Bikaji Foods International Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 122.60 Crs. of Bikaji Foods International Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (12 Feb 2021)	Present
Fund Based	145.00	117.60	Long Term	BWR AA- /Stable Reaffirmation	BWR AA - /Stable Reaffirmation
Non Fund Based	5.00	5.00	Short Term	BWR A1+ Reaffirmation	BWR A1 + Reaffirmation
Grand Total	150.00	122.60	(Rupees One Hundred Twenty Two Crores and Sixty 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 (BWR) has reaffirmed the long-term rating at BWR AA- (Stable) and short-term rating at A1+ for the bank loan facilities of Bikaji Foods International Limited (BFIL or the company).

The rating derives comfort from its established track record and known 'Bikaji' brand, experienced management, improving scale of operations, and strong financial risk profile via consistent growth in topline, strong debt protection metrics and liquidity of the company, good profit margins, and low gearing providing leverage to raise funds.

The Outlook is Stable considering the steady business performance and sound credit profile which is likely to remain so in the medium term.The company registered total revenue of Rs 771.13 Crs in H1FY22.

IPO (Initial Public Offering)
Bikaji Foods International Ltd. in February 2022 filed draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) to seek the market regulator’s approval for raising funds from the primary market through an IPO.At present, the company has got approval of the same from the regulator. The proposed IPO is an offer-for-sale and will provide an exit option to current investors.

KEY RATING DRIVERS

Credit Strengths:

Experienced management :
The company has established a successful track record for more than 3 decades in the manufacturing and processing of bhujia, papad, namkeens and sweets, among other products. The company’s Chairman and Managing Director Mr. Shiv Ratan Agarwal has more than three decades of experience, and other key director Mr. Deepak Agarwal has more than two decades of experience in the same line of business activity.
Consistent growth in scale of operations :
The company has shown consistent growth in revenue over the years. Total operating income of the company has grown with a CAGR of 18.77% from the last 3 fiscal years till FY21. Total operating income has improved annually by 21.77% from Rs 1074.55 Crs in FY20 to Rs 1308.46 Crs in FY21.The company registered total revenue of Rs 771.13 Crs in H1FY22.The company have six existing manufacturing facilities, with four facilities located in Bikaner (Rajasthan), one in Guwahati (Assam), one facility in Tumakuru (Tumkur) (Karnataka) held as subsidiary Petunt Food Processors Private Limited to cater to the southern markets in India that are operated by company and objective is to penetrate the southern market since the company has a major presence in the North and East of India and additional facilities in South (primarily manufactures western snacks and namkeen) will provide a competitive edge in South. The company has investment of approximately Rs 110 Crs (H1FY22) Crs and entered into agreements on an exclusive basis with third party (Hanuman Agrofood, Vindhyawasini Sales Private Limited and Dadiji Snacks Private Limited ) contract manufacturers in Bikaner (Rajasthan), Muzaffarpur (Bihar),Patna (Bihar), keeping proximity to the local markets and to reduce the logistics costs.
Comfortable solvency position and debt/EBITDA :
The company has low gearing (Total Debt/TNW) of 0.15x in FY21 (0.14x in FY20). The gearing is comfortable owing to a sound net worth of Rs 602.39 Crs in FY21, compared with the company’s total debt of Rs 88.05 Crs in FY21 ,providing a strong position to capitalize on the leverage for further expansion, if required. Current ratio is comfortably at 1.50x in FY21 (PY:2.19x in FY20) indicates the ability of the company to meet its current liabilities from its current assets comfortably. Conversion cycle of the company is efficient at 18 days in FY21(PY : 19 days in FY20) owing to quick reasonable days of 12 days in FY21(14 days in FY20) and inventory period of only 16 days in FY21 which is the same as the previous year. In addition to that the company has a favorable Total debt/EBITDA ratio at 0.61x in FY21 (0.79x in FY20).
Strong debt protection metrics :
The company’s ability to meet its interest and fixed term obligations is reflected by its Interest service coverage ratio (ISCR) and debt service coverage ratio (DSCR) of 44.62x in FY21 (17.18x in FY20) and 7.51x in FY21 (5.88x in FY20).
Reasonable profit margins :
The company had a good net profit margin and operating profit margin. Operating Profit Margin(OPM) has improved from 8.79% in FY20 to 11.10% in FY21 (OPM was slightly low in FY20 due to increased advertising spending in FY20) while net profit margin (NPM) has improved from 5.16% in FY20 to 6.86% in FY21.The company had operating profit margins and net profit margins of approximately 9.29% and 5.30% respectively in H1FY22.
Established distribution network :
The company has product portfolio of 119 products and registered revenue of 86.37% in FY21 and 85.20% in H1FY22 though general trade which includes super stockist and distributor The company has five depots, 43 super stockists, 438 direct and 1,644 indirect distributors that work with super stockists, located across 22 states and three union territories in India. Besides that the company has arrangements with modern retail channels including supermarkets, hypermarkets and retail store chains either directly or through super stockists and register sales of 5.94% in FY21 and 6.56% in H1FY22.E-commerce platform channels contributed 0.78% in FY21 and 1.49% in H1FY22.In addition to that company exports to more than 30 countries and contributes sales of 5.09% in FY21 and 4.60% in H1FY22 respectively.

Credit Risks:

Competition and fragmented nature of industry :
Bikaji faces fierce competition from the organized, as well as unorganized sectors, which constitutes a major portion of the market currently. However, with factors such as lifestyle changes, rising urbanization, a growing middle-class population, local availability and the availability of snacks in small package sizes, along with a low price and the company's strategies to focus on regional taste, growth is expected in the organized sector. The company's topline has been growing over the years despite competition from the above mentioned sectors.
Regulatory risk :
The food industry is regulated under food safety and regulations by the FSSAI. Any major deviation from subscribed quality parameters could result in a ban or penalties from the authorities, leading to reputational risk.
Raw material price fluctuation risk :
Prices for raw material such as pulses and sugar are susceptible to demand and supply in the market. Any adverse variation in the prices of raw material could affect the company’s profitability. At present the raw material prices have been increasing, which can be passed on to some extent due to advantage of being a branded player, but may not be passed on in entirety leading to margin pressures.

ANALYTICAL APPROACH - Standalone

BWR has factored in the standalone business parameters and financial risk profile of the company to arrive at the rating. Although BFIL has reported consolidated financials for FY21, factoring in the financials of newly formed subsidiary Petunt Food Processors Private Limited (PFPPL), there is no major variation between standalone and consolidated financials due to nascent stage of PFPPL operations and its small balance sheet size. Also interim consolidated financials are not available, hence BWR has used the standalone approach for the rating analysis.

RATING SENSITIVITIES

Upward: The rating may be upgraded if there is continued improvement in the revenue along with product/geographic diversification while sustaining the strong financial risk profile.
Downward: BWR may revise the ratings downwards if the company achieves notably lower revenue than expected, along with a deterioration in debt protection metrics and liquidity.

LIQUIDITY INDICATORS - Strong

BFIL’s had cash accruals (profit after tax +depreciation) of Rs 122.67 Crs in FY21 (Rs 58.91 Crs in H1FY22) against CPLTD of only Rs 13.51 Crs. The company had cash and cash equivalents of Rs 15.36 Crs & bank balances other than cash and cash equivalents of Rs 135.97 Crsin H1FY22. The working capital utilization in SBI is around 66% for the last 6 months till March 2022 and for HDFC bank is NIL. The company had a comfortable current ratio of 1.50x in FY21, besides the company had low gearing of only 0.15x in FY21, which the company can leverage to raise funds incase of need. In addition to that, there was infusion of approximately Rs 150 Crs in the first half of FY22 which further strengthened the liquidity of the company. Projected liquidity index also remains in the Strong category for BFIL.

ABOUT THE ENTITY

Bikaji Foods International Ltd (previously Shivdeep Industries Limited) was founded in 1986 as a partnership concern and was converted to a limited company in October 1995. The erstwhile firm used to sell its product under the name of Haldiram, and from 1993 onwards, the company established the BIKAJI brand for its products. The company is engaged in the manufacturing and processing of bhujia, papad, namkeens, cookies, snacks and sweets, among other products. It also exports to more than 35 countries and contributes approximately 5% of sales. The company has ISO: 9001:2015 and ISO 22000:2005 certified manufacturing facilities in Bichhwal, Bikaner.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	1308.46	1074.55
EBITDA	Rs.Crs.	145.25	94.41
PAT	Rs.Crs.	89.75	55.48
Tangible Net Worth	Rs.Crs.	602.39	526.78
Total Debt/Tangible Net Worth	Times	0.15	0.14
Current Ratio	Times	1.50	2.19

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

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	117.60	BWR AA-/Stable (Reaffirmation)	12Feb2021	BWR AA- Stable (Reaffirmation)	NA	NA	15Nov2019	BWR AA- Stable (Assignment)
Fund Based	ST	0.00	NA	NA	NA	NA	NA	15Nov2019	BWR A1+ (Assignment)
Non Fund Based	ST	5.00	BWR A1+ (Reaffirmation)	12Feb2021	BWR A1+ (Reaffirmation)	NA	NA	15Nov2019	BWR A1+ (Assignment)
Grand Total		122.60	(Rupees One Hundred Twenty Two Crores and Sixty lakhs Only)

Rating Advisory, as on 11Feb2022
Press Release, as on 11Feb2022
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
Raman Thakur Senior Rating Analyst Board : +91 11 2341 2232 raman.t@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Bikaji Foods International 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	Term Loan - Sanctioned	25.00	_	25.00
2	HDFC Bank	Cash Credit - Sanctioned	15.00	_	15.00
3	State Bank Of India (SBI)	Cash Credit - Sanctioned	50.00	_	50.00
4	State Bank Of India (SBI)	Term Loan - Out-standing	27.60	_	27.60
5	State Bank Of India (SBI)	BG/ILC - Sanctioned	_	5.00	5.00
Total			117.60	5.00	122.60
TOTAL (Rupees One Hundred Twenty Two Crores and Sixty lakhs Only)

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