Key rating drivers & detailed description

Strengths:

Extensive experience of the promoters and established market position:

Presence of more than two decades and strong relationships with stakeholders have helped the promoters to register revenue of Rs 255 crore in the first nine months of fiscal 2023; revenue is expected to reach Rs 335-340 crore for the full fiscal. Over the years, AIL has diversified its product profile by introducing dates, cornflakes, soya, vermicelli, pickles, and jam. This has reduced its dependence on honey to around 60% in fiscal 2023 from 85% in 2018. The company has also launched various flavours and varieties in honey and dates, which will support growth in business.

Healthy capital structure:

Gearing is expected to be strong at 1.0 time as on March 31, 2023 (1.20 times in the previous fiscal). Though reliance on working capital debt had increased in the past, this is likely to moderate and result in a comfortable gearing in the near term. Networth is expected to be large at above Rs 95 crore as on March 31, 2023 (Rs 87 crore as on March 31, 2022), and has steadily improved over the years. Debt protection metrics remained adequate, with interest coverage and net cash accrual to adjusted debt ratios of 2.4 times and 0.08 time, respectively, for fiscal 2022. In the absence of any major debt-funded capital expenditure, financial risk profile is likely to remain stable in the near term.

Weaknesses:

Stretched working capital cycle:

Gross current assets (GCAs) were 270 days as on March 31, 2022, because of sizeable inventory of 145-150 days due to a wide product range with 35-40 stock keeping units; receivables were 90-100 days. Over the medium term, the GCAs are likely to remain at 250 days due to large seasonal procurement of honey during March-end.

Exposure to intense competition constraining profitability:

Low entry barrier has resulted in high fragmentation in the honey market. The margin of the company has taken a hit in the export and domestic B2B (business-to-business) segments to sustain scale and presence. Furthermore, with increased focus on the B2C division, AIL has to compete with large players such as Dabur and Zandu, thereby constraining profitability.

Key financial indicators

Annexure - Details of Instrument(s)

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