Rating Rationale
October 26, 2017 | Mumbai
Coastal Corporation Limited
Ratings upgraded to 'CRISIL BBB/Stable/CRISIL A3+'
Rating Action
Total Bank Loan Facilities Rated Rs.85 Crore
Long Term Rating CRISIL BBB/Stable (Upgraded from 'CRISIL BBB-/Stable')
Short Term Rating CRISIL A3+ (Upgraded from 'CRISIL A3')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank facilities of Coastal Corporation Limited (CCL) to 'CRISIL BBB/Stable/CRISIL A3+' from 'CRISIL BBB-/Stable/CRISIL A3'.
The rating upgrade reflects CRISIL's belief that CCL's business risk profile would continue to improve over the medium term. The company's revenues grew at a CAGR of 29 per cent over the three years ended fiscal 2017 to Rs.460 crores while the operating margins were 7.4 per cent during fiscal 2017 vis-à-vis 6.5 per cent in fiscal 2016. The company has booked operating income of Rs.141 crore in the quarter ended June 2017 and is expected to grow at over 20 per cent in fiscal 2018. The growth would be supported by increase in offtake volume from its existing and newly added customers.
Healthy accretion to reserves has resulted in strengthening of net worth which stood at Rs.57 crore as on March 31, 2017. The gearing ratio improved to 1.36 times as on March 31, 2017 from 2.13 times as on March 31, 2015. Moreover, the company holds healthy cash and bank balances that enhance the financial flexibility. As on March 31, 2017, cash and bank balances stood at Rs.18.3 crores. The financial risk profile is expected to improve with steady accretions and with no major debt funded capital expenditure (capex) plans over the medium term.
The ratings reflect the company's established regional presence, supported by the extensive experience of its promoters in the seafood industry, and its healthy operating efficiencies. The ratings also factor in CCL's comfortable financial risk profile, marked by a healthy net worth and debt protection metrics and a moderate gearing. These rating strengths are partially offset by the company's exposure to regulatory changes and to intense competition in the seafood processing industry, and the susceptibility of its profitability margins to volatility in shrimp prices and foreign exchange rates.

Key Rating Drivers & Detailed Description
* Established regional presence, supported by the extensive experience of promoters in the seafood industry, and healthy operating efficiencies
CCL's promoters have been in the marine products' processing and export business for over three decades. The promoters' extensive industry experience is expected to help CCL recognise the threats and opportunities in the business over the medium term. Their long-standing presence in the industry has enabled the company to diversify its geographical reach.
* Comfortable financial risk profile, marked by a healthy net worth and debt protection metrics and a moderate gearing
The company's net worth is healthy, estimated at Rs. 56.7 crore as on March 31, 2017. The gearing ratio improved to 1.36 times as on March 31, 2017 from 2.13 times as on March 31, 2015. The company's interest coverage and net cash accruals to total debt (NCATD) ratios were estimated at 3.8 times and 0.21 times, respectively for 2016-17.
* Exposure to regulatory changes and to intense competition in the seafood processing industry
The seafood export segment is marked by stringent regulations and quality requirements. Adverse regulatory changes, such as the levy of anti-dumping duties by importing countries, can have an adverse impact on the profitability of the entire industry. The seafood processing industry is highly fragmented, marked by the presence of several small players operating in India's coastal areas. Indian seafood exporters have also faced intense competition from countries such as Bangladesh, Thailand, and Indonesia.
* Susceptibility of its profitability margins to volatility in shrimp prices and foreign exchange rates
Shrimp prices are dependent on availability and demand during a particular period, and the company's revenues and profitability are exposed to volatility in prices of shrimps. Moreover, given that majority of sales are through exports, CCL's margins are also exposed to volatility in exchange rates.
Outlook: Stable

CRISIL believes that CCL will continue to benefit from the promoters' extensive industry experience. The outlook may be revised to 'Positive' if there is a substantial and sustained increase in the company's revenues and profit margins, while its capital structure is sustained at comfortable levels. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in the company's revenues or profitability margins, or significant deterioration in its capital structure caused most likely on account of a large debt-funded capital expenditure or a stretch in its working capital cycle.

About the Company

Established in 1981, CCL is engaged in processing and export of frozen marine food products primarily shrimps. The company has two processing facilities in Andhra Pradesh. Its day-to-day operations are managed by its managing director, Mr. T Valsaraj, and director, Mr. G V V Satyanarayana.

Key Financial Indicators
Particulars Unit  2017       2016
Revenue Rs. Cr.  460.22   332.80
Profit After Tax (PAT) Rs. Cr.   13.40  7.92
PAT Margins %  2.91   2.38
Adjusted Debt/Adjusted Net worth Times  1.36  1.46
Interest coverage Times  3.84   2.97

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 Bill Purchase NA NA NA 15 CRISIL A3+
NA Credit Limit Under Gold Card NA NA NA 5 CRISIL BBB/Stable
NA Export Packing Credit NA NA NA 65 CRISIL BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  85  CRISIL BBB/Stable/ CRISIL A3+    No Rating Change    No Rating Change    No Rating Change  30-06-14  CRISIL BBB-/Stable/ CRISIL A3  CRISIL BB+/Stable/ CRISIL A4+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bill Purchase 15 CRISIL A3+ Bill Purchase 15 CRISIL A3
Credit Limit Under Gold Card 5 CRISIL BBB/Stable Credit Limit Under Gold Card 5 CRISIL BBB-/Stable
Export Packing Credit 65 CRISIL BBB/Stable Export Packing Credit 65 CRISIL BBB-/Stable
Total 85 -- Total 85 --
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 rating short term debt

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