NM FoodImpex Pvt. Ltd.

Brickwork Ratings reaffirms the long term rating and the short term rating for the Bank Loan Facilities of Rs. 14.62 Crs. of NM FoodImpex Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (17 Apr 2020)	Present
Fund Based	2.22	2.12	Long Term	BWR BB- /Stable Reaffirmed	BWR BB - /Stable Reaffirmation
	(1.50)	(1.50)	Long Term	BWR BB- /Stable Reaffirmed	BWR BB - /Stable Reaffirmation
	12.50	12.50	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
	(2.00)	(0.00)	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
Grand Total	14.72	14.62	(Rupees Fourteen Crores and Sixty Two 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

BWR has reaffirmed the long term rating at “BWR BB-'' with “Stable” outlook and the short term rating at “BWR A4” for the bank loan facilities of NM FoodImpex Pvt. Ltd. (‘NMFPL’ or ‘the company’).

The rating draws strength from the long operational track record of the company, vastly experienced directors, geographically diversified customer base and moderate financial risk parameters. However, the rating is constrained on account of high gearing, intense competition in the rice industry, exposure to agro-climatic risks, inventory price risks and foreign exchange risk.

The rating outlook has been assigned as "Stable" as BWR believes that NM FoodImpex Pvt. Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case there is sustained improvement in revenues and profitability. The rating outlook may be revised to 'Negative' if there is any deterioration in financial risk profile or any liquidity issues.

KEY RATING DRIVERS

Credit Strengths:

Long operational track record and Experienced Directors :
Being incorporated in 1981, the company has a long operational track record. Further, the company is managed and controlled by the directors having a long experience of around two decades in the rice processing and export business which has helped them in establishing strong relations with customers and suppliers.
Geographically diversified customer base :
A presence in both domestic and global markets provides protection against any sharp decline in demand in a single region. Exports contributed ~60% of sales in fiscal 2020.
Moderate Financial Risk Profile :
Net sales have increased around 42% from Rs. 46.01 cr in FY19 to Rs. 65.50 cr in FY20. The company has booked total revenues of Rs. 71.45 crs in FY21 (Prov.) . Further as submitted by management, Q1FY22 net sales is Rs. 17.39 cr. The profitability continues to remain moderate with OPM and NPM of 2.25% and 0.54% in FY20 as against 3.59% and 0.57% in FY19, respectively due to low value-added nature of business operations and the stiff competition. ISCR remained average at 1.05x in FY20 as against 1.02x in FY19. DSCR has improved from 0.75x in FY19 to 1.32x in FY20.

Credit Risks:

High gearing :
Debt/Equity ratio is high but the same is improving y-o-y from 7.11x as on 31.03.2019 to 5.36x as on 31.03.2020 due to reduction in debt. The company’s working capital intensity remains high due to high inventory levels (need to store the rice for ageing to improve the quality of rice and attract premium pricing). The same is reflected through the long conversion cycle of 131 days in FY20.
Exposure to agro-climatic risks and inventory price risks :
Given its operations in an agro-based industry which is characterized by its seasonality, the company is indirectly exposed to agro-climatic risks such as abnormal weather conditions impacting produce , unpredictable demand supply conditions and raw material price fluctuations. Further, any sudden spurt in raw material prices may not be passed on to customers completely owing to the company’s presence in a highly competitive industry.
Intense competition :
The rice industry is highly fragmented and is marked by the presence of a large number of large players and small players in the market. This intensifies competition and limits the pricing flexibility of the industry participants. Further, paddy prices are regulated by the government to safeguard the interest of farmers which in turn limits the bargaining power of the rice millers.
Exposure to foreign exchange risk :
As exports constitute a significant percentage of the turnover i.e. around 60% in FY 20, the company remains exposed to currency fluctuations to the extent of unhedged exposure. However, it has a hedging mechanism in place to reduce any impact of fluctuation in foreign exchange rates.

ANALYTICAL APPROACH - Standalone

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

RATING SENSITIVITIES

Going forward, the ability of the company to improve its financial risk profile and maintaining adequate liquidity will remain the key rating sensitivities.

Positive: The rating may be upgraded if the company interalia, is able to increase its revenues, profitability margins, improve its gearing, debt protection metrics or on account of any other favourable factor.

Negative: The rating may be downgraded if inter alia, there is any deterioration in financial risk profile, fails to maintain adequate liquidity or on account of any unforeseen unfavourable events.

LIQUIDITY INDICATORS - Adequate

The company has cash & cash equivalent balance of Rs. 0.03 crs as on 31.03.2020. The current ratio stood at 1.77x as on 31.03.2020 and the conversion cycle is at 131 days in FY20. Net cash accruals are tightly matched against the repayment of CPLTD as showcased by net cash accruals generated in FY20 against CPLTD of Rs. 0.21 cr. However, the company had free cash flows of Rs. 2.98 cr in FY20. Further, the company has an Interest service coverage ratio (ISCR) of 1.05x in FY20. Overall liquidity of the company is adequate with average cash credit limit utilization of around 11.80% for the six months period ending June’ 2021.

ABOUT THE ENTITY

Incorporated in 1981, NM Food Impex Pvt. Ltd. is a private limited company based in Karnal, Haryana. The company is managed and controlled by directors- Vinod Kumar Goyal, Rakesh Kumar Goyal and Ramesh Kumar Goyal . It is engaged in the processing of rice and export of rice to various countries. It is an ISO 22000, HACCP certified and a Government recognized export house. The company has hi-tech processing plants and quality testing labs for the purpose of processing of rice for further export.It deals in the following varieties of rice - basmati rice, 1121 basmati rice, pusa basmati rice , non basmati rice (steam, golden sella and creamy sella) and broken rice. Rice is exported under 2 brand names to global clients - Suprice and NM Superior. Exports are made to around 25 countries such as - Saudi Arabia, UAE, Iraq, Germany, Jordan and Qatar.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	65.70	46.04
EBITDA	Rs.Crs.	1.48	1.65
PAT	Rs.Crs.	0.36	0.26
Tangible Net Worth	Rs.Crs.	3.90	3.55
Total Debt/Tangible Net Worth	Times	5.36	7.11
Current Ratio	Times	1.77	1.76

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

Not Applicable

ANY OTHER INFORMATION

Note 1 : The company has no direct subsidiaries or associate concerns.
Note 2 : Rated amount mentioned above of term loan is outstanding balance as on 24.06.2021.
Note 3 : One way interchangeability from OCC/ODBD to Packing credit limit to the extent of Rs. 2.00 cr against confirmed orders is permitted by the banker.
Note 4: PC/FDB/FCE limit of Rs. 8.00 cr is backed by PBLC/NPBLC/Confirmed Orders and PC/FDB/FCE limit of Rs. 4.50 cr is exclusively backed by PBLCs.
Note 5: The company has a forward contract limit Rs. 40.00 cr against which exposure reckoned at 2% of the limit i.e. Rs. 0.80 cr. Rs. 0.80 cr is not included in the amount rated above.

RATING HISTORY FOR THE PREVIOUS 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	2.12	BWR BB-/Stable (Reaffirmation)	17Apr2020	BWR BB-/Stable (Reaffirmed)	30Mar2019	BWR BB-/Stable (Reaffirmed)	16Feb2018	BWR BB-/Stable (Assigned)
FB SubLimit	LT	(1.50)	BWR BB-/Stable (Reaffirmation)	17Apr2020	BWR BB-/Stable (Reaffirmed)	NA	NA	NA	NA
Fund Based	ST	12.50	BWR A4 (Reaffirmation)	17Apr2020	BWR A4 (Reaffirmed)	30Mar2019	BWR A4 (Reaffirmed)	16Feb2018	BWR A4 (Assigned)
FB SubLimit	ST	NA	NA	17Apr2020	BWR A4 (Reaffirmed)	30Mar2019	BWR A4 (Reaffirmed)	16Feb2018	BWR A4 (Assigned)
Grand Total		14.62	(Rupees Fourteen Crores and Sixty Two 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
Rashi Arora Rating Analyst Board : +91 172 5032 295 / 6 rashi.a@brickworkratings.com	V.K.Kukreja Associate Director - Ratings Board : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

NM FoodImpex 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	Canara Bank	Cash Credit - Sanctioned	2.00	_	2.00
	Sub-Limit (ODBD (sub-limit of CC)) - Sanctioned	(1.50)
2	Canara Bank	PC/FDB/FBE - Sanctioned	_	8.00	8.00
3	Canara Bank	PC/FDB/FBE - Sanctioned	_	4.50	4.50
4	Canara Bank	Term Loan - Sanctioned	0.12	_	0.12
Total			2.12	12.50	14.62
TOTAL (Rupees Fourteen Crores and Sixty Two lakhs Only)

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