| Zeal Aqua Limited | ||||
| Rated amount enhanced for Bank Debt | ||||
| 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 rating on the bank facilities of Zeal Aqua Limited (ZAL) at 'CRISIL BBB-/Stable'.
The rating reflects ZAL's established position in shrimp farming, processing, and trading, and company's moderate financial risk profile. These strengths are partially offset by large working capital requirements, susceptibility to volatility in shrimp prices and changes in government regulations, supplier and geographic concentration risks, and competition. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters in the shrimp business ZAL's promoters have more than 25 years of experience in shrimp farming. Mr Pradeep Navik started with a small farm and later in 2009, he tied up with Mr Shantilal Patel to form ZAL. The company has witnessed healthy growth because of its diversified revenue from shrimp and satellite farming. ZAL has developed a strong network of farmers for satellite farming, and a strong sourcing channel for shrimps and seeds. The company commenced its shrimp processing unit in fiscal 2018, capitalizing on its existing captive and satellite farming facilities, strengthening its operating efficiency. Company has reported an operating income of Rs 370 crore in fiscal 2023, a CAGR of 12% over the last five fiscals. The operating margin was at 7.24% in fiscal 2023 and expected to remain in range of 7-7.5% supported by increase in sales from better quality Black Tiger Shrimp as well as sale of Tilapia fish fillets to offset the low sales of shrimp during off-season.
Moderate financial risk profile Company has a comfortable networth of Rs 70.44 crore and a moderate gearing of 1.8 times as on March 31, 2023. Gearing is expected to improve over the medium term in the absence any major debt funded capex and term loan repayments. Debt protection metrics are moderate, with interest coverage and NCA/AD ratios of 1.97 times and 0.1 time in fiscal 2023.
Weakness: Large working capital cycle Operations of the company remains working capital intensive, with Gross Current Asset (GCA) days of 229 days as on March 31, 2023 (193 days as on March 31, 2022) driven by debtor days at 66 days (53 days in previous fiscal) and inventory days at 159 days (135 days in previous fiscal). Working capital requirements are adequately supported by working capital limits and creditors (which stood at 55 days as on March 31, 2023 (36 days in previous fiscal)).
Exposure to risks associated with price fluctuations, geographic concentration, and competition ZAL, a Gujarat-based player, operates on the north Gujarat sea coast near Surat. Though Gujarat is a large producer of shrimps in India, Andhra Pradesh is the leader in shrimp farming, and gives tough competition to other states. As all activities of ZAL are centered in Gujarat, it is susceptible to regional specific events impacting the business. Furthermore, the company's performance is vulnerable to volatility in the price and availability of shrimp. Any change in export or import regulations may also adversely impact the company’s performance. |
Liquidity: Adequate Net Cash Accruals (NCA) remain sufficient, expected to be at Rs 12-18 crore per fiscal, against which company has repayment obligations of Rs 6-7 crore per annum. There is no major capex planned in the medium term. The bank lines are highly utilised during past 12 months ended June 2023. Liquidity is supported by USL from promoters and related parties amounting to Rs 11.40 crore as on March 31, 2023. Current ratio was 1.37 times as on March 31, 2023. Cash and bank balance stood at Rs 7.78 crore as on March 31, 2023. |
Outlook: Stable CRISIL Ratings believes that ZAL will continue to benefit from the extensive experience of the promoters and established relationship with suppliers and farmers. |
Rating Sensitivity Factors Upward factors
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About the Company Incorporated in 2009, ZAL is an aquaculture company promoted by Mr Shantilal Patel and Mr Pradeep Navik, which farms and trades in white shrimps, and deals in shrimp seeds, feed, and probiotics. In July 2017, the company started processing shrimp. It is listed on Bombay Stock Exchange under the small and medium enterprises segment. |
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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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