Rating Rationale
December 31, 2024 | Mumbai
Magnum Sea foods Limited
'CRISIL A3+' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.105 Crore
Short Term RatingCRISIL A3+ (Assigned)
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 assigned its ‘CRISIL A3+’ rating to the short term bank facilities of Magnum Sea Foods Ltd (MSFL; a part of the Magnum group).

 

The ratings reflect the extensive experience of the promoters in the seafood industry and moderate financial risk profile of the group. These strengths are partially offset by exposure to risks inherent in the industry and large working capital requirement.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of Magnum Estate Ltd (MEL) and Magnum Sea Foods Ltd (MSFL) because both these entities, together referred to as the Magnum group, operate in the same industry 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:

  • Extensive experience of the promoters: The promoters have more than three decades of experience in the seafood industry; their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business.

 

The group has two product lines -- one is seafood and the other feed sales. Profitability from feed sales is nominal but the group utilises its market presence and receives 90-120 days of credit period from feed suppliers. The group sells this feed to local farmers who in return supply prawns; this ensures consistent availability of raw material. Thus, revenue stood strong at around Rs 315.5 crore with operating margin of 4.1% in fiscal 2024.

 

  • Moderate financial risk profile: The group’s capital structure should remain moderate due to limited reliance on external funds. Networth is estimated at around Rs 111 crore as on March 31, 2024, with gearing of 0.7 time and total outside liabilities to adjusted networth ratio of 1.1 times. Debt protection metrics may continue to be comfortable owing to moderate profitability. Interest coverage ratio was 1.7 times and net cash accrual to total debt was 12 times for fiscal 2024.

 

Weaknesses:

  • Exposure to risks inherent in the seafood industry: Shrimp prices depend on its availability during a particular period. Therefore, any volatility in the cost of shrimp significantly impacts the profitability of players. Further, the seafood export segment is marked by stringent regulations and quality requirements. Many of the export destinations implement regulations from time to time (including anti-dumping duty, food safety regulations, and quality requirements) that need to be met. Adverse regulatory changes, such as the levy of anti-dumping duties by importing countries, can constrain the profitability of players.

 

  • Large working capital requirement: Gross current assets have been 120-190 days during the past three fiscals and were 189 days as on March 31, 2024, driven by high debtors of 84 days and  inventory of 85 days. The group needs to extend long credit period particularly in feed sales and maintain sizeable work in process and inventory to meet business need. Efficient working capital management will remain a monitorable over the medium term.

Liquidity: Adequate

Liquidity should remain supported by the ample surplus available in cash accrual and bank lines. Bank limit utilisation was around 80% during the 12 months through November 2024. Cash accrual is projected at Rs 8-9 crore per annum, against yearly debt obligation of less than Rs 1 crore over the medium term. Current ratio stood at 1.26 times and cash and bank balance at around Rs 9 crore as on March 31, 2024. Low gearing and moderate networth will aid financial flexibility.

Rating sensitivity factors

Upward factors

  • Strong revenue growth per fiscal with operating margin of more than 8%, leading to higher-than-expected net cash accrual
  • Improvement in the working capital cycle and absence of any major, debt-funded capital expenditure (capex)

 

Downward factors

  • Significant decline in revenue and/or operating margin, resulting in net cash accrual less than Rs 3 crore
  • Further stretch in the working capital cycle or any large, debt-funded capex

About the Magnum Group

The group comprises two companies -- MSFL (incorporated in 1987) and MEL (1993); it is based in Bhubaneswar, Odisha. Both the entities are in the aquaculture business, mainly engaged in harvesting, processing and export of shrimp and fish feed. Mr Ramesh Mahapatra and Ms Geeta Rani Padhi are the promoters.

Key Financial Indicators

Combined

 

 

 

As on/for the period ended March 31

 

2024

2023

Operating income

Rs crore

315.54

405.41

Reported profit after tax (PAT)

Rs crore

0.55

1.45

PAT margin

%

0.17

0.36

Adjusted debt/adjusted networth

Times

0.68

0.51

Interest coverage

Times

1.64

1.97

    

 

 

 

MSFL

 

 

 

As on/for the period ended March 31

 

2024

2023

Operating income

Rs crore

217.27

284.95

Reported PAT

Rs crore

0.53

0.91

PAT margin

%

0.24

0.32

Adjusted debt/adjusted networth

Times

1.01

0.73

Interest coverage

Times

1.57

1.86

  

 

 

 

MEL

 

 

 

As on/for the period ended March 31

 

2024

2023

Operating income

Rs crore

110.46

153.14

Reported PAT

Rs crore

0.02

0.54

PAT margin

%

0.02

0.35

Adjusted debt/adjusted networth

Times

0.14

0.14

Interest coverage

Times

1.99

2.33

Status of non cooperation with previous CRA:

MSFL has not cooperated with Credit Analysis & Research Ltd, which has classified the company as non-cooperative vide release dated January 03, 2018. The reason provided by Credit Analysis & Research Ltd is non-furnishing of information for monitoring the ratings.

 

MSFL has not cooperated with India Ratings And Research Private Limited, which has classified the company as non-cooperative vide release dated September 13, 2024. The reason provided by India Ratings And Research Private Limited is non-furnishing of information for monitoring the 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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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. Crore) Complexity Levels Rating Outstanding with Outlook
NA Export Packing Credit NA NA NA 70.00 NA CRISIL A3+
NA Proposed Working Capital Facility NA NA NA 35.00 NA CRISIL A3+

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Magnum Estates Limited

100% 

Both entities operate in the same industry and have operational and financial linkages

Magnum Sea foods Limited

100%

Both entities operate in the same industry and have operational and financial linkages
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST 105.0 CRISIL A3+   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Export Packing Credit 70 Indian Overseas Bank CRISIL A3+
Proposed Working Capital Facility 35 Not Applicable CRISIL A3+
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Criteria for rating entities belonging to homogenous groups
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
CRISILs Approach to Recognising Default

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