ALM Food Products Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 141.27 Crs. of ALM Food Products Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	141.27	Long Term	BWR BBB - /Stable Assignment
Grand Total	141.27	(Rupees One Hundred Forty One Crores and Twenty Seven lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

STABLE

BWR has assigned the long term rating of BWR BBB- (Stable) for the bank loan facilities of ALM Food Products Limited (AFPL). The ratings takes into consideration the extensive experience of the promoter Mr. Fazlur Rehman and Mr. Jamshed Ali for more than 4 decades in the meat processing industry and other allied businesses , a well established customer base diversified across domestic as well as overseas market, consistent growth in revenues with adequate credit metrics. However, the rating is constrained due to intense competition in the industry owing to a large number of unorganized players, thin net profit margins, moderate working capital intensity, leading to high utilization of working capital limits and the fact that the industry is prone to regulatory risks.

BWR has essentially relied upon the audited financial statements of ALM Industries Ltd. of FY18,FY19,FY20 and provisional financial statements of FY21 and projected financials of FY22, publicly available information and information / clarifications provided by the entity’s management.

The outlook is Stable as the company has been able to achieve growth in revenues year on year basis in FY21 (on a provisional basis) when compared to FY20. BWR believes that the company will continue to benefit from the healthy demand for buffalo meat in the export market and its established track record in the meat-processing business.

KEY RATING DRIVERS

Credit Strengths:

Extensive experience of promoters :
Over 4 decades of experience of the promoter Mr. Fazlur Rehman and Mr. Jamshed Ali in the processed meat industry, has helped the company scale up its operations and build strong relationships with customers and suppliers in domestic as well as overseas markets.
Improved scale of operations and locational advantage :
Over FY17-FY21 the company has consistently grown at a CAGR (compounded annual growth rate) of around 46%. The revenue soared from Rs. 70.90 Crs in FY17 to Rs.625.75 in FY21 (on a provisional basis). The company’s plant is located at Dera Bassi in Punjab, which facilitates easy availability of raw material with its manufacturing facility being in a prominent agricultural state of the country.
Healthy financial risk profile with an upward growth curve :
The company has a healthy financial risk profile which is reflected by a reasonable scale of operations, comfortable net worth, adequate gearing and debt protection metrics. In FY20, the company's gearing stood at 1.42x. Debt coverage indicators (interest service coverage ratio and debt service coverage ratio) stood at 2.22x and 1.52x respectively in FY20. Tangible net worth for the company stood at 92.21 crs in FY20. The company’s turnover for FY21 stood at Rs. 625.75 crs registering an y-o-y growth of around 11% in the revenues. In FY22, the company has projected a turnover of Rs.675.00 Crs with an estimated yearly growth of over 8.00%. With an installed capacity of 33,750 MT per annum and the average capacity utilization of around 75% during the last 3 years .
Likely Growth in Indian Bovine Exports :
With government support the Indian buffalo meat export market is expected to grow in the medium term due to competitive export pricing, a fast-growing urban population globally, an improvement in domestic transportation and storage practices, and the growing popularity of supermarkets. India is a leading buffalo meat exporter in the world due to high buffalo population and low domestic consumption.

Credit Risks:

Susceptibility to changes in government regulations :
Changes in government policies could directly affect sales and raw material supply, as currently the government of Uttar Pradesh is not issuing new licenses for opening up of new slaughter houses or capacity expansion of existing slaughter houses. However, the policies that have affected illegal abattoirs have been positive for licensed abattoirs. But, an adverse change in policy could impact business. Also, products have to meet international quality standards as per the policy and regulations of importing nations.
Moderate operating profitability :
The intense competition in the domestic and international markets has kept operating margin low (estimated at 3.62% in fiscal 2020 nominally lower than 3.65% during the preceding year). However, margins are expected to marginally improve in the near term due to better realisations from the international market and cash discounts availed from creditors.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

UPWARD: BWR could upgrade the ratings if there is sustained growth in revenues with improved profitability margins and debt coverage indicators, along with an efficient working capital management, leading to improvement in capital structure and liquidity.

DOWNWARD: BWR may revise the ratings downwards, if the company's scale of operations, operating and net profit margins and liquidity profile deteriorates .

LIQUIDITY INDICATORS - Adequate

In FY20, the company generated an internal cash accrual of Rs. 11.66crs. with a committed repayment obligation of Rs.5.08 crs, while in FY21, the company is estimated to generate an internal cash accrual of Rs.11.69crs with a committed repayment obligation of Rs.5.08 crs for the year. So, the company can comfortably honour its debt obligation.

The average utilization in fund based accounts (with 100% interchangeability from PCFC (packing credit in foreign currency) to EBD (Export bill discounting ) stood at more than 95%. The higher utilization is due to consistently growing turnover.

The current ratio in FY20, stood at 1.19x.

ABOUT THE ENTITY

AFPL was incorporated on 30-07-1996 with its Registered Office at Saharanpur (U.P.) which later on shifted to New Delhi. The Company commenced Merchant Export Business in Rice, Meat and allied Commodities. Later in 2015-16 the company set up a State of Art “Frozen Boneless Buffalo Meat processing unit” with fully automatic imported Slaughter House and waste recovery plant located at Village Behra, Gulabgarh Road, Derabassi, S.A.S. Nagar (Punjab). The unit commenced production in January 2017.

The company has set up a modern slaughtering unit and a waste recovery management unit with a capacity of 33750 MT/Annum. The Company is presently utilizing its capacity at around 70%-75% and plans to increase it up to 80%-85% in 2021-22.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	560.60	569.68
EBITDA	Rs.Crs.	20.28	20.79
PAT	Rs.Crs.	4.32	4.29
Tangible Net Worth	Rs.Crs.	92.21	87.89
Total Debt/Tangible Net Worth	Times	1.42	1.36
Current Ratio	Times	1.23	1.20

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	141.27	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		141.27	(Rupees One Hundred Forty One Crores and Twenty Seven lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Ankit Dixit Ratings Analyst Board : 91 11 23 413896 ankit.d@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

ALM Food Products Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	PC/PCFC/FDB/BRD/FBE - Sanctioned	47.00	_	47.00
2	Bill Discounted (BD) - Sanctioned	80.00	_	80.00
3	Term Loan - Sanctioned	2.93	_	2.93
4	Covid -19 Emergency Line Credit - Sanctioned	11.34	_	11.34
Total		141.27	0.00	141.27
TOTAL (Rupees One Hundred Forty One Crores and Twenty Seven lakhs Only)

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