| Gadre Marine Export | ||||||
| Ratings reaffirmed at 'CRISIL BBB+/Stable/CRISIL A2' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2' on the long-term bank facilities of Gadre Marine Exports (GME; part of the Gadre Marine group).
The ratings continue to reflect above-average financial risk profile of the group and its moderate-yet-strong business risk profile, marked by an established market position in the surimi seafood products segment and a healthy and diversified customer base built by an experienced management team. These strengths are partially offset by large working capital requirement and exposure to risks arising from inherent volatility in fish supply (sea catch) and their prices, fluctuations in foreign exchange rates and changes in government regulations.
Revenue of the group increased to Rs 1,450.2 crore in fiscal 2022 from Rs 1,020.7 crore in fiscal 2021, driven by revival in demand, increasing sales of surimi imitation/analogue products (backed by enhanced capacity) and better realisations. Nonetheless, the operating margin dipped to 7.4% from 10.8% due to higher freight and other input costs that could not be readily passed on to customers. In fiscal 2023, the group has achieved improved sales and operating margin, backed by higher realisations, rates revision for surimi analogue customers, stabilised freight cost and moderation in fish procurement prices. The group is undertaking a capital expenditure (capex) to set up a new surimi capacity at Odisha that shall be operational in the near term. With this, group has surimi capacities at Chorwad (Gujarat), Mangaluru (Karnataka) and Odisha and surimi analogue capacity at Ratnagiri (Maharashtra). Having facilities at both the west and east coasts of India shall continue to benefit the group, driven by widened fish procurement over the medium term. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has consolidated GMEPL, its subsidiaries and Gadre Marine Export (GME). These entities, collectively referred to herein as the Gadre Marine group, have common promoters, operate in similar line of business, and have operational and financial linkages.
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 in surimi seafood products business and a diverse clientele: The group was one of the early entrants into the surimi products segment in India. Over the past two decades, it has established itself as the largest surimi exporter in the domestic market and a leading player across the globe. Continuous capacity enhancements and scale up of operations helped the group maintain its market position. It has plants at Ratnagiri, Chorwad, and Mangaluru, and a vast procurement network across Maharashtra, Karnataka, Gujarat, Andhra Pradesh/Telangana, Tamil Nadu, and Odisha. Most of the products are exported to customers, primarily in Japan and countries in Southeast and Far East Asia, the US and Europe.
GME, on standalone basis, operates at a modest scale and is into more competitive business of processing and export of frozen fish. Its performance has improved in fiscal 2022 with operating income of Rs.102 crore and operating margin of 3.08%. Performance is expected to improve further in current fiscal with company booking revenue of Rs.78 crore till Sep-22 in current fiscal.
Above-average financial risk profile: Financial risk profile remains above average, driven by sufficient accretion to reserve. Networth improved to Rs 525.92 crore as on March 31, 2022, with gearing at 0.91 time and total outside liabilities to tangible networth ratio at 1.19 times. Capex towards the new facility at Odisha is worth about Rs 65 crore, 70% of which will be debt funded. Debt protection metrics had moderated in fiscal 2022 due to a dip in profitability; interest coverage ratio was 3.09 times and net cash accrual to total debt ratio was 0.11 time in fiscal 2022. Nonetheless, the metrics may improve sharply in fiscal 2023, with estimated revival in profitability. Financial risk profile shall remain above average, driven by better operating performance, moderate capex and incremental working capital requirement.
Capex towards the new plant at Balasore, Odisha, expected to be functional by end of fiscal 2023, is likely to add towards efficiencies and economies of scale in fiscal 2023. The operating margin should improve over the medium term, with increasing operating profitability from stabilisation of freight cost and healthy sale of surimi analogue product.
Weaknesses: Exposure to volatility in fish supply (sea catch) and prices, and to government regulations: Players in the surimi seafood processing industry face high supply-side risk as revenue and profitability are determined by availability of fish. The group mainly procures fish from the sea catch, which tends to fluctuate based on sea fish landings, number of available fishing days (amidst uncertainty in the form of monsoon or fishing bans), and natural conditions/calamities. Operations also remain susceptible to changes in government policies related to the fishing industry and the prevailing regulations in overseas destinations. Despite its strong presence in the seafood export segment, the group faces competition for sea catch procurement. A lower catch can increase procurement prices and adversely impact profitability, as seen in the past. The group typically has periodic rate contracts with customers for surimi analogue products and any rise in input costs cannot be immediately passed through.
Working capital-intensive operations: Gross current assets have been 150-180 days for the two fiscals ended March 31, 2022, driven by sizeable inventory of 80-100 days and moderate receivables of 40-50 days. Limited credit on procurement further constrains the working capital cycle. |
Liquidity: Adequate Bank limit utilisation was high at around 90% for the 12 months through October 2022. Cash accrual is projected at more than Rs 80-100 crore per annum, against term debt obligation of Rs 45-50 crore over the medium term. Current ratio was adequate at 1.23 times on March 31, 2022, and cash and bank balance stood at around Rs 50 crore. Healthy networth and comfortable capital structure also aid financial flexibility. |
Outlook: Stable The Gadre Marine group will continue to benefit from its strong market position in the surimi business. Financial risk profile should also remain healthy because of substantial cash accrual. |
Rating Sensitivity factors Upward factors
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About the Group GMEPL was incorporated in 1994 by the promoter, Mr Deepak Gadre, and his family members. The company, based in Ratnagiri, manufactures and exports seafood products such as surimi and surimi analogue (crabstick) products. Surimi is a Japanese term for minced fish. The company has processing facilities at Maharashtra, Gujarat and Karnataka. Operations are managed by Mr Deepak Gadre (the chairman) and his son, Mr Arjun Gadre (the managing director).
The Hongkong-based subsidiary -- Gadre Marine Asia Pvt Ltd (GMAPL) -- is the marketing arm of GMEPL. Sales to Japan, China, Thailand and few other far-east countries are routed through GMAPL for operational and regulatory convenience. It does not have any external debt.
Gadre Marine Export (GME) was set up in 1978 as a proprietorship of Mr Deepak Gadre. It processes various types of raw fishes at its facility in Ratnagiri. This was the first business venture of the group. Earlier, the surimi business was under GME and later got transferred to GMEPL. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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This Annexure has been updated on 14-Dec-2022 in line with the lender-wise facility details as on 04-Aug-2021 received from the rated entity.
Criteria Details
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