| Roha Dyechem Private Limited | ||||||
| Rating outlook revised to ‘Positive’; Ratings Reaffirmed; Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 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 revised its rating outlook on the long-term bank facilities of Roha Dyechem Private Limited (RDPL) to ‘Positive’ from 'Stable' while reaffirming the long term rating at ‘CRISIL A’. The rating on the short-term bank facilities has been reaffirmed at ‘CRISIL A1’.
The revision in outlook factors in a continued strong market position in the food colour segment, commissioning of non-food colour plant in Dahej which will have a positive impact on overall margins, increase in product diversification through acquisition of Saraf Foods Ltd. and expectations of reduction in support being extended to other group companies going forward.
During fiscal 22, overall revenue of the company on a consolidated basis grew by 17% on y-o-y to Rs. 2,005 crore from Rs. 1708 crores in fiscal 2021. Growth recorded was sharper at 20% on a standalone level wherein revenues recorded stood at Rs. 912 crore during fiscal 2022 (fiscal 2021: Rs. 760 crore). Food color segment (Dhatav Plant) recorded 19% y-o-y growth from Rs. 662 crores during fiscal 21 to Rs. 787 crores during fiscal 22. This was aided by growth in realizations by ~16% while volume growth remained moderate at ~3%. Capacity utilization for this plant remained healthy at 93% vis-à-vis ~91% in previous fiscal. Revenue from renewable segment remained stable at Rs. 97 crores during fiscal 22 as against Rs. 98 crores in fiscal 21. Revenue from overseas subsidiaries grew by ~12% from earlier Rs. 950 crore in fiscal 2021 to Rs. 1,061 crs in fiscal 2022. During fiscal 23, overall revenues is estimated to reach Rs. 2,250 crore driven by growth primarily at the standalone level. Dahej plant started its operations during quarter 4 of fiscal 2022 and was in a ramp up phase last fiscal. With this plant reaching optimum capacity utilization levels this fiscal, standalone revenues will go up but overall impact on consolidated revenues will be marginal as it will mainly be towards substituting trading activities undertaken in the overseas subsidiaries.
Consolidated operating margins for the company decreased by 200 bps but remained healthy at 17.5% in fiscal 2022 vis-à-vis 19.5% in fiscal 2021. The decline in margins was primarily on account of reduction in standalone margins to 22% in fiscal 2022 from 28% in fiscal 2021. This was on account of stabilization expenses in the Dahej unit which dragged down the margins at the standalone level. While margins in the renewable segment broadly remained stable, margins in the overseas business also moderated by ~200 bps to 11% in fiscal 22 from 13% in fiscal 2021 primarily owing to increase in logistics and other admin expenses. Overall consolidated margins of the company are expected to remain flattish at ~17% during fiscal 23 as against 17.5% in fiscal 22.
During the year, company acquired Saraf Foods Limited which is engaged in the frozen food segment. This acquisition will complement the company’s existing unit in Italy and would help in further diversifying its product profile. The total consideration for the acquisition stood at Rs. 185 crore funded though fresh debt of Rs. 103 crore and balance through internal accruals.
The business risk profile is expected to be supported over the medium term by revenue contribution of new products, healthy demand for existing products, market leadership in the food color business in both domestic and overseas markets and healthy operating margin of 16-18% at a consolidated level. The profitability will be supported by strong operating efficiency and ramp-up of facility at the Dahej Plant. The business risk profile will continue to benefit from the company’s dominant position in the food color segment, established relationships with most large fast-moving consumer goods (FMCG)/consumer companies globally and sound operating efficiencies. The business risk profile will further benefit from the acquisition which will aid in revenue diversification going forward. Stable performance of the solar projects in Gujarat, Maharashtra and Rajasthan, with an average plant load factor (PLF) of 20%, will also provide significant stability to the operating performance.
The financial risk profile remained strong backed by estimated net-worth of ~Rs. 1400-1450 gearing of 0.50x. Debt protection metrics are also expected to remain healthy with interest cover of about 8x-10x times and NCATD of ~0.30x-0.50x times. Net cash accruals of Rs 260-300 crores would be sufficient to meet the term debt repayment obligations of Rs. 90-120 crores and annual capex requirements not exceeding Rs 50-80 crores per annum. Liquidity for the company also remained healthy with unencumbered cash and bank balances of ~Rs 200 crore at March 31, 2022.
The company has provided support to the Roha’s Housing Finance business through corporate guarantee upto Rs 100 crore out of which Rs. 30 crore is currently outstanding. Company has articulated that no further guarantees will be given to Roha Housing or any other group entities and guarantee o/s in Roha Housing will also come down over medium term. Further, company also has loans and advances to group companies of Rs. 235 crore as on March 31, 2022. Any sharp increase in loans and advances and dividends beyond profits generated in the solar segment will be a key monitorable.
The ratings continue to reflect RDPL’s established market position in the food colour business, stable solar energy business backed by consistent PLF and regular payments by customers. These strengths are partially offset by working capital-intensive operations and exposure to counterparty risks in the power segment, especially for wind power |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of RDPL and its subsidiaries (including newly acquired Saraf Foods Ltd), associates and joint ventures. This is because all the companies, together referred to as RDPL, have common promoters and management, and business 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 RDPL has a strong business risk profile marked by leadership position in food color business being the second largest player globally with ~37-38% market share. About 77-80% of revenue of color business is derived from exports/ overseas markets. It also has sizeable global presence with 27 group companies in 20 countries. It has longstanding relationships with major domestic and global FMCG players and meets their stringent norms and certifications, which is an imperative in the food color business. Adjusted net-worth and total outside liabilities to adjusted net-worth ratio stood at Rs 1,267 crore and 1.05 times, respectively, as on March 31, 2022, and are expected to improve going forward. The debt protection metrics were also healthy with NCATD and interest coverage at 30% and about 10.08 times, respectively, for fiscal 2022. The financial risk profile is expected to gradually improve, from already comfortable levels, over the medium term with strong cash accruals, progressive debt repayment, and limited debt-funded capex.
* Sound operating capability in the solar energy business The company has 63.5 megawatt (MW) solar power capacity in Gujarat (25MW), Rajasthan (27.5MW) and Maharashtra (11MW). The electricity generated from Maharashtra solar is expected to be consumed captively by the company. The company has entered into power purchase agreement (PPA) for offtake of electricity from Gujarat and Rajasthan project with Gujarat and Rajasthan Government entities respectively. Operating margins of this segment stood at a comfortable 80-85%.
The company has entered into power purchase agreements with state utilities for the power generated from its renewable energy projects and is exposed to counterparty risks such as delays in payments. While payments for solar energy are regular, payments in the wind energy segment are delayed by up to six months. However, the contribution of this segment to revenue is just 0.1%. Stable cash flows from its major revenue sources (food colour and solar energy) mitigate the risk.
Gross current assets (GCAs) were at 180-260 days in the past four fiscals and were relatively higher at 224 days as on March 31, 2022 , because of inventory of 132 days and receivables of 79 days. The GCAs are estimated at 200-220 days as on March 31, 2022. The company has to maintain large inventory, being in a relatively niche category and as it deals in a large variety of products. The large receivables are due to the long approval process for products from the customers. |
Liquidity: Adequate Cash accrual is expected at Rs 260-300 crore per annum during fiscals 2023-25 against yearly term debt obligation of Rs 80-120 crore. Company also had cash and cash equivalent of Rs. 200 crore as on Matrch 31, 2022 and is expected to maintain surplus liquidity of over Rs 100 crore at all times. Standalone fund-based working capital limit of Rs 180 crore were utilised at 86% on average over the 12 months through February 2023 |
Outlook: Positive CRISIL Ratings believes RDPL will continue to benefit from its established market position in the food colour business, increased operational efficiencies from commissioning of Dahej plant, better product diversification through acquisition of Sarad Foods Ltd and the stable operating performance of its solar power projects. |
Rating Sensitivity factors Upward Factors |
About the Company Established in 1972 and promoted by Mr Ramakant Tibrewala, RDPL manufactures dyes and colours used in food and beverages, drugs and cosmetics. It has a wide global network with group companies across 20 countries. RDPL also owns and operates three solar energy projects of 63.5 MW in Gujarat, Rajasthan and Maharashtra; and three wind energy projects of 31.5 MW in Maharashtra, Madhya Pradesh and Rajasthan. The energy generated from the solar plant in Maharashtra shall be used for captive purposes.
For fiscal 2022, at a standalone level, RDPL’s revenue increased by 20% and PAT margin dropped to 12.6% from 14.6% in fiscal 2022. At a consolidated level, revenue was around Rs 2005 crore in fiscal 22 with steady operating margin of around 17.5%. |
Key Financial Indicators - Standalone
Key Financial Indicators - Consolidated
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with export packing credit and packing credit in foreign currency |
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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 10-Apr-2023 in line with the lender-wise facility details as on 2-Aug-2021 received from the rated entity
*Interchangeable with export packing credit and packing credit in foreign currency
Criteria Details
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