Albys Agro Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 59.76 Crs. of Albys Agro Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	58.26	Long Term	BWR BB + /Stable Assignment
Fund Based	(40.00)	Long Term	BWR BB + /Stable Assignment
Non Fund Based	1.50	Short Term	BWR A4 Assignment
Grand Total	59.76	(Rupees Fifty Nine Crores and Seventy Six 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

The ratings reflect the improved yoy operational & financial performance in FY21 coupled with medium term revenue visibility for FY22, industry experience of the management, accreditation of the manufacturing facility with various national and international agencies, long standing supplier and customer relationships and locational advantages in terms of proximity to the international sea route. However, these strengths are partially offset by susceptibility to risks inherent in the seafood industry, volatility in shrimp prices and availability, competitive shrimp export market, vulnerability of shrimp exports to variance in climatic conditions, exposure to regulations of importing countries and foreign exchange fluctuation risk given that 100% revenue is from exports.

The Stable outlook reflects BWR expectation that the business and financial risk profile would not change in the medium term.

KEY RATING DRIVERS

Credit Strengths:

Improved operational and financial performance in FY21 coupled with medium term revenue visibility for FY22 :
The Company’s operating income marginally improved to Rs. 95.85 Crs in FY21 (FY20: Rs.93.61Crs) mainly due to the surge in demand for shrimps from their export customers. The company has reported net sales of Rs.47 Crores from April 2021 to August, 2021. Further the company has orders worth of Rs. 33.7 Crs which will be executed over the next 2 months and the company expects further increase in its order book post October. Operating margin improved from 6.80% in FY20 to 11.09% in FY21 on account of reduction in administration and overhead expenses. The net profit margins have improved from FY20: 3% to FY21: 12.62% mainly on account of other income from duty credit scrips and foreign exchange gain amounting to Rs 8.00 Crs. The current ratio has remained moderate at 1.06 times as on March 31, 2021(FY20: 0.76x) and ISCR improved from 1.91 times in FY20 to 3.39 times in FY21.
Location Advantage :
The Company's processing unit is situated in Sanguem, Goa and is close to the International sea route. The company enjoys topographical advantage on account of easy access to the Arabian Sea, access to diverse and plentiful reserves of marine products. Further, the location aids Albys to take advantage of procuring the freshest raw material from landing centers in Goa and neighbouring states ie.Karnataka and Maharashtra. Being centrally located between Gujarat, Andhra and Karnataka helps Albys to have cost effective procurement of Aquacultured vennamei shrimps from farms across India.
State of Art and Accredited Manufacturing Facility :
Albys has State-of-the-art processing unit and a fully equipped in-house laboratories the operations are handled by experienced quality control personnel and huge manpower pool ensuring strict monitoring of quality standards. Skilled managerial talent adding professionalism to company operations. Albys is accredited with best Certifications for Quality control.The Company’s processing unit has certifications 4 stars from Global Aquaculture Alliance Best Aquaculture Practices (BAP), AA grade FoodChain ID certification from UKAS accredited certification body BRC and Aquaculture Sustainability Certificate(ASC). These certifications help the company to gain preference over competition, charge a premium price for their products and enable preferential treatment from buyers especially in EU and US markets.
Established Customer and Supplier Relationship :
The company has long and satisfactory relationships with key customers who have been associated with them since inception. The payment terms with customers are through various modes such as Door Delivery Payment, Letter of credit, Cash against documents, telegraphic transfer and advance payment in some cases.As confirmed with management, since inception, Albys has not faced issues w.r.t any write off for bad debts. The company has a diversified base of suppliers with whom Albys has been dealing since inception which has helped them to garner support during the pandemic phase and also ensures sustainable supply of raw materials.

Credit Risks:

Moderate scale of operation and financial risk profile:
Albys was able to successfully navigate through the constraints arising out of the pandemic and managed to marginally improve its moderate scale of operations from Rs. 93.61 Crs in FY20. to Rs. 95.85 Crs FY21. The company’s tangible net worth (TNW), though low, grew to Rs. 12.16 Crs. in FY21 (Rs. 0.06 Crs in FY20) on the back of significant other income Rs. 8.58 Crs. mostly from sales of duty credit scrips and foreign exchange gains. Though the company was able to bring down its total debt from Rs 62.95 Crs. in FY20 to Rs 54.68 Crs. in FY21 the Total debt/TNW still remains high at 4.50x and Total Outside Liability/TNW at 6.20x in FY21.
Working Capital Intensive Business :
With increasing shrimp processing revenues, the working capital requirements of the company have increased. Operations remain working capital intensive with Gross Current Assets (GCA) of 267 days as of March 31, 2021 (increased from 250 days as on March 31,2020) caused by debtors of 84 days and inventory of 183 days (increased from 144 days a year earlier). Inventory and debtor days remain elongated amidst the pandemic, resulting in extensive utilization of bank lines to as high as 99%. Operations are expected to remain working capital intensive over the medium term. GCA is expected to reduce and be in the range of 210-230 days.
Intense Competition :
The industry is characterized by low entry barriers and intense competition from unorganized players. Volatility in feed prices, diseases, climatic vagaries, lack of quality feed affect supply of seafood and hence, prices. Further, the seafood industry is affected by demand-supply imbalance as seafood is a depleting commodity; tightened regulations on fishing have made supply conditions more irregular. However, Albys’ international certified processing location in West Coast of India mitigates risk of intense competition to a certain extent.
Regulations compliance :
Many export destinations such as the US and European countries implement regulations (including anti-dumping duty, food safety regulations, and quality requirements) that need to be met and any detrimental regulation could impact profitability. Any adverse policy change or new regulation may be detrimental to the profitability of sea food exporter. Indian seafood exporters also face intense competition from cheaper varieties sourced from countries such as Bangladesh, Thailand, Indonesia, etc.
Forex fluctuation :
As entire sales of Albys are derived from exports, the company is more susceptible to foreign exchange fluctuation risk. The company predominantly utilises PCFC and FBP limits at LIBOR rates which are low when compared to rupee denominated borrowings. The company has not been using any hedging products to deal with forex risk as the company has been making forex gains. Further the management view is that the dollar would appreciate further from current level hence they do not envisage use of any hedging mechanism in near term thus exposing them to forex fluctuation risk in case of adverse movements in exchange rates.
Supplier Concentration Risk: :
The top 2 suppliers of the company meet 75% of the total raw material requirement for the company thus highlighting the concentration risk. Majority suppliers are from Andhra Pradesh since a large catchment of shrimps is available from the said market. The risk is mitigated to a certain extent on account of long term association with the suppliers and the location advantage.

ANALYTICAL APPROACH

For arriving at its ratings, Brickwork Ratings has applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale). The Company does not have any subsidiary.

RATING SENSITIVITIES

Positive: Sustained Improvement in Sales, sustainability of profit margins, improvement in financial risk profile and reduction in working capital cycle.

Negative: Deterioration in profitability, working capital cycle and financial risk profile.

LIQUIDITY INDICATORS - Adequate

Fund based working capital limits are utilized at average 98% for 6 months ending August 2021. Working capital cycle remains high with elongated receivable and inventory days, resulting in extensive utilization of bank lines, The company has received an enhancement of Rs 10 Crs. in working capital facility during September 2021 which is likely to provide cushion towards incremental working capital requirement. Further, Net Cash Accruals (NCA) remain sufficient, expected to be at Rs 16-17.5 crore in FY 22, and expected to increase to Rs 19-20 crore per annum in the medium term, against which the company has repayment obligations of Rs 4-6 crore per annum. Company had an unencumbered cash and bank balance of Rs 0.26 crore as on March 31, 2021. No major capex is planned in the medium term.

ABOUT THE ENTITY

Alby's Agro Pvt Ltd is in the business of exporting processed sea food, Its a 100% export oriented unit. It started production in 2017 with a state of the art processing plant in Sanguem, Goa. The company is 100% owned by Corlim Marine Exports Pvt Ltd which was promoted by Mr R S Jari. Mr Jari has been in sea food industry for more than 3 decades. Albys has wide product range offering which includes; Shrimps, Marine Fish, Cephalopods, Crabs etc.

As informed during our discussion with the Management, Albys is in an advanced stage of securing a business partnership with Tata International Ltd and is likely to sign a MOU by end of September 2021. The business partnership is expected to leverage on the expertise of Albys in sea food business & branding, distribution and logistics capability of the Tata's.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	95.85	93.61
EBITDA	Rs.Crs.	10.63	6.37
PAT	Rs.Crs.	12.10	2.90
Tangible Net Worth	Rs.Crs.	12.16	0.06
Total Debt/Tangible Net Worth	Times	4.50	993.45
Current Ratio	Times	1.06	0.76

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	58.26	BWR BB+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
FB SubLimit	LT	(40.00)	BWR BB+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	1.50	BWR A4 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		59.76	(Rupees Fifty Nine Crores and Seventy Six 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
Sagar Harendra Desai Ratings Analyst sagar.d@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Albys Agro Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	HDFC Bank	GECL - Sanctioned	8.00	_	8.00
2	Saraswat Bank	EPC/ PCFC/ FBP/ PSFC - Sanctioned	40.00	_	40.00
	Sub-Limit (FBN/FBP/PSFC) - Sanctioned	(40.00)
3	Saraswat Bank	Foreign Bill Discounting - Sanctioned	5.00	_	5.00
4	Saraswat Bank	FCL - Sanctioned	5.26	_	5.26
5	Saraswat Bank	Bank Guarantee - Sanctioned	_	1.50	1.50
Total			58.26	1.50	59.76
TOTAL (Rupees Fifty Nine Crores and Seventy Six lakhs Only)

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