Foods And Inns Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.172.30 Crs. of Foods And Inns Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (27 Apr 2020)	Present
Fund Based	139.80	139.80	Long Term	BWR BBB /Stable Reaffirmed	BWR BBB /Stable Reaffirmation
Non Fund Based	32.50	32.50	Short Term	BWR A3 Reaffirmed	BWR A3 Reaffirmation
Grand Total	172.30	172.30	(Rupees One Hundred Seventy Two Crores and Thirty 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 reaffirmation of the rating factors in the Y-o-Y operating performance, established relationship with reputed client base and the experience & long track record of the promoters. These strengths, however, are offset by a dip in profit margins, coverage ratios, ongoing debt funded capex, seasonal nature of business and working capital intensive nature of business. BWR believes FIL’s business risk profile will be maintained over the medium term.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

• Experienced Promoters :

  FIL is managed under the leadership of Mr. Bhupendra Dalal who has more than four decades’ experience in the industry. He is ably supported by Mr. Milan Dalal and Mr. Raymond Simkins, each of whom carries a rich experience of more than two decades. FIL’s has six manufacturing units, apart from eight warehouses, which are spread across three states. FIL exports its products to various regions like Europe, Middle East, USA, China and Japan.

• Moderate Financial Position :

  The company’s total operating income registered Y-o-Y decline in FY21 - Rs.358.53 Crs. (FY20: Rs.384.45 Crs.) mainly on account of covid induced lockdowns, abnormal increase in ocean freight and withdrawal of MEIS. Notwithstanding the significant improvement in Q1FY21 revenue, the same remained ~11% lower as compared to Q4FY21 mainly due to the second wave of the pandemic. FIL has registered a 1.5% CAGR in sales over the last 5 years ending FY21. The tangible net worth of FIL has remained stable at Rs.169 Crs. over the last 3 years ended FY21, FIL has been running its operations at an improved level of ~82% capacity utilisation currently as compared to ~59% for FY-21 and ~74% for FY-20.

• Diversified Portfolio with Reputed Client base :

  FIL has a long track record in the industry and over the years, the company has established business relationships with reputed customers such as PepsiCo group and Coca-Cola group, both of which account for ~28% of FIL’s sales in FY21 and have been FIL’s clients for around 15 years, thus ensuring repeat orders to the company. FIL’s product profile includes frozen foods, canned foods, fruit and vegetable powders etc. with mango-based products (powder & puree) constituting a significant part of the revenue. Exports account for a significant portion of FIL’s sales - 54.34% in FY21 (FY20: 56.53%) thus resulting in a diversified mix of domestic as well as export sales and negating potential segmental concentration risk.

Credit Risks:

• Decline in Profitability :

  Commensurate with the decline in topline, the Y-o-Y EBITDA and PAT also reduced to Rs.23.51 Crs. in FY21 (FY20: Rs.31.98 Crs.) and Rs.3.89 Crs. (FY20: Rs.11.03 Crs.) respectively. The total debt has gradually increased from Rs.98.94 Crs. in FY19 to Rs.163.24 Crs. in FY21 mainly on account of an increase in short-term borrowings. The operating margins, while moderate, have decreased to 6.56% in FY21 (FY20: 8.32%) and net profit margins have reduced to 1.08% in FY21 (FY20: 2.87%). The increased total debt has resulted in an increased interest expense on a Y-0-Y basis.

• Debt funded capital expenses :

  FIL is enhancing its capacity with the new green field project in Vankal (Gujarat) and expansion of the Spray Drying plant. The ~Rs.32 Crs. greenfield project in Gujarat (consisting of three sections: Tetra Recart is expected to be commissioned by Dec’21, Frozen plant by Feb’22 and Aseptic & Canning section by Apr’22) is expected to be funded by a combination of term loan (Rs.24 Crs., yet to be disbursed), government grant and internal accruals. The Spray Drying plant is expected to be completed by Mar’22 with an estimated project cost of Rs.7.20 Crs and is proposed to be funded in a D/E ratio of 1:1, with the debt portion already sanctioned. The timely completion of these facilities, within budgeted costs, and the achievability of projections would be key monitorables going forward.

• Seasonal nature of business :

  The company remains susceptible to volatility in the prices of raw materials (agro-commodities) such as fruits and vegetables. Availability of these are highly dependent on monsoon and other climatic conditions. However, the FIL partially mitigate this risk by entering fixed price contract with the customers on CFR terms. While FIL has a diversified product base, mango pulp still accounts for a high 75% of total sales.

• Working Capital intensive nature of operations :

  The operations of FIL are working capital intensive and FIL’s total fund based working capital utilisation was significantly high at 99% for 9-months ended July 2021. Despite a declining topline, the receivables for FY21 have remained stable on a Y-o-Y basis at Rs.83 Crs.

ANALYTICAL APPROACH - Standalone

To arrive at its ratings, BWR has applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale). BWR has analysed FIL’s on a standalone basis to arrive at the rating.

RATING SENSITIVITIES

Upward: BWR may revise the ratings upward in the case of a sustained and substantial improvement in the scale of operations with an improvement in profitability margins along with improvement of credit metrics.

Downward: BWR may revise the rating downward in the case of deterioration in key financial metrics, and/or deterioration in its debt protection metrics.

LIQUIDITY INDICATORS - Adequate

FIL’s liquidity position stands adequate. For FY22 and FY23, cash accruals of Rs.27.51 Crs and Rs.30.07 Crs are expected against CPLTD of Rs.8.68 Crs. and Rs.7.17 Crs. respectively. The company has availed a moratorium on loan facilities with SBI Bank and EXIM Bank. Moreover, the company has also availed WCDL- Covid loan of Rs.3.33 Crs. and Rs.2.35 Crs. from UBI and SBI respectively to meet immediate operational liabilities and manage liquidity mismatch due to pandemic. As on 30-Jun-2021, the company has a total cash in hand of Rs.0.13 Crs. and balance with C.A. of Rs.1.27 Crs. FIL’s total fund-based working capital utilisation is at a higher level of around 99% for 9-months ending July 2021. The current ratio remained stable at 1.14x in FY21.

ABOUT THE ENTITY

Foods and Inns Ltd, incorporated in 1967, is a Mumbai-based company engaged in the processing of fruit pulp, and natural spray dried fruit/vegetable powder. The company is one leading names in fruit pulp industry with manufacturing facilities at Chittoor (Andhra Pradesh), Valsad (Gujarat), Sinnar (Maharashtra) and Gonde (Maharashtra) with a total 54000MT of fruit pulp extraction capacity. The company is managed by professionally efficient management with active guidance of BOD. The company is majorly engaged in exports to Europe, Middle East, USA and Japan. The products are sold in aseptic, canned, frozen and spray dried form. The Company is listed on the BSE since 1978.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	358.53	384.45
EBITDA	Rs.Crs.	23.51	31.98
PAT	Rs.Crs.	3.89	11.03
Tangible Net Worth	Rs.Crs.	169.47	166.26
Total Debt/Tangible Net Worth	Times	0.96	0.80
Current Ratio	Times	1.14	1.16

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	139.80	BWR BBB/Stable (Reaffirmation)	27Apr2020	BWR BBB/Stable (Reaffirmed)	NA	NA	NA	NA
		NA	NA	14Apr2020	BWR BBB/Stable (Assigned)	NA	NA	NA	NA
Non Fund Based	ST	32.50	BWR A3 (Reaffirmation)	27Apr2020	BWR A3 (Reaffirmed)	NA	NA	NA	NA
		NA	NA	14Apr2020	BWR A3 (Assigned)	NA	NA	NA	NA
Grand Total		172.30	(Rupees One Hundred Seventy Two Crores and Thirty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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.

Analytical Contacts
Gaurav Agnihotri Senior Rating Analyst gaurav.a@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@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	Union Bank of India	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	_	_	0.00
2	Union Bank of India	Pre Shipment - Sanctioned	_	_	0.00
3	Union Bank of India	ILC/FLC - Sanctioned	_	_	0.00
4	Union Bank of India	Bank Guarantee - Sanctioned	_	_	0.00
5	Export Import Bank of India	Term Loan - Sanctioned	8.00	_	8.00
6	Export Import Bank of India	Term Loan - Sanctioned	5.80	_	5.80
7	HDFC Bank	Post Shipment - Sanctioned	35.00	_	35.00
8	HDFC Bank	Pre Shipment - Sanctioned	30.00	_	30.00
9	HDFC Bank	Letter of Credit - Sanctioned	_	10.00	10.00
10	State Bank Of India (SBI)	Cash Credit - Sanctioned	23.50	_	23.50
11	Union Bank of India	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned	10.55	_	10.55
12	Union Bank of India	Pre Shipment - Sanctioned	26.95	_	26.95
13	Union Bank of India	ILC/FLC - Sanctioned	_	21.50	21.50
14	Union Bank of India	Bank Guarantee - Sanctioned	_	1.00	1.00
Total			139.80	32.50	172.30
TOTAL (Rupees One Hundred Seventy Two Crores and Thirty lakhs Only)