| V.V.V and Sons Edible Oils Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of V.V.V And Sons Edible Oils Limited (VVV) to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL BBB+’. The short term rating has been reaffirmed at ‘CRISIL A2'..
The rating action factors in improvement in the operating performance resulting in a better business and financial risk profile. Revenue registered compounded annual growth rate of 15% over the three fiscals through 2022. Operating margin remained range-bound at 5-5.5% during this period. Steady accretion to reserve and sustained debt have helped the total outside liabilities to tangible networth (TOLTNW) ratio improve to 0.61 time as on March 31, 2022, from 0.68 time a year before. Higher cash accrual provided more cushion against the debt obligation. Sustenance of revenue growth, improvement in profitability and any large debt-funded capital expenditure (capex) affecting the financial risk profile, are key monitorables.
The ratings reflect the extensive experience of the promoters, established brand presence of VVV in the edible oil market in South India, and the comfortable financial risk profile. These strengths are partially offset by susceptibility to intense competition, product and geographical concentration in revenue, and volatility in raw material prices. |
Analytical Approach Unsecured loans from promoters have been treated as neither debt nor equity. |
Key Rating Drivers & Detailed Description Strengths: Established brand presence in South India: VVV has been active for around six decades, with an established brand presence in the edible sesame oil segment in Tamil Nadu. The flagship brand, Idhayam is the market leader in the sesame oil segment, has a strong brand recall in South India, and is known for its superior quality. Other sesame oil brands of VVV include Tahini, Sambandhi, and Vanga, with each differentiated by the quality of sesame.
Comfortable financial risk profile: Financial risk profile is healthy with comfortable networth of Rs 101 crore and low gearing and total outside liabilities to tangible networth (TOL/TNW) ratios of 0.85 time and around 0.60 time, respectively, estimated as on March 31, 2022. Interest cover remains modest at over 2 times for fiscal 2022.
Weaknesses: Susceptibility to product and geographical concentration in revenue profile: VVV operates only within the traditional unrefined edible oils segment. Refined edible oils such as sunflower and palm are priced lower than unrefined ones, and hence, command a higher market share. Product diversity is low as 60% of revenue accrues from the sale of edible sesame oil. Further, majority of the revenue is comes from South India, reflecting a limited geographic reach.
Exposure to volatility in raw material prices and intense competition: Operating margin remains volatile as the price of sesame seeds is linked to the monsoon and production yield for the year. However, the margin has remained stable for the three fiscals through March 2022. Further, the market is intensely competitive, with several small, unorganised and regional players accounting for a significant share. |
Liquidity: Adequate Expected cash accrual of around Rs 20 crore should more than suffice to cover the term debt of Rs 1-3 crore per fiscal over the medium term. Bank limit of Rs 80 crore was utilised at an average of 98% for the 12 months ended March 31, 2022. Current ratio is moderate estimated at 1.74 times as on March 31, 2022. Healthy cash and bank balance further aids liquidity. |
Outlook: Positive CRISIL Ratings believes VVV will continue to benefit from its strong market position and healthy financial risk profile. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company VVV was set up in 1943 as a partnership firm by Mr. V V Vanniaperumal; the firm was reconstituted as a closely held public limited company in May 2008. The company manufactures and trades in branded sesame oil (gingelly oil), groundnut oil, mustard oil, oil cakes, and related products. Its key markets are Tamil Nadu, Kerala, and Andhra Pradesh. |
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 | |||||||||||||||
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Criteria Details
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