| Tropical Mushrooms (Goa) Private Limited | ||||
| Rating reaffirmed at 'CRISIL BBB/Stable' | ||||
| 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 reaffirmed its ‘CRISIL BBB/Stable’ rating on the long-term bank facilities of Tropical Mushrooms (Goa) Private Limited (TMG, part of the Zuari Foods group).
The rating continues to reflect the promoter’s extensive experience in the food industry and group’s healthy operating efficiencies and financial risk profile. These strengths are partially offset by average, but improving, scale of operations and large working capital requirement. |
Analytical Approach For arriving at the rating, CRISIL Ratings has consolidated the business and financial risk profiles of Zuari Foods and Farms Pvt Ltd (ZFF) with those of its subsidiary, TMG, together referred to as the Zuari Foods group as the companies are in similar line of business and are managed together.
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: Experience of the promoter and established brand: Dr Sangam Kurade holds a doctorate degree in food technology and has expertise in mushroom cultivation. He has set up one of the earliest modern mushroom cultivation facilities in India, helping the group to establish a strong customer base and established brand, Dr Kurade’s, in Goa, Karnataka, Tamil Nadu and Kerala. Under his guidance, the group has recorded continuous revenue growth backed by steady capacity additions.
Healthy operating efficiencies: Operating margin has remained healthy at 21.6-30% in the four fiscals through 2022, supported by optimum capacity utilisation, growing demand for mushrooms, strong brand and improving economies of scale. However, operating margin were volatile in 2022 due to some exposure to volatility in raw material prices. The operating margins will remain healthy in range of 22-23% over medium term
Comfortable financial risk profile: Adequate networth of Rs 48.2 crore, as on March 31, 2022, has resulted in comfortable capital structure, with gearing of 0.72 time. Also, interest coverage and net cash accrual to adjusted debt ratios were 6.21 times and 0.31 time, respectively, for fiscal 2022 due to healthy profitability. The group has undertaken capital expenditure (capex) of around Rs 19 crore, which has been funded by debt of Rs 13 crore, to augment its capacity by about 30%. It is also planning for further capex of ~Rs 23.0 crore in fiscals 2024 and 2025. The debt-funded capex is not expected to weaken the financial metrics, given strong accretion to reserves.
Weaknesses: Average, but improving, scale of operations: Due to the perishable nature of mushroom, the group limits the supply to certain geographies. However, it has made capacity enhancements in fiscal 2022 and 2023 which is expected to support the scale over the medium term. Also, the group is expected to further enhance its capacity by about 40% and expand into new geographies helping to register healthy revenue growth over the medium term.
Large working capital requirement: Gross current assets are expected to remain moderate at 100-117 days on account of inventory of 80-105 days due to the nature of business. Though the working capital cycle remains largely supported by limited credit offered to customers, continued control over receivables remains critical. With growing scale of operations, the working capital management remains a key monitorable. |
Liquidity is expected to remain adequate over the medium term. Average bank limit utilisation was low at 22% (for ZFF) and 44% (for TMG) for the 12 months through November 2022. Cash accrual of the group is expected to be over Rs 10.0 crore, which should be sufficient against term debt obligation of Rs 5-6 crore over the medium term. In addition, it will cushion the liquidity of the company.
Current ratio was 1.01 times as on March 31, 2022. Low gearing and moderate networth support the company’s financial flexibility and provides the financial cushion required in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes the group will continue to benefit, over the medium term, from the experience of the promoter and established brand. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Group The Zuari Foods group cultivates and sells fresh mushrooms and the products are sold under the brand, Dr Kurade's. Dr Sangam Kurade is the promoter. ZFF, incorporated in 1993, has mushroom growing capacity of about 4 tonne per day (tpd). TMG, incorporated in 2011, has mushroom growing capacity of 10.1 tpd. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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 Bank Lenders & Facilities | ||||||||||||||||||||||||
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This Annexure has been updated on 21-Dec-2022 in line with the lender-wise facility details as on 30-Sep-2021 received from the rated entity.
Criteria Details
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