RATING RATIONALE
04Apr2022

MilkFood Ltd.

Brickwork Ratings reaffirms the ratings, with a change in outlook from "Negative" to "Stable" for the long term rating, for the Bank Loan Facilities of Rs. 74.35 Crs. of MilkFood Ltd.

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(13 Jul 2021)
Present
Fund Based 67.73 68.85 Long Term BWR BBB- /Negative
Reaffirmation and change in Outlook
BWR BBB - /Negative to Stable
Reaffirmation and change in Outlook
Non Fund Based 5.50 5.50 Short Term BWR A3
Reaffirmation
BWR A3
Reaffirmation
Grand Total 73.23 74.35 (Rupees Seventy Four Crores and Thirty Five 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

Brickwork Ratings has reaffirmed the ratings for the bank loan facilities of Milk food Limited ( MFL or the company) with change in outlook from ‘Negative’ to ‘Stable’ . The rating draws strength from the company's comfortable networth, interest coverage ratios, brand value recognition and sustained demand for its products in the FMCG space. The ratings, however, remain constrained by a decline in the scale of operations owing to the covid pandemic, low profitability margins and competition from large numbers of players in the organized and the unorganized sectors.

Outlook:- Stable

The revision in the rating outlook from 'Negative' to ‘Stable’ is on account of likelihood of the company achieving its projected revenues and profitability margins in FY22 and the expected increase in demand for it’s products owing to the opening up of the HoReCa segment in the country. The GST case against the company is also expected to get cleared, as advised to us. Further, he market sentiments have been improved and the company's revenue are likely to improve going forward.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

The ratings of Milkfood Ltd. are arrived at on a standalone basis after independent evaluation of its financial risk profile. For arriving at its ratings, BWR has applied its rating methodology as detailed in the rating criteria detailed below (hyperlinks provided at the end of this rationale)

RATING SENSITIVITIES

Going forward, the ability of the company to improve its scale of operations, profitability margins, overall credit risk profile and efficiently manage its working capital obligations would be the key rating sensitivities.

Positive: Ratings may be upgraded if the company is able to restore its revenues and profitability backed by a strong recovery in demand while also improving its liquidity position as a result of a favorable outcome of the ongoing GST related investigation.

Negative: Ratings may be downgraded if there is a further stretch on the liquidity either due to lower cash accruals to repay the maturing debt or due to an adverse outcome of the ongoing investigation

LIQUIDITY INDICATORS - Adequate

The company's liquidity position is considered adequate. The company has unencumbered cash and cash equivalents was Rs. 0.92 Cr for FY21. Net cash accruals (PAT+Dep.) for FY22 and FY23 are projected to be Rs. 10.93 Crs and 15.84 Crs respectively as against the projected maturing term debt debt obligations of Rs. 7.50 Crs in FY22 and Rs. 6.20 Crs in FY23. The average utilization of cash credit limits for the past 6 months has been around 95 %. The promoters are also expected to infuse the unsecured loan of up to Rs. 10 Crs into the company. The current ratio stood comfortable at 1.24x in FY21.

ABOUT THE ENTITY

Milkfood Limited (MFL), incorporated in 1973, promoted by Jaiswal family is engaged in manufacturing of pure ghee, skimmed and whole milk powder, dairy whitener, casein, and whey powder. Pure ghee is marketed under the ‘Milkfood’ brand in the domestic markets. Milk products, other than Ghee, have almost been discontinued. Manufacturing plants are located at Patiala (Punjab) and Moradabad (Uttar Pradesh). Around 99% of the revenue comes from Ghee manufacturing.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 367.91 551.41
EBITDA Rs.Crs. 19.83 24.67
PAT Rs.Crs. 2.44 8.39
Tangible Net Worth Rs.Crs. 119.04 63.83
Total Debt/Tangible Net Worth Times 0.62 1.19
Current Ratio Times 1.24 1.03
KEY COVENANTS OF THE FACILITY RATED

NA


STATUS OF NON-COOPERATION WITH PREVIOUS CRA

NA

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)
Facilities Current Rating (2022) 2021 2020 2019
Type Tenure Amount
(Rs.Crs.)
Rating Date Rating Date Rating Date Rating
Fund Based LT 68.85
BWR BBB-/Negative to Stable
(Reaffirmation and change in Outlook)
12Mar2021
BWR Rating Not Reviewed
(Rating not Reviewed)
09Mar2020
BWR BBB Stable
(Reaffirmation)
22Feb2019
BWR BBB Stable
(Upgrade)
0.00
NA
27Apr2021
BWR BBB- Stable
(Downgrade)
NA
NA
NA
NA
0.00
NA
13Jul2021
BWR BBB- Negative
(Reaffirmation and change in Outlook)
NA
NA
NA
NA
Non Fund Based ST 5.50
BWR A3
(Reaffirmation)
12Mar2021
BWR Rating not reviewed
(Rating not Reviewed)
09Mar2020
BWR A3+
(Reaffirmation)
22Feb2019
BWR A3+
(Upgrade)
0.00
NA
27Apr2021
BWR A3
(Downgrade)
NA
NA
NA
NA
0.00
NA
13Jul2021
BWR A3
(Reaffirmation)
NA
NA
NA
NA
Grand Total 74.35 (Rupees Seventy Four Crores and Thirty Five 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

Nisha Nagar

Ratings Analyst nisha.n@brickworkratings.com

Ashwini Mital

Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
MilkFood 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 Term LoanOut-standing 0.58 _ 0.58
2 Canara Bank Cash CreditSanctioned 6.00 _ 6.00
3 Canara Bank Bank GuaranteeSanctioned _ 2.00 2.00
4 Canara Bank GECLOut-standing 2.94 _ 2.94
5 Canara Bank GECLSanctioned 1.83 _ 1.83
6 State Bank Of India (SBI) GECLSanctioned 4.63 _ 4.63
7 State Bank Of India (SBI) ILC/IBGSanctioned _ 3.50 3.50
8 State Bank Of India (SBI) GECLOut-standing 8.87 _ 8.87
9 State Bank Of India (SBI) Cash CreditSanctioned 44.00 _ 44.00
10 State Bank Of India (SBI) Term LoanOut-standing _ _ 0.00
Total 68.85 5.50 74.35
TOTAL (Rupees Seventy Four Crores and Thirty Five lakhs Only)
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