RATING RATIONALE
02Sep2021

Megastar Foods Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 33.67 Crs. of Megastar Foods Ltd.

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(20 Oct 2020)
Present
Fund Based 34.12 33.67 Long Term BWR BBB-/Stable
Reaffirmation
BWR BBB - /Stable
Reaffirmation
Grand Total 34.12 33.67 (Rupees Thirty Three Crores and Sixty 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

BWR reaffirmed  the long term rating of  BWR BBB- Stable to Megastar Foods  Limited. 

The rating draws strength from the rich experience of the management of the company and moderate financial risk profile, . The rating of the company is constrained by susceptibility to fluctuations in raw material prices, and competition in the industry.

BWR believes that the business risk profile of “Mega Star Foods  Limited.” 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 significant improvement in revenues, and profit margins of the company. The rating outlook may be revised to “Negative” if there is any deterioration in the financial risk profile including liquidity of the company.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

RATING SENSITIVITIES

Going forward, the ability of the company to improve its revenues and financial risk profile would remain the key rating sensitivities.

Positive: Rating may be upgraded in case of substantial improvement in revenues and net worth  of the company.

Negative: Rating may be downgraded in case there is deterioration in financial risk profile of the company including the liquidity of the company

LIQUIDITY INDICATORS - Adequate

1. The company has subsidiary concern with the name of Mega Pacific Ventures Private Limited but there is no operational linkages between them..

2. The company has cash and bank balances of Rs 0.09 crores in FY21 (Audited) .

3. The company has average utilisation of 86% for last six months of cash credit limit.

4. The company has long term borrowings of Rs 5.60 crores which comprises of term loan of Rs 4.96 crores and vehicle loan of Rs 0.64 crores.  The company has generated cash surplus of Rs 5.86  against the CPLTD of Rs 1.60 crores in FY21 (Audited).

5. The company has Interest Service Coverage Ratio of 3.62 Times and Debt Service Coverage Ratio of 2.27 Times in FY21 (Audited).

6.The current ratio has been 1.23 Times as at FY21 (Audited).

7. The company has  conversion cycle of 104 days due to high days Inventory.

ABOUT THE ENTITY

Megastar Foods Limited (‘The company’ or ‘MFL’) was incorporated in 2011. The company’s main line of business is milling wheat to produce types of wheat flours, suji/rava and wheat bran. MFL’s plant is located at Chandigarh with an warehousing capacity of 15000 MT and manufacturing capacity of 9000 MT per month. MPL is mainly promoted by Mr. Vikas Goel and Mr. Vikas Gupta. The company was listed on Bombay Stock Exchange in FY19.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 165.30 162.97
EBITDA Rs.Crs. 8.94 9.16
PAT Rs.Crs. 4.25 3.40
Tangible Net Worth Rs.Crs. 26.36 22.11
Total Debt/Tangible Net Worth Times 1.90 0.98
Current Ratio Times 1.23 1.42

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 33.67
BWR BBB-/Stable
(Reaffirmation)
20Oct2020
BWR BBB-Stable
(Reaffirmation)
05Aug2019
BWR BBB-Stable
(Assignment)
NA
NA
Non Fund Based ST NA
NA
20Oct2020
BWR A3
(Withdrawal)
05Aug2019
BWR A3
(Assignment)
NA
NA
Grand Total 33.67 (Rupees Thirty Three Crores and Sixty Seven 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.

Hyperlink/Reference to applicable Criteria
Analytical Contacts

Aman sharma

Rating Analyst Board : +91 172 5032 295 / 6 aman.s@brickworkratings.com

V.K.Kukreja

Associate Director - Ratings Board : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Megastar Foods 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 Cash CreditSanctioned 33.00 _ 33.00
2 HDFC Bank Term LoanSanctioned 0.67 _ 0.67
Total 33.67 0.00 33.67
TOTAL (Rupees Thirty Three Crores and Sixty Seven lakhs Only)
Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.