Rating Rationale
April 23, 2018 | Mumbai
Freshtrop Fruits Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.56 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 Freshtrop Fruits Limited (FFL).
 
The rating continues to reflect the extensive experience of the company's promoter in the fresh fruit segment, its healthy financial risk profile because of robust capital structure, and strong operating margin. These strengths are partially offset by modest scale of operations; large working capital requirement during the peak season; exposure to risks related to seasonality in the fruits and vegetables processing industry, to intense competition, and to stabilisation of operations at its upcoming fresh fruit/vegetable drinks unit.

Key Rating Drivers & Detailed Description
Strengths
* Extensive experience of the promoter: Benefits from the extensive experience of the promoter, and established relationships with over 1000 farmer-members in the Nashik region and with reputed customers in the domestic and overseas markets, will continue. The company has access to 1000 hectares of grape cultivation, which ensures regular supply. Key customers include ASDA (part of the Walmart family), Albert Heijn, Pepsico, and ITC Ltd ('CRISIL AAA/Stable/CRISIL A1+').
 
* Healthy financial risk profile: Networth and gearing were healthy at Rs 61.1 crore and 0.28 time, respectively, as on September 30, 2017. Gearing will remain less than 0.6 time over the medium term despite large working capital requirement at the end of the fiscal. Debt protection metrics remain healthy, with interest coverage of more than 10 times and net cash accrual to total debt ratio of 0.5 time for the six months ended September 30, 2017.
 
* High operating margin: Operating margin remained healthy over the 3 fiscals through March 2017, backed by improvement in operating efficiency and realisations. Though profitability remains susceptible to seasonal availability of fruits and vegetables, FFL has maintained operating margin at 12%. Furthermore, enterprise resource planning (ERP) and supply chain management (SCM) systems enable the company and its customers to track farm input and production.
 
Weaknesses
* Modest scale of operations, and large working capital requirement during peak season: Gross current assets of 225 days as on March 31, 2017, reflect working capital intensity, mainly due to receivables and inventory. The company generally offers credit of 60 days to customers in Europe, and cash against documents to those in Russia. While inventory is low (less than 10 days) for grape processing, as the product is dispatched on a daily basis, it is higher on account of goods-in-transit. However, the company has to maintain inventory of 60 days (including work-in-progress and finished goods) for other fruits. Given the seasonal nature of grape export, almost 80% of sales happen between January and April every year. Credit of 60-75 days from suppliers supports working capital management. Efficient working capital management, especially during the peak season, will be a key rating sensitivity factor.
 
* Susceptibility to seasonality in the fruits and vegetables processing industry: The company remains susceptible to volatility in the prices of agricultural commodities such as grapes and pomegranates. Also, availability of fruits and vegetables depends on monsoon and other climatic conditions, which will remain a key rating sensitivity factor over the medium term.
 
* Exposure to intense competition, and to risks related to timely stabilisation of operations at upcoming juice unit: FFL has to compete with large and organised as well as unorganised players, which limits pricing power with customers. Operations in the fruit juice segment are expected to commence in April 2018 and timely stabilisation of operations will be a key rating sensitivity factor.
Outlook: Stable

CRISIL believes FFL will benefit from the extensive experience of its promoter and its healthy financial risk profile. The outlook may be revised to 'Positive' if increase in revenue or operating margin improves cash accrual. The outlook may be revised to 'Negative' if operating profitability is adversely affected by entry into new business segment, or if financial risk profile weakens on account of stretched working capital cycle or larger-than-expected, debt-funded capital expenditure.

About the Company

Incorporated as a private limited company in 1992 in Ahmedabad by Mr Ashok Motani and reconstituted as a public limited company in 1994, FFL exports fresh fruits (majorly grapes) and processed fruits. The company is setting up a unit to manufacture fresh juices.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs Cr. 133.87 111.52
Profit after tax Rs Cr. 9.01 8.05
PAT margin % 6.4 6.8
Adjusted debt/adjusted networth Times 0.47 0.52
Interest coverage Times NA 9.3

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 Cr) Rating Assigned with Outlook
NA Cash credit
#
NA NA NA 21.00 CRISIL BBB/Stable
NA Export packing credit
@
NA NA NA 15.0 CRISIL BBB/Stable
NA Long-term loan NA NA 30-Sep-2023 20.00 CRISIL BBB/Stable
@ Interchangeable with Foreign bill purchase/ Foreign bill discounting to the extent of Rs. 15.00 Cr.
# Interchangeable with Pre/Post shipment Finance/ Letter of Credit / Working capital demand loan / Bank Guarantee to the extent of Rs. 15.00 Cr.
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  56.00  CRISIL BBB/Stable      31-01-17  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
Cash Credit# 21 CRISIL BBB/Stable Cash Credit 6 CRISIL BBB/Stable
Export Packing Credit@ 15 CRISIL BBB/Stable Export Packing Credit 15 CRISIL BBB/Stable
Long Term Loan 20 CRISIL BBB/Stable Long Term Loan 3.74 CRISIL BBB/Stable
-- 0 -- Proposed Long Term Bank Loan Facility 31.26 CRISIL BBB/Stable
Total 56 -- Total 56 --
@ Interchangeable with Foreign bill purchase/ Foreign bill discounting to the extent of Rs. 15.00 Cr.
# Interchangeable with Pre/Post shipment Finance/ Letter of Credit / Working capital demand loan / Bank Guarantee to the extent of Rs. 15.00 Cr.
Links to related criteria
CRISILs Approach to Financial Ratios
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt

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