| HMA Agro Industries Limited | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
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| This Rating Rationale is published solely to update the bank-wise facility details as provided by the rated entity; other sections are same as the previous Rating Rationale dated December 24, 2021. |
Detailed Rationale CRISIL Ratings on the bank facilities of HMA Agro Industries Ltd ((HMA part of HMA Group) continues to reflect the extensive experience of the promoter, the group's healthy financial risk profile and efficient working capital management. These strengths are partially offset by susceptibility to changes in government regulations, and moderate however improving operating profitability.
CRISIL Ratings had upgraded its rating on the long-term bank facilities of HMA to ‘CRISIL A-/Stable’ from ‘CRISIL BBB+/Stable’ on December 13, 2021. |
Analytical Approach CRISIL Ratings has revised its analytical approach and has combined the business and financial risk profiles of HMA Agro Industries Limited and United Farm Products Pvt Ltd (UFPPL). This is because UFPPL is wholly owned subsidiary of HMA, and both the companies, together referred as the HMA group, have common management with 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: Strong business risk profile: The group has experience of more than six decades in meat processing which has helped maintain healthy relationships with customers and suppliers along the supply chain management. Group is among the largest exporters of buffalo meat in India and accounts for more than 10% of India’s total export of frozen buffalo meat. Its revenue is estimated at Rs 1784 crores during fiscal 2021 as against Rs 2375 crore for fiscal 2020. Decline in revenue was on account of the impact of pandemic. Strong demand for buffalo meat in the international market and established customer relationships will ensure steady revenue growth over the medium term. HMA group has achieved sales of more than Rs.1432 crore in H1 of the current fiscal with estimated revenue bookings of around ~3000 crores in the current fiscal.
Healthy financial risk profile: The financial risk profile has improved, as reflected in the decline in the TOLTNW ratio estimated at 0.88 time as on March 31, 2021 as against 1.11 times in fiscal 2020, due to significant improvement in the working capital cycle. Moderate reliance on debt has kept gearing below 1 time (0.71 time estimated as on March 31, 2021). Debt protection metrics were healthy, as reflected in interest coverage and net cash accrual to total debt ratios estimated at 11 times and 0.38 time, respectively, in fiscal 2021. CRISIL believes the financial risk profile will remain healthy over the medium term.
Efficient working capital management: Working capital cycle is prudent as indicated by estimated GCAs of 78 days as on March 31, 2021, driven by low inventory and receivables of 37 and 30 days, respectively. Payables have reduced significantly due to faster payment to major suppliers. CRISIL believes the working capital management will remain efficient over the medium term.
Weakness: Susceptibility to changes in government regulations: Changes in government policies could directly affect sales and raw material supply. Policies that have affected illegal abattoirs have been positive for licensed abattoirs. However, an adverse change in policy could impact business. Also, products have to meet international quality standards which is expected to get achieved from the new plant process. However, with the support from the government to ensure regular raw material supply, is expected to further support the operations of the company in the medium term.
Moderate however improving operating profitability: The intense competition in the domestic and international markets has kept moderate operating margin (estimated at 6% in fiscal 2022). The margin has improved in fiscal 2021 due to better realisations from the international market and cash discounts availed from creditors. While the company to benefit from its established market position and enhanced capacities in subsidiary, sustainability of these margins will remain a key monitorable. |
Liquidity: Strong Liquidity is adequate as reflected in bank limit utilisation of 56.76% on average over the 12 months through September 2021. Cash accrual is expected over Rs 128 crores per fiscal against negligible repayment obligations, and the surplus will cushion liquidity and also help fund the proposed capex in subsidiary. Current ratio was moderate at 1.89 times estimated as on March 31, 2021. |
Outlook Stable CRISIL Ratings believes HMA group will continue to benefit from the promoter’s industry experience and maintain its comfortable financial risk profile over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company HMA: Incorporated in 2008, HMA processes and exports frozen buffalo meat. The manufacturing facility is in Aligarh, Uttar Pradesh. Late Mr Haji Mohammed Ashiq Qureshi is the founder and Mr. Gulzeb, Gulzar and Wazib Ahmed are the three directors from the group.
About UFPPL: UFPPL was incorporated in 2018. UFPPL is currently setting up an integrated and export-oriented buffalo meat processing plant as well as animal slaughterhouse, located in Haryana. UFPPL is expected to commence its operation from April 2022. It is part of HMA Agro group and wholly owned subsidiary of HMA Agro Industries Limited (HMA). The company is focused to export in the European market however the same is subjected to change with the government regulations. |
Key Financial Indicators
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Status of non cooperation with previous CRA: HMA has not cooperated with INFOMERICS Valuation and Rating Private Limited, which led to its classification as ‘issuer not cooperative’ vide release dated November 29, 2021. The reason provided by INFOMERICS Valuation and Rating Private Limited, is non-furnishing of information for monitoring of ratings. |
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)
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 22-Mar-2022 in line with the lender-wise facility details as on 24-Dec-2021 received from the rated entity.
Criteria Details
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