Rating Rationale
October 13, 2020 | Mumbai
Bambino Pasta Food Industries Private Limited
Rating outlook revised to 'Stable'; ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.75 Crore
Long Term Rating CRISIL BBB-/Stable (Outlook revised from 'Negative' and rating reaffirmed)
Short Term Rating CRISIL A3 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has revised its rating outlook on the long-term bank facilities of Bambino Pasta Food Industries Private Limited (BPFIPL; formerly known as MLR Industries Pvt Ltd; part of the Bambino group) to 'Stable' from 'Negative', while reaffirming the rating at 'CRISIL BBB-'. The rating on the short-term bank facility has been reaffirmed at 'CRISIL A3'.
 
The outlook revision reflects CRISIL's belief that the Bambino group's business risk profile has improved, as indicated by growth in revenue in fiscal 2020 to Rs 265 crore and strong performance in the current fiscal till August 2020, despite the economic slowdown caused by the Covid-19 pandemic. The improvement in revenue and sustenance of margins expected in FY21 will lead to increased cash accruals. Moderate bank limit utilisations have improved the liquidity position.
 
The ratings continue to reflect the group's established position in the food products industry, aided by a strong brand and the extensive experience of its promoter. The ratings also factor in the company's moderate financial risk profile, driven by comfortable capital structure and debt protection metrics. These strengths are partially offset by susceptibility of operating margin to fluctuations in raw material prices, exposure to intense competition and large working capital requirement.

Analytical Approach

To arrive at the ratings, CRISIL has combined the business and financial risk profiles of BPFIPL and Seshsayi Foods Pvt Ltd (SFPL). Both the companies, together referred to as the Bambino group, are in the same business and have common management, business synergies and fungible cash flow.
 
Unsecured loan extended to the entities by the promoter has been treated as 75% equity and 25% debt as it is non-interest bearing and is expected to remain in the business over the medium term.

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 market position with strong brand:
Bambino is an established brand under which the group sells multiple products made of wheat, such as vermicelli and pasta products. Longstanding industry presence of over 30 years, along with strong distribution network, also supports the business. The promoter, Mr M Subramanyam, has experience of more than three decades in the food products business.
 
* Moderate financial risk profile:
Networth and gearing were Rs 114 crore and 0.8 time, respectively, as on March 31, 2020. Interest coverage and net cash accrual to adjusted debt ratios were also moderate at 2.34 times and 0.18 time, respectively, in fiscal 2020.
 
Weaknesses:
* Susceptibility of operating margin to fluctuations in raw material prices and exposure to intense competition:
Raw material prices account for about 55% of sales. Hence, any sharp change in raw material prices will impact the group's realisations and profitability. Moreover, the group faces competition from other brands in the segment.
 
* Working capital-intensive operations:
The company needs to hold large inventory on account of seasonal availability of wheat. Gross current assets are at 186 days as on March 31, 2020, driven by receivables of 62 days and inventory of 114 days.
Liquidity Adequate

The bank limit was moderately utilised at 71.89% on average over the 12 months ending June 30, 2020. Net cash accrual is expected to be Rs 19-22 crore per annum in fiscals 2021 and 2022, against maturing term debt of Rs 5-11 crore (entire term debt is in BPFIPL) . The promoter has been extending need-based funds through equity infusion or interest-free unsecured loans. Also, in fiscal 2020, the group prepaid the entire term debt in SFPL through unsecured loans.

Outlook: Stable

CRISIL believes the Bambino group will continue to benefit from extensive experience of its promoter.

Rating Sensitivity factors
Upward factors
* Sustained revenue growth and stable operating margin, resulting in healthy net cash accrual of Rs 20 crore
* Significant improvement in financial risk profile, especially capital structure and debt protection metrics
 
Downward factors
* Decline in operating margin or stretch in the working capital cycle
* Larger-than-expected, debt-funded capital expenditure, weakening the capital structure with gearing increasing to 1.5 times
About the Group

BPFIPL manufactures vermicelli, macaroni, spaghetti and other pasta products under the Bambino brand. The plant is in BB Nagar, Telangana.
 
SFPL's main products include pasta such as vermicelli and macaroni under the Bambino brand. Its manufacturing units are at Nagpur, Maharashtra, and Indore, Madhya Pradesh.
 
Mr M Subramanyam, the promoter of the group, has been in the food products business since 1985.

Key Financial Indicators Consolidated
As on / for the period ended March 31   2020 2019
Operating income Rs crore 264.85 240.41
Reported profit after tax (PAT) Rs crore 10.96 7.47
PAT margin % 4.1 3.11
Adjusted debt/adjusted networth Times 0.8 1.23
Interest coverage Times 2.34 2.00

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of
instrument		 Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size (Rs crore) Complexity level Rating assigned with outlook
NA Cash credit NA NA NA 21.00 NA CRISIL BBB-/Stable
NA Letter of credit NA NA NA 1.00 NA CRISIL A3
NA Proposed long -term bank loan facility NA NA NA 3.36 NA CRISIL BBB-/Stable
NA Term loan NA NA Mar-2023 47.14 NA CRISIL BBB-/Stable
NA Standby letter of
credit		 NA NA NA 2.50 NA CRISIL BBB-/Stable
 
Annexure - List of entities consolidated
Names of entities consolidated Extent of consolidation Rationale for consolidation
Bambino Pasta Food Industries Pvt Ltd (formerly known as
MLR Industries Pvt Ltd)		 Full consolidation Same business, common promoter, and fungible cash flow
Seshsayi Foods Pvt Ltd Full consolidation Same business, common promoter, and fungible cash flow
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  71.50  CRISIL BBB-/Stable  06-04-20  CRISIL BBB-/Negative  28-02-19  CRISIL BBB-/Stable          Suspended 
Non Fund-based Bank Facilities  LT/ST  3.50  CRISIL BBB-/Stable/ CRISIL A3  06-04-20  CRISIL BBB-/Negative/ CRISIL A3  28-02-19  CRISIL BBB-/Stable/ CRISIL A3    --    --  -- 
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
Cash Credit 21 CRISIL BBB-/Stable Cash Credit 21 CRISIL BBB-/Negative
Letter of Credit 1 CRISIL A3 Letter of Credit 1 CRISIL A3
Proposed Long Term Bank Loan Facility 3.36 CRISIL BBB-/Stable Proposed Long Term Bank Loan Facility 3.36 CRISIL BBB-/Negative
Standby Letter of Credit 2.5 CRISIL BBB-/Stable Standby Letter of Credit 2.5 CRISIL BBB-/Negative
Term Loan 47.14 CRISIL BBB-/Stable Term Loan 47.14 CRISIL BBB-/Negative
Total 75 -- Total 75 --
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
Criteria for rating entities belonging to homogenous groups

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