| Elite Foods Private Limited | ||||
| Rating upgraded to 'CRISIL A-/Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale
The upgrade reflects sustained improvement in the group’s overall credit profile. Revenue and operating margin increased to Rs 660 crore and 7.76%, respectively, in fiscal 2021 from Rs 551 crore and 5.70%, respectively, in fiscal 2019, thereby resulting in cash accrual rising to Rs 35.43 crore from Rs 17.49 crore in the said period. This was backed by healthy demand for its products and strong brand recall in southern India, increasing presence in pan-India and addition of new products. Financial risk profile improved with total outside liabilities to adjusted networth improving to below 1 time and interest coverage ratio to above 15 times, in fiscal 2021. Liquidity is strong with strong accruals, no major repayments and moderate bank limit utilisation backed by prudent working capital management.
The rating reflects the group’s strong market position in Kerala, aided by strong brand recall in the bakery and food products segments and extensive experience of management, comfortable financial risk profile and efficient working capital management. These weaknesses are partially offset by exposure to volatility in raw material prices and intense competition in consumer food industry. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of EFPL, Elite Tasty Toast Pvt Ltd, Elite Natural Pvt Ltd, Elite Green Pvt Ltd, Elite Agro Specialities and Yamuna Roller Flour Mills Pvt Ltd, collectively referred to as the Elite group together referred to as the Elite Group. The entities have common business and management, along with operational and financial linkages.
Unsecured loans have been treated as debt.
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 promoter: The promoters have an experience of 40 years in the consumer foods industry. This has given them a strong understanding of market dynamics and helped establish a healthy relationship with customers across geographies, which has resulted in diversification of the product portfolio as per the regional requirement.
Comfortable financial risk profile: As on March 31, 2021, networth remained strong at Rs 130 crore and gearing and total outside liabilities to adjusted networth (TOLANW) were low at 0.51 time and 0.9 time, respectively. Capital structure is expected to remain comfortable over the medium term, with strong accretion to reserve and absence of any major debt-funded capex. Debt protection metrics were strong, indicated by interest coverage and net cash accrual to total debt ratios of 15.92 times and 0.53 time, respectively, in fiscal 2021. With moderate profitability and steady accretion, the metrics are expected to remain strong over the medium term.
Efficient working capital management: Elite group's working capital is efficiently managed, as reflected in low gross current assets of 89 days as on March 31, 2021, driven by low inventory and receivables of 30-40 days. This is because of easy availability of raw material and perishable nature of products and low credit provided to customers. This leads to reduced dependence on creditors and bank lines.
Weaknesses Susceptibility to volatility in raw material prices: The group's major raw material is wheat, prices of which vary based on the monsoons and production in the crop seasons. As cost of the raw material accounts for 70% of the overall cost, variation in rates may impact operating profitability. Inability to pass on hike in raw material prices to customers may lead to volatility in the operating margin,
Exposure to intense competition: The food industry segment catered to by Elite group is dominated by few major players, , as well as large number of regional and unorganised players, which restricts the pricing power and margin. Large players enjoy better brand recall on account of extensive promotional activities and better pricing capabilities. Emergence of any new players or change in consumer preferences may impact performance of the group. |
Liquidity: Strong Elite group has strong liquidity driven by expected cash accruals of Rs.35-37 crores per annum in fiscal 2022 and fiscal 2023, against repayment obligations of Rs.2.48 crore and Rs.2.08 crores respectively. Fund-based limits of Rs.73 crores was, utilized 70% on an average over the 12 months ended August 2021. The group has no major debt funded capex plans. As on March 31, 2021 cash and cash equivalent were Rs.44.04 crore and current ratio were at 1.69 times. CRISIL ratings expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirement. |
Rating Sensitivity Factors
Downward factors
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About the Group
Yamuna Roller Flour Mills Pvt Ltd, incorporated in 1988 and based in Thrissur, produces broken wheat, rice maida, semolina and wheat flour, among others.
Elite Natural Pvt Ltd, incorporated in 1995 and based in Hosur, Tamil Nadu, manufactures products such as rusks, cakes, staples and cookies.
Elite Tasty Toast Pvt Ltd, incorporated in 1995 and based in Thrissur, manufactures products such as breads, buns and rusks.
Elite Agro Specialties, incorporated in 2002 and based in Thrissur, produces staple food items, such as semolina, wheat flour, all-purpose flour, ready mix and chapati/idli/dosa mix.
Elite Green Pvt Ltd, incorporated in 2008, exports various mixes, organic food items and flour products. It has offices in Ahmedabad and Thrissur. |
Key Financial Indicators (Consolidated)
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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Annexure - List of Entities Consolidated
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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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