Brickwork Ratings Downgrades the ratings for the Bank Loan Facilities of Rs. 95.00 Crs. of Tasty Dairy Specialities Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (08 Sep 2020) |
Present | ||
Fund Based | 94.00 | 94.00 | Long Term |
BWR BBB (Stable)
Assignment |
BWR BBB -
/Stable Downgrade |
Non Fund Based | 1.00 | 1.00 | Short Term |
BWR A3+
Assignment |
BWR A3
Downgrade |
Grand Total | 95.00 | 95.00 | (Rupees Ninety Five Crores Only) |
Brickwork Ratings (BWR) downgrades the long-term rating to BWR BBB- and short-term rating to BWR A3 for the bank loan facilities of Tasty Dairy Specialities Ltd. (TDSL or the company).
The rating downgrades take into account deteriorated company performance in Q4FY21 resulting in negative PAT PAT of - 13.83 Crs, EBITDA loss of Rs -13.56 Crs on account of inventory written off of Rs 16.95 Crs and consequent weakening of credit profile. ISCR (interest service coverage ratio) and DSCR (debt service coverage ratio) of the company deteriorated to -2.67x and -0.91x in FY21 besides elongated conversion cycle and risk associated with the perishable nature of milk and its products. The rating is however supported by experienced promoters and established business, comfortable gearing and current ratio.
The outlook is Stable considering the essential nature of milk demand and its by-products.
Note : The present rating amount is considered as per initial rating as BWR does not have complete information and rating action/review is mainly on the basis of Q4 results of the company.
Credit Strengths:
Promoters have been into the business since 1992 and have seen multiple business cycles. The company has been selling the products under various brand names such as Verifresh, Ujjwal, CIMA etc for different product categories. Over the years, the Company has developed a direct procurement model which enables TDSL control costs and quality at the same time. The company is an approved supplier for some of the large brands like ITC Ltd., Parle Products Pvt. Ltd, Mother Dairy Fruit & Vegetable Pvt. Ltd, Gujarat Co-operative Milk Marketing Federation Ltd etc.
Gearing (Total Debt/Equity) of the company has deteriorated in FY21 to 1.00x from 0.66.x in FY20 due to decline in reserve & surplus but still comfortable.
Current ratio is comfortable at 1.62x in FY21 against 1.87x in FY20 indicates the company's ability to meet its current liabilities from its current assets.
The company’s total operating income has declined from Rs 403.81 Crs in FY20 to Rs 328.01 Crs in FY21. profit after tax (PAT) of the company declined from Rs 4.2 Crs in FY20 to Rs -13.83 Crs in FY21 owing to inventory written off of Rs 16.95 Crs due to declined sales resulting in accumulated stocks which finally turned out not fit for human consumption ( perishable nature of products).
Interest service coverage ratio(ISCR) and debt service coverage ratio (DSCR) is negative at -2.67x and -0.91x in FY21 on account of negative PAT. In addition to that net profit margins and operating profit margins are negative in FY21 due to negative PAT and EBIDTA of the company in FY21.
The conversion cycle of the company is stretched to 105 days in FY21 (86 days) on the account of elongated inventory of 70 days in FY21 (62 days in FY20).
Raw material milk and its by-products are perishable in nature and have limited shelf life. In case of the elongated inventory holding period, company may suffer loss due to inventory written off as it happened in Q4FY21, where the company written off inventory of Rs Rs 16.94 Crs which resulted in deteriorated financial risk profile and liquidity of the company.
Upward: The outlook may be revised to Positive or the rating may be upgraded if there is a substantial improvement in the scale of operations of the company, improvement in profitability and liquidity of the company, besides other ratios like gearing and current ratio continue to be comfortable.
Downward: BWR may revise the ratings downwards if there is a further deterioration in the financial risk profile and liquidity of the company, or inability to recover from the current level.
The company had cash accruals (profit after tax plus depreciation) of Rs -12 Crs in FY21 (5.85 Crs in FY20), simultaneously ISCR and DSCR of the company is negative because of negative cash accruals in FY21.The working capital utilization of the company is above 95%. Although, the company had cash & cash equivalent of Rs 1.80 Crs at the end of March 2021 but considering the other points liquidity is stretched.
ABOUT THE ENTITYPromoted by Mr. Atul Mehra, the Company was originally incorporated as a private limited company on 30th July, 1992 under the name Tasty Dairy Specialities Private Limited.Subsequently, it was converted into a public limited in 2004 and the name of the company was changed to “Tasty Dairy Specialities Limited ''. The Company is listed in the SME segment on Bombay Stock Exchange.The Company is currently involved in processing milk, along with bulk milk procurement and handling during which primarily caters to bulk institutional customers. Company is further involved in value added milk products like Skimmed Milk Powder, Butter, Ghee etc. which are packaged under the brand names “Ujjwal”, “Shikhar”, “Verifresh”, "Cima", "Mithai Master”.The Company markets the branded products in Uttar Pradesh, Madhya Pradesh and Bihar, and its plant is located in Jainpur, Uttar Pradesh. The Company with the existing plant and machinery is capable of handling approximaely 5,00,000 litres of raw milk per day.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 328.01 | 403.16 |
EBITDA | Rs.Crs. | -13.56 | 12.27 |
PAT | Rs.Crs. | -13.83 | 4.20 |
Tangible Net Worth | Rs.Crs. | 58.62 | 72.70 |
Total Debt/Tangible Net Worth | Times | 1.00 | 0.66 |
Current Ratio | Times | 1.62 | 1.87 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 94.00 |
BWR BBB-/Stable
(Downgrade) |
08Sep2020 |
BWR BBB (Stable)
(Assignment) |
NA |
NA
|
NA |
NA
|
Non Fund Based | ST | 1.00 |
BWR A3
(Downgrade) |
08Sep2020 |
BWR A3+
(Assignment) |
NA |
NA
|
NA |
NA
|
Grand Total | 95.00 | (Rupees Ninety Five Crores Only) |
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 CriteriaAnalytical Contacts | |
---|---|
Raman Thakur Senior Rating Analyst Board : +91 11 2341 2232 raman.t@brickworkratings.com |
Tanu Sharma Director - Ratings tanusharma@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
---|---|---|---|---|---|---|
1 | Kotak Mahindra Bank | Bill Discounted (BD)Sanctioned | 8.00 | _ | 8.00 | |
2 | Punjab National Bank | Cash CreditSanctioned | 44.00 | _ | 44.00 | |
3 | Punjab National Bank | Term LoanSanctioned | 1.35 | _ | 1.35 | |
4 | Punjab National Bank | Bill Discounted (BD)Sanctioned | 10.00 | _ | 10.00 | |
5 | Punjab National Bank | Bank GuaranteeSanctioned | _ | 1.00 | 1.00 | |
6 | Un tied portion | Facilities FB (CC/TL/OD)Proposed | 30.65 | _ | 30.65 | |
Total | 94.00 | 1.00 | 95.00 | |||
TOTAL (Rupees Ninety Five Crores Only) |
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