Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 33.67 Crs. of Megastar Foods Ltd.
ParticularsFacilities** | 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) |
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 DRIVERSCredit Strengths:
The promoters of the company have an extensive experience of over two decades in this line of business. The established track record of operations with growing efficiency and ability to operate through various economic cycles and changes in the industry is an outcome which is cushioned by experience of the promoters and top management.
The company has moderate financial risk profile with revenues of Rs 165.30 crores in FY21 (Audited) that is improved from Rs 162.97 crores in FY20 (Audited) Further the company has achieved revenues of Rs 60.00 crores till July 2021 and Projected to achieved revenues of Rs 200.00 crores in FY22 due to healthy order in hand . The company has Moderate Debt Service Indicators with Interest Service Coverage Ratio of 3.62 Times and Debt Service Coverage Ratio of 2.27 Times in FY21 (Audited) against Interest Service Coverage Ratio & Debt Service Coverage Ratio of 2.82 Times & 1.58 Times in FY20 (Audited) along with Moderate Profitability Margins, Net Profit Margins of 2.57% and Operating Profit Margins of 5.41% in FY21 (Audited) against the NPM and OPM of 2.09% & 5.62% in FY20 (Audited) marked with low gearing level TD/TNW of 1.90 Times in FY21 (Audited) against the gearing level of 0.98 Times in FY20 (Audited). The company has current ratio of 1.23 Times in FY21 (Audited).
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability
Fluctuations in the prices of wheat and rice and its availability can affect the margins of the company. Nevertheless, the company has managed to maintain consistency in margins by following a prudent stocking policy through back-to-back arrangements for a portion of its sales and by leveraging its relationships with customers
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 ENTITYMegastar 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 |
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) |
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 | |
---|---|
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 |
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) |
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