Detailed Rationale

Crisil Ratings has continued its rating on the long-term bank loan facilities of Haldiram Snacks Pvt Ltd (HSPL; part of the Haldiram Delhi group) on ‘Rating Watch with Developing Implications’. Further, Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the short-term bank facilities of the company.

 

The ratings have been placed on watch following re-organisation of the group with demerger of the fast-moving consumer goods (FMCG) business of HSPL and Haldiram Foods International Private Limited (HFIPL; part of Haldiram Nagpur group) into a newly incorporated entity named Haldiram Snacks Foods Private Ltd (HSFPL). HSPL has received NCLT approval vide order dated 21st March 2025 for the demerger of the FMCG business. The rating continues to remain on watch pending receipt of key information including financials for the standalone entities post demerger, details of business transferred and retained, status of banking limits, clarity on support structure for group entities and other relevant business information.

 

Revenues grew to Rs 6,976 crores in fiscal 2024 supported by healthy demand for namkeen products. Profitability is also improved by 219 bps to 17.9% due to normalization of key raw material prices such as palm oil, milk and packaging costs. Going forward, Crisil Ratings expect the revenue growth to remain healthy at 8-10% with operating profitability sustaining at 18-19%.

 

The ratings continue to reflect the group’s -popular market position in the high-growth -savoury snack segment in India supported by its quality and trusted brand, Haldiram’s, and the extensive experience of the promoters. The ratings also factor in the group’s healthy operating efficiency and comfortable financial risk profile, as reflected in adequate cash accrual, negligible external borrowing and healthy liquidity. These strengths are partially offset by susceptibility to volatility in raw material prices and exposure to intense competition.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of HSPL and its group companies, Haldiram Manufacturing Company Pvt Ltd, Haldiram Ethnic Foods Pvt Ltd, Haldiram Marketing Pvt Ltd, Ankita Agro and Food Processing Pvt Ltd and Haldiram Products Pvt Ltd as the entities are strategically important. These are collectively referred to as the Haldiram Delhi group.

 

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 market position in the salted snack segment: The salted snack segment is the biggest driver of HSPL, with over 75% revenue earned through this segment.

 

The product profile is diversified, comprising snacks, namkeen, sweets, ready to eat / pre-mix food, frozen food, biscuits, non-carbonated ready to drink beverages, pasta, etc. The group has diverse presence in India and exports to various countries outside India, including the United states of America and Europe. Furthermore, presence of over 80 years has helped introduce products in different categories and diversify revenue. Brand equity and the ability to localise the taste of products relatively insulate the group from downturns in the fast-moving consumer goods sector.

 

The group has a strong distribution network. Healthy growth prospects for the namkeen industry, strong demand for snacks, increasing distribution reach and regular product launches will help sustain revenue growth in fiscal 2025.

 

Supported by a robust market position and strong supply-chain network, the group has established its restaurant business (12% of turnover). It has multiple outlets (owned and leased) in north India.

 

• Healthy operating efficiency: Close monitoring of procurement, cost and working capital has helped maintain healthy operating efficiency, reflected in return on capital employed (RoCE) of over 20% in the past two fiscals. Furthermore, the group’s strong distributor network helps drive growth. The group will continue to benefit from its cost-effective and established sourcing strategy for raw materials. Furthermore, the group’s working capital cycle is efficiently managed, as reflected in historically healthy receivables and inventory of 8-10 days and 22-24 days respectively.

 

• Robust financial risk profile: The financial risk profile is supported by healthy cash accrual of Ra 1079 crores and negligible borrowings of Rs 80 crores. Strong cash accrual of Rs 1000 crore per annum is expected to remain sufficient to fund any planned capex and incremental working capital requirement.  The group does not have any major capex plans over the medium term. Gearing was stable at 0.02 time as on March 31, 2024 and is estimated to remain at similar levels going further.

 

Weaknesses:

• Susceptibility to volatility in raw material prices: The key raw materials (palm oil, pulses, peanuts, sugar, gram flour and packaging material) account for over 60% of cost. Their prices depend on geoclimatic conditions, global prices and domestic demand-supply situation. Hence, profitability is partly susceptible to fluctuations in raw material prices. However, focus on cost efficiency and continued price leadership should help mitigate the impact of volatility in raw material prices.

 

• Exposure to intense competition in the packaged food industry: Large companies, with deep pockets, in the food segment are increasing investment in the savoury snacks division, constraining the profitability of players such as HSPL. Intense competition constrains the ability to pass on increase in raw material prices. Therefore, players have to regularly innovate, introduce differentiators and refreshes, and build on their reach and distribution to sustain market share and profitability. While the group has been able to effectively compete and engage in competitive pricing, competition from organized and unorganized players persist.

Liquidity: Strong

Liquidity will remain strong over the medium term. Healthy cash accruals of Rs 1000 crores per annum expected to remain sufficient against nil debt obligation. Company does not have any external borrowing Liquidity is cushioned by cash surplus of over Rs 1058 crore as on March 31, 2024.

Rating sensitivity factors

Upward factors:

• Significant ncrease in revenue, driven by product diversity, and rise in operating margin to 25%
• Sustenance of the financial risk profile and liquidity.
   

Downward factors:

• Weakening of capital structure driven by gearing of above 0.5 time
• Unrelated inorganic diversification
• Decline in the operating margin, or any large debt-funded capex or acquisition, weakening the financial risk profile and liquidity

About the Group

Incorporated in 1989, HSPL is engaged in the manufacture and distribution of packaged food products in India such as snacks, namkeen, sweets, ready to eat / pre-mix food, frozen food, biscuits, non-carbonated ready to drink beverages, pasta, vermicelli, macaroni, etc.  under the brand, Haldiram’s. It started out as a namkeen company and diversified into other product categories. HSPL markets more than 100 products across India and exports to various countries. It has manufacturing facilities in Noida, Uttar Pradesh, and Rudrapur, Uttarakhand; and a captive solar plant in Hardoi, Uttar Pradesh. Also, multiple restaurants including in National Capital Region, Uttar Pradesh, Punjab and Haryana are being operated under different group companies.

 

The packaged foods business contributes 85% to the group’s turnover, while the restaurant business contributes 15%. The group is owned and managed by Mr Manohar Lal Agrawal and Mr Madhu Sudan Agrawal.

Any other information: Not applicable