Rating Rationale
October 07, 2022 | Mumbai
NIF Private Limited
Ratings reaffirmed at 'CRISIL A-/Stable/CRISIL A2'
 
Rating Action
Total Bank Loan Facilities RatedRs.280 Crore
Long Term RatingCRISIL A-/Stable (Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
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 A-/Stable/CRISIL A2+’ ratings on the bank facilities of NIF Private Limited (NIFPL; part of the Rohit Surfactants Pvt Ltd [RSPL] group).

 

The ratings reflects CRISIL Ratings' expectation of sustained improvement in NIFPL's operating performance over the medium term. For fiscal 2023, revenue is expected to grow ~20% due to stable demand for milk, price hikes undertaken and better demand of value-added products. For the first quarter of fiscal 2023, Company reported revenues of Rs.398 crore, a growth of 33% over the same period in the previous fiscal. The operating margin is expected to be around 3-3.5% in the current fiscal as the impact of higher milk procurement prices will partially offset by price hike undertaken in August 2022 better capacity utilization and expectation of softening of input prices.

 

Recovery in operating performance is expected to keep debt metrics at adequate levels. Financial risk profile remains comfortable with adequate liquidity. Cash accruals of about Rs 50 crore are sufficient for repayments of Rs 18-Rs 20 crore in fiscal 2023.The company had unutilized limits of Rs 27 crore as of July 2022. The debt protection metrics are expected to remain comfortable due to stable profitability with interest cover of more than 10 times. Further, the financial risk profile will remain supported by need based funding support from the promoters.

 

For fiscal 2022, company reported operating income of Rs 1,308 crore (growth of 16% compared to fiscal 2021) primarily due to price growth. Operating margin in fiscal 2022 moderated by 400 basis points due to the higher lower milk procurement prices, advertising and selling expenses on the new ice cream plant and high freight and procurement costs during the fiscal. Financial risk profile moderated on account of lower cash accruals and lower profitability. Interest cover was at  5 times (6 time in fiscal 2021) and gearing remained same at 0.7 time.

 

The ratings reflect NIFPL’s market position driven by improving market position driven by increasing scale of operations and product diversity, adequate financial risk profile because of efficient working capital management, funding support by way of unsecured loans and equity from RSPL group. These strengths are partially offset by NIFPL’s susceptibility to adverse regulatory changes and epidemic-related risks and modest operating profitability.

Analytical Approach

CRISIL Ratings has considered standalone business and financial risk profiles of NIFPL. Also, CRISIL Ratings has also factored in group support from RSPL promoter group due to strong financial linkages with the group.

 

Unsecured loans from promoters have been treated as 75% equity and 25% debt as per CRISIL Ratings criteria. Preference shares have also been treated as 100% equity as per CRISIL Ratings criteria.

Key Rating Drivers & Detailed Description

Strengths

  • Improving market position driven by increasing scale of operations and product diversity: NIFPL operates its dairy business under the Namaste India brand, and predominantly operates in the Kanpur and NCR region. Nevertheless, the brand is growing rapidly and is diversifying to other parts of Uttar Pradesh as well as NCR region. This is reflected in revenues growing at compounded annual growth rate of 10% for five years ended fiscal 2022.

 

NIF has also started commercial operations of its ice cream plant in fiscal 2022 and it is expected to scale up this fiscal. NIFPL’s revenue growth in the medium term will be driven by improving capacity utilization, efficient milk procurement, expansion of distribution in newer geographies such as NCR, improvement in product mix and steady demand from existing markets.

 

  • Adequate financial risk profile because of efficient working capital management, funding support by way of unsecured loans and equity from RSPL group: NIFPL has been receiving strong funding support from its promoters and parent during exigencies. The company’s promoters has done regular infusion of funds to meet capex funding requirements, working capital support and for repayment of term debt obligations. The company’s efficient working capital management is also reflected in the moderate utilisation of its bank lines. CRISIL Ratings believes that NIFPL will continue to receive strong funding support from its promoters and parent.

 

The NIFPL’s financial risk profile is supported by healthy networth at Rs 292 crore as on March 31, 2022. With company having only maintnenace capex plans and expansion of chilling centres in the medium term, gearing is expected to be less than 1 time in fiscal 2023. Higher capacity utilization and increased geographic reach, scaling up of cash accrual and low capex intensity are expected to result in gradual improvement in NIFPL’s financial profile.

 

Weaknesses:

  • Susceptibility to adverse regulatory changes and epidemic-related risks: The price of milk is sensitive to adverse changes in government policies and environmental conditions. Like all other agriculture-based products, pricing of milk products is sensitive to environmental conditions. Milk is procured from dairy farmers, and dairy-product manufacturers face the risk of lack of direct control over production, and are vulnerable to risks of low milk production because of factors such as variations in climatic conditions or livestock diseases. For instance, the operating margin was adversely impacted in fiscal 2022 and went down to 2.8% from 6.8% in the previous fiscal due to high milk procurement prices, and freight and packaging costs during the fiscal.

 

CRISIL Ratings believes that NIFPL’s revenue and profit will remain susceptible to any change in government policies and regulations and to volatility in prices of raw material.

 

  • Modest operating profitability: Operating profitability has remained between 1-4% in last few years albeit improving to 6.8% in fiscal 2021 on account of lower milk procurement prices. Also as about 70% revenue is derived from liquid milk which is a low value add product, the margins are highly dependent on milk procurement costs. Operating margins are expected to  remain between 3.5%-4.5% over the medium term on account of fluctuation in milk procurement prices and resumption of advertising and selling expenditure.

Liquidity: Adequate

Liquidity is expected to be adequate with estimated annual net cash accruals of Rs 50-70 crores sufficient for repayment obligations of Rs 20-30cr in the next 2-3 fiscals. Bank Limits are also moderately utilised at 35% for the past 12 months ending July 31, 2022. Further, financial support from RSPL group is likely to support liquidity.

Outlook: Stable

CRISIL Ratings believes that NIFPL’s business risk profile will continue to benefit from its established brands, improving geographic reach and expectation of continued support from its promoters.

Rating Sensitivity factors

Upward Factors:

  • Increase in scale of operations and operating profitability sustained over 5.5%.
  • Improvement in its financial risk profile due to higher cash accruals or equity infusion

 

Downward Factors:

  • Company's financial risk profile deteriorates, most likely because of a decline in its scale of operations, leading to operating profitability below 2-3%
  • Large debt-funded capital expenditure, significant increase in its working capital, or
  • Change in stance of RSPL group for support to NIFPL.

About the Company

NIFPL (wholly owned subsidiary of Leayan Global Pvt Ltd; rated CRISIL BBB+/Stable/CRISIL A2 and part of RSPL group), incorporated in 2007, manufactures various dairy products, such as pouched milk, buttermilk, skimmed milk powder, pure ghee, dairy whitener, butter, and instant food products under its Namaste India brand, mainly in Uttar Pradesh.

 

The company is promoted by the Kanpur-based Gyanchandani family, which also owns RSPL Ltd (RSPL; maker of Ghadi detergents; rated ‘CRISIL AA/Stable/CRISIL A1+’). RSPL hived off its dairy business to NIFPL.

Key Financial Indicators

Particulars

Unit

2022

2021

Revenue

Rs. Cr.

1313

1129

Profit After Tax (PAT)

Rs. Cr.

-10

27

PAT Margin

%

-0.8

2.38

Adjusted Debt/Adjusted Net worth

Times

0.68

0.67

Interest coverage

Times

4.46

6.26

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 assigned
with outlook
NA Bank Guarantee NA NA NA 5 NA CRISIL A2+
NA Cash Credit NA NA NA 88 NA CRISIL A-/Stable
NA Cash Credit and Working Capital Demand Loan NA NA NA 1.68 NA CRISIL A-/Stable
NA Cash Credit* NA NA NA 13 NA CRISIL A-/Stable
NA Foreign Exchange Forward NA NA NA 0.4 NA CRISIL A2+
NA Proposed Long Term Bank Loan Facility NA NA NA 50 NA CRISIL A-/Stable
NA Proposed Short Term Bank Loan Facility NA NA NA 32.94 NA CRISIL A2+
NA Standby letter of Credit NA NA NA 5 NA CRISIL A-/Stable
NA Term Loan NA NA 27-Sep 8.99 NA CRISIL A-/Stable
NA Term Loan NA NA 26-Mar 24.99 NA CRISIL A-/Stable
NA Term Loan** NA NA 26-Nov 50 NA CRISIL A-/Stable

*WCDL Sub-limit of cash credit of Rs 13 crore.

**Sub-limit of Rs 8 crore

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 270.0 CRISIL A2+ / CRISIL A-/Stable   -- 29-10-21 CRISIL A2+ / CRISIL A-/Stable 21-07-20 CRISIL BBB+/Stable / CRISIL A2 31-05-19 CRISIL A2+ / CRISIL A-/Stable CRISIL A2+ / CRISIL A-/Stable
      --   --   --   --   -- CRISIL A-/Stable
Non-Fund Based Facilities ST/LT 10.0 CRISIL A2+ / CRISIL A-/Stable   -- 29-10-21 CRISIL A2+ / CRISIL A-/Stable 21-07-20 CRISIL A2 31-05-19 CRISIL A2+ / CRISIL A-/Stable CRISIL A2+ / CRISIL A-/Stable
Commercial Paper ST   --   --   --   --   -- Withdrawn
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 5 State Bank of India CRISIL A2+
Cash Credit& 13 HDFC Bank Limited CRISIL A-/Stable
Cash Credit 88 State Bank of India CRISIL A-/Stable
Cash Credit & Working Capital Demand Loan 1.68 State Bank of India CRISIL A-/Stable
Foreign Exchange Forward 0.4 State Bank of India CRISIL A2+
Proposed Long Term Bank Loan Facility 50 Not Applicable CRISIL A-/Stable
Proposed Short Term Bank Loan Facility 32.94 Not Applicable CRISIL A2+
Standby Letter of Credit 5 State Bank of India CRISIL A-/Stable
Term Loan^ 50 HDFC Bank Limited CRISIL A-/Stable
Term Loan 24.99 State Bank of India CRISIL A-/Stable
Term Loan 8.99 State Bank of India CRISIL A-/Stable
This Annexure has been updated on 16-Feb-23 in line with the lender-wise facility details as on 25-Jan-23 received from the rated entity.
& - WCDL Sub-limit of cash credit of Rs 13 crore.
^ - Sub-limit of Rs 8 crore
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Fast Moving Consumer Goods Industry
Criteria for Notching up Stand Alone Ratings of Companies based on Group Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Mohit Makhija
Senior Director
CRISIL Ratings Limited
B:+91 124 672 2000
mohit.makhija@crisil.com

Gautam Shahi
Director
CRISIL Ratings Limited
B:+91 124 672 2000
gautam.shahi@crisil.com

Vedika Kedia
Rating Analyst
CRISIL Ratings Limited
B:+91 124 672 2000
Vedika.Kedia@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html