| Prestige Feed Mills Limited | ||||||
| Ratings Reaffirmed and Withdrawn | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Rating has reaffirmed its ratings on the bank facilities of Prestige Feed Mills Limited (PFML) at and has subsequently withdrawn the ratings at the company's request and on receipt of no objection certificate from the bankers. The withdrawal is in-line with CRISIL Ratings' policy on withdrawal of bank loan ratings. |
Analytical Approach Total unsecured loans stood at Rs.12 crore as on March 31, 2021. The same has been treated as 75% equity 25% debt to the extent of Rs. 11.91 Crore on account of track record of non-withdrawal and are also expected to remain in business over medium term. |
Key Rating Drivers & Detailed Description Strengths: * Established brand presence backed by extensive experience of the promoters: The company is promoted by 'Padma Shri' Dr. N.N. Jain and his two sons, Dr. Davish Jain & Mr. Dipin Jain who have around 5 decades of experience in the industry. Over the years, on back of promoters understanding of industry dynamics and established customer and supply base, the company has built up a dominant market position resulting in a healthy brand recall of the 'Prestige' brand in key consumption markets while diversifying its product profile. This has helped the company successfully navigate business cycles over the years.
* Comfortable financial risk profile: Moderate total outside liabilities to adjusted networth 1.7 times on a healthy networth base of 68.9 crore represents healthy capital structure. Debt protection metrics were moderate, with the interest coverage ratio at 2.4 times and the net cash accrual to adjusted debt (NCA/AD) ratio at 0.10 time, for fiscal 2021. Debt protection metrics is expected to improve further with debt expected to remain flattish and expected improvement in operating margin.
* Efficient working capital management: Working capital is efficiently managed, as reflected in gross current assets (GCAs) of estimated at around 52 days as on March 31, 2021, driven by receivables of 17 days and inventory of around 27 days.
Weakness: * Exposure to risks inherent in agro-commodity-related businesses: Soya seeds is a major raw material (RM) for PFML and forms around 90 percent of the total cost of sales. RM prices are dependent on the domestic production of soya seed which in turn depends on the area under cultivation, monsoon, minimum support price and other incentives offered by the Government of India; all these factors also determine the final product price. Limited availability of soya bean seeds and fluctuating soya bean seed prices can impact PFML's top line and profitability. However this risk is partly mitigated by prudent inventory management practices and strategic location of the company.
* Exposure to intense competition: Presence of several small and similar players with strong regional presence across the value chain, from crushing to solvent extraction, has led to intense competition in the soybean industry which is highly fragmented. While the edible oil consumption pattern has changed dramatically over the past two decades, Soybean oil is subject to intense competition from its substitutes such as mustard, coconut, groundnut, sesame, safflower and sunflower. PFML therefore has constrained pricing flexibility. Moreover, the company's focus on building the brand 'Prestige' in new markets has also led to increased marketing and selling cost over the period resulting in lower operating margins. |
Liquidity: Adequate PFML is expected to generate accruals of around Rs 10-12 crore per annum in fiscal 2022 and 2023 against repayment obligation of approximately Rs 1.62 crore in fiscal 2022. Company has access to fund based limits of Rs 90 Crore, utilized at an average of 86.1% for 12 months ended June 2021. Cash and cash equivalents were at Rs 0.42 crore as on March 31, 2021. Current ratio was moderate at 1.38 times as on March 31, 2021. The company does not have any significant debt funded capex plan over the medium term. CRISIL Ratings expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements over the medium term. |
Outlook: Positive CRISIL Ratings believes that PFML will sustain its improved business risk profile supported by established presence in the industry, promoter’s extensive experience and established relations with suppliers and customers |
Rating Sensitivity Factors Upward factor:
Downward factor:
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About the Company Incorporated in 1981, PFML is an Indore-based company promoted by Dr. N. N. Jain and his family. The company manufactures and sells soya bean oil, de-oiled cakes and other value-added soya products such as soya flakes and soya flour under its own brand 'Prestige'. The manufacturing facilities of the company are located in Dewas, Madhya Pradesh. The operations are currently managed by Dr. Davish Jain, the second generation of the family. |
Key Financial Indicators
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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)
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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 | ||
| Facility | Amount (Rs.Crore) | Rating |
| Bank Guarantee | 0.25 | CRISIL A3+ (Rating Reaffirmed and Withdrawn) |
| Cash Credit | 30 | CRISIL BBB/Positive (Rating Reaffirmed and Withdrawn) |
| Cash Credit | 26.5 | CRISIL BBB/Positive (Rating Reaffirmed and Withdrawn) |
| Cash Credit | 33.5 | CRISIL BBB/Positive (Rating Reaffirmed and Withdrawn) |
| Letter of Credit | 1.1 | CRISIL A3+ (Rating Reaffirmed and Withdrawn) |
| Term Loan | 8 | CRISIL BBB/Positive (Rating Reaffirmed and Withdrawn) |
Criteria Details
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