| Baba Agro Food Limited | ||||
| Rating upgraded to 'CRISIL BBB+/Stable'; Rated amount enhanced for Bank Debt | ||||
| 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 upgraded its ratings on the bank facilities of Baba Agro Food Limited (BAFL) to ‘CRISIL BBB+/Stable’ from ‘CRISIL BBB/Positive’.
The upgrade reflects significant improvement in the business risk profile driven by established brand recall leading to turnover of Rs 820 crore in FY23, a 24% sales growth as against the previous fiscal on the back of volumetric growth and better realisations commanded owing to its brand image. Operating profitability has also been sustained on the back of brand image and sustained capacity utilisation leading to economies of scale. Going forward, with benefits of additional capacity to accrue from Q2FY24 and robust demand scenario, the business risk profile is further expected to improve.
BAFL has also sustained its healthy financial risk profile with a networth of Rs 151 crore in FY23 and comfortable capital structure and debt protection metrics. Liquidity risk profile has also improved with sufficient enhancement in working capital limits leading to adequate cushion in the bank lines. Healthy and sustained profitability shall support generation of healthy accruals against debt repayment obligations.
The ratings reflect the extensive experience of the promoters in the rice milling industry, and the comfortable financial risk profile and efficient working capital management of the company. These strengths are partially offset by exposure to intense competition. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: The promoters’ experience of more than 20 years in the rice industry and healthy relationships with customers and suppliers will continue to support the business. The company deals with over 1000 wholesalers and retailers across east India. The brand, Baba, has an established market position and is sold in the open market to traders or retailers in Jharkhand, West Bengal and Bihar.
Comfortable financial risk profile: Despite the debt-funded capex towards enhancing the manufacturing capacity in Aurangabad, Bihar, capital structure remains comfortable with gearing and Total Outside Liabilities to Tangible Networth (TOL/TNW) ratio at 1.12 times and 1.34 times as on March 31st, 2023. Networth stood healthy at Rs 151 crore as on March 31st, 2023. Debt protection metrics were robust, reflected in interest coverage and net cash accrual to total debt (NCATD) ratios of 5 times and 0.22 time, respectively, in fiscal 2023. The financial risk profile will remain comfortable over the medium term driven by steady accretion to reserves.
Efficient working capital management: Gross current assets stood at 120 days as on March 31st, 2023 driven by inventory and receivables of 98 and 21 days, respectively.
Weakness: Exposure to intense competition: The rice milling business in east India is highly competitive with several players catering to regional demand. Despite the company’s presence of over two decades and established relationships with customers and farmers, competitive pressure persists. |
Liquidity: Adequate Bank limit utilisation of the fund based limits is moderate at 81% on average for the 12 months through May 2023. Cash accrual, expected over Rs 40-45 crore per annum, will sufficiently cover yearly term debt obligation of Rs 8-13 crore over the medium term. The surplus will cushion the liquidity of the company. Current ratio is healthy at 1.72 times as on March 31, 2023. Promoter backing in the form of unsecured loans is available whenever needed. Unencumbered cash and bank balance of Rs 4-5 crore exists as on March 31st, 2023. |
Outlook: Stable CRISIL Ratings believes BAFL will continue to benefit from the extensive experience of the promoters and its established brand image. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Set up in 2008, BAFL operates a non-basmati parboiled rice mill in Ranchi, Jharkhand. Operations are managed by the promoter-directors, Mr Gyan Prakash Sahu Its unit has capacity of 4,63,200 tonne per annum. |
Key financial indicators**
*Provisional **CRISIL Ratings’ adjusted numbers |
Status of noncooperation with previous CRA BAFL has not cooperated with India Ratings and Research Pvt Ltd, which has classified it as non-cooperative vide release dated March 29, 2023. The reason provided by India Ratings is non-furnishing of information for monitoring of ratings. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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Criteria Details
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