Rating Rationale
October 22, 2019 | Mumbai
Coastal Corporation Limited
Rating Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.105 Crore
Long Term Rating CRISIL BBB/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL BBB/Stable' rating on the long-term bank facilities of Coastal Corporation Limited (CCL; part of Coastal group).
The rating continues to reflect CCL's established position in the seafood industry, comfortable financial risk profile and extensive experience of promoters. These strengths are partially offset by the company's exposure to regulatory changes, intense competition and volatility in shrimp prices and foreign exchange (forex) rates.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of CCL and its wholly-owned subsidiaries Seacrest Seafoods Inc (SSI) and Continental Fisheries India Pvt Ltd (CFIPL), collectively referred to as the Coastal group, as they are engaged in similar line of business.

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
* Extensive experience of the promoters
Benefits from the promoters' experience of over three decades, their in-depth understanding of the industry and diversified customer base should support the business.
* Comfortable financial risk profile
Networth is healthy, at Rs 113.49 crore as on March 31, 2019. Capital structure has also strengthened steadily as reflected in the improvement in gearing to 0.78 time on March 31, 2019 from 2.13 times as on March 31, 2015. Debt protection metrics are adequate with interest coverage and net cash accrual to total debt ratios of 7.62 times and 0.46 time, respectively, for fiscal 2019.
* Exposure to regulatory changes
The seafood export segment is marked by stringent regulations and quality requirements. Regulatory changes, such as the levy of anti-dumping duties by importing countries, can impact industry profitability adversely. Apart from several small domestic players, Indian seafood exporters have to face intense competition from exporters in countries such as Vietnam, Thailand, and Indonesia.
* Susceptibility to volatility in shrimp prices and forex rates
Shrimp prices are dependent on the availability and demand during a particular period. Accordingly, the company's revenue and profitability are exposed to volatility in the prices of shrimps. Moreover, given that majority of sales are through exports, margins are also exposed to volatility in exchange rates.

Liquidity: Adequate
Liquidity is expected to be adequate supported by healthy cushion between cash accruals and maturing debt. Net cash accrual, estimated at Rs 29-31 crore in fiscals 2020 and 2021, will comfortably service the term debt of under Rs 1 crore. Though working capital limits remained almost fully utilised at 98.3% over the 12 months through July 2019, the expected enhancement in bank lines will likely support the incremental working capital requirements.
Outlook: Stable

CRISIL believes that CCL will continue to benefit from the extensive experience of its promoters.
Rating sensitivity factors:
Upward factor
* Sustained improvement in operating margin to over 10%, while maintaining healthy revenue growth and efficient working capital cycle
* Faster-than-expected stabilisation of planned capital expenditure (capex), resulting in substantial improvement in business risk profile
Downward factor
* Higher-than-expected debt-funded capex or stretch in working capital cycle weakening financial risk profile, especially liquidity
* Delay in receipt of enhancement in working capital limits pressurizing the liquidity
* Decline in operating margin to under 6%

About the Company

Incorporated in 1981, CCL processes and exports frozen marine food products, primarily shrimps. The company has two processing facilities in Andhra Pradesh. Mr T Valsaraj, managing director and Mr G V V Satyanarayana, director, manage the operations.
US-based SSI is a wholly-owned subsidiary of CCL and undertakes trading of processed shrimp.
CFIPL is a wholly-owned subsidiary of CCL and is engaged in processing and sale of shrimp.

Key Financial Indicators
Particulars - Consolidated Unit 2019 2018
Revenue Rs crore 619.8 608.3
Profit after tax (PAT) Rs crore 37.9 23.9
PAT margin % 6.1 3.9
Adjusted debt/adjusted net worth Times 0.78 1.2
Interest coverage Times 7.62 4.92

Status of non cooperation with previous CRA:
CCL has not cooperated with CARE, which has classified it as issuer not cooperative vide release dated March 19, 2019. The reason provided by CARE is non-furnishing of information 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.crore) Rating assigned with outlook
NA Foreign Bill Purchase NA NA NA 40 CRISIL BBB/Stable
NA Export Packing Credit NA NA NA 65 CRISIL BBB/Stable

Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Coastal Corporation Ltd Full Same line of business
Seacrest Seafoods Inc Full Wholly owned subsidiary of CCL engaged in the same line of business
Continental Fisheries India Pvt Ltd Full Wholly owned subsidiary of CCL engaged in the same line of business
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  105.00  CRISIL BBB/Stable      10-07-18  CRISIL BBB/Stable  26-10-17  CRISIL BBB/Stable/ CRISIL A3+  04-07-16  CRISIL BBB-/Stable/ CRISIL A3  CRISIL BBB-/Stable/ CRISIL A3 
            06-07-18  CRISIL BBB/Stable           
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 Packing Credit 65 CRISIL BBB/Stable Export Packing Credit 65 CRISIL BBB/Stable
Foreign Bill Purchase 40 CRISIL BBB/Stable Foreign Bill Purchase 40 CRISIL BBB/Stable
Total 105 -- Total 105 --
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 Criteria for Consolidation
CRISILs Criteria for rating short term debt

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