and standby letter of credit facilities
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  107.27  CRISIL A-/Stable/ CRISIL A2+  05-03-19  CRISIL A-/Stable/ CRISIL A2+  02-02-18  CRISIL A-/Stable/ CRISIL A2+          Suspended/ Suspended 
Non Fund-based Bank Facilities  LT/ST  7.50  CRISIL A2+  05-03-19  CRISIL A2+  02-02-18  CRISIL A2+    --    --  -- 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Export Funding* 30 CRISIL A2+ Export Funding* 30 CRISIL A2+
Export Funding^ 70 CRISIL A2+ Export Funding^ 70 CRISIL A2+
Foreign Currency Term Loan 5.17 CRISIL A-/Stable Foreign Currency Term Loan 5.17 CRISIL A-/Stable
Non-Fund Based Limit@ 7.5 CRISIL A2+ Non-Fund Based Limit@ 7.5 CRISIL A2+
Proposed Long Term Bank Loan Facility 2.1 CRISIL A-/Stable Proposed Long Term Bank Loan Facility 2.1 CRISIL A-/Stable
Total 114.77 -- Total 114.77 --
*Interchangeable between packing credit in foreign currency, export packing credit, foreign bill discounting, and letter of credit
^Interchangeable between packing credit in foreign currency, export packing credit, foreign bill purchase, and standby working capital limit
@Includes letter of credit and standby letter of credit facilities
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Bank Loan Ratings

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