| K. T. V. Health Food Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB-/Stable/CRISIL A3 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL has reaffirmed its ratings on the bank facilities K. T. V. Health Food Private Limited (KTVHFPL, part of the KTV group) at ‘CRISIL BBB-/Stable/CRISIL A3’.
CRISIL ratings on the bank facilities of KOG-KTV continues to reflect the group's established market position in the edible oil market and moderate financial risk profile. These strengths are partially offset by volatile edible oil prices, fluctuations in foreign exchange (forex) rates and exposure to intense competition. |
Analytical Approach For arriving at the ratings, CRISIL has combined the business and financial risk profiles of KOG-KTV and KTV Health Food Pvt Ltd (KTVHPL). This is because the two companies, together referred to as the KTV group, operate in the same business, and have common promoters, fungible cash flow, and significant business synergies
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:
The group has a strong presence in South India's edible oil segment, as reflected in its operating income of Rs.3219 crores for fiscal 2020. The group retails palm oil and sunflower oil under its Roobini and Sunland brands, respectively; and also sells in bulk. Group's business risk will remain healthy over the medium term on account of presence of strong brand name and continued demand for edible oil in southern market.
Financial risk profile is supported by moderate capital structure and debt protection metrics. Total outside liabilities to tangible networth (TOLTNW) has improved to 3.1 times in 2020 against 6.2 times in 2019. Nevertheless, it needs to be seen for sustainability, given the group’s reliance on letter of credit (LC) for procurement of input materials. Ability to improve TOLTNW further, will remain a key sensitivity factor. Interest coverage and Net Cash accruals to Total Debt (NCA/TD) was about 5.5 times and 0.19 times in fiscal 2020, respectively
Weakness:
Palm oil prices are highly volatile compared to other edible oils, resulting in fluctuations in operating profitability. The group has seen an impact on its margins in the previous fiscals, with operating margins moving between 2-5 percent. Also, large movements in forex can also impact the group’s margins for the company. Though high dependence on imports exposes operating margin to any sharp change in forex rates, this is partially mitigated by the group’s prudent risk management policy.
Presence of several small, unorganized players across the value chain, from crushing to solvent extraction, has led to intense competition in the edible oil industry. Given the price-sensitive nature of demand, players mainly cater to regional demand to avoid high marketing and distribution costs. Furthermore, the industry is vulnerable to government policies in the form of duties imposed on import of refined and crude edible oil, volatility in edible oil prices and foreign exchange rates. Therefore, the group’s profitability margins from sale of edible oil, remains thin over the past few years, ended fiscal 2020. |
Liquidity: Adequate The group’s liquidity remains adequate supported by high fixed deposits against its maturing LC obligations and cushion in its cash credit limits to support any ad-hoc requirements. Majority of the group’s LCs are backed 100% by fixed deposits. Also, with an efficient working capital cycle, the collection are often utilized to close the LC obligations. Cash credit limit of Rs.4 crore, remains unutilized and is set aside to meet any ad-hoc obligations. LC limits are utilized to the extent of 71% over the past 12 months, ended Oct 2020. Additionally, the promoters can extend fund support to meet any business requirements. Unencumbered cash and bank deposits of above Rs.19 crore as on 31 March, 2020, will support the liquidity for the group |
Outlook Stable CRISIL believes that the group will continue to benefit from the established market position in the edible oil segment over the medium term. |
Rating Sensitivity Factors Upward factor
Downward Factor
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About the Group The KTV group refines and trades sunflower oil and palm oil. KOG-KTV, the flagship company, was set up in 2004. KOG-KTV and KTVHPL are 50:50 joint ventures of the KTV group and Adani Wilmar Limited (AWL). |
Key Financial Indicators
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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)
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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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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