Marya Frozen Agro Food Products Pvt. Ltd.

Brickwork Ratings upgrade the long term ratings and assign a short term rating for the Bank Loan Facilities of Rs. 47.44 Crs. of Marya Frozen Agro Food Products Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (28 Oct 2021)	Present
Fund Based	22.94	41.94	Long Term	BWR BB-/Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB + /Stable Upgrade
Fund Based	0.00	5.00	Short Term		BWR A4 + Assignment
Non Fund Based	0.00	0.50	Short Term		BWR A4 + Assignment
Grand Total	22.94	47.44	(Rupees Forty Seven Crores and Forty Four 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
Note: *Issuer did not cooperate; based on best available information.

RATING ACTION / OUTLOOK

BWR has upgraded the llong term ratings of Marya Frozen Agro Food Products Pvt. Ltd. to BWR BB+/Stable and assign the short term ratings to BWR A4+. The upgradation of ratings reflects the strong global presence of the parent company, Marya Day Agro Foods Pvt. Ltd. and strong operational track record for both the companies. The rating is strengthened by the above average financial risk profile, reflected in a moderate tangible net worth of Rs. 28.57 Crores, and good coverage indicators i.e. ISCR & DSCR of 6.10X & 3.46X respectively as on 31 March 2021. The rating is, however, constrained by the working capital intensive nature of operations and Competition in the industry in the worldwide. The ‘stable’ outlook indicates a low likelihood of a rating change in the medium term. BWR expects that the firm’s performance is likely to be maintained over the next few years.

KEY RATING DRIVERS

Credit Strengths:

Established set of operations : :
The Directors are well experienced in packaged foods & meats industry. This has resulted in healthy revenue growth over the past three years; Rs. 981.03 crs in Provisional 2022 and Rs 778.08 crore in fiscal 2021 from Rs 659.77 crore in fiscal 2020. Revenue is further expected to improve aided by incremental orders from existing customers as well as addition of new customers. Company has been able to diversify their geographical presence with export to more than 10 countries over the past 3 years leading to improvement in revenue.
Efficient working capital management: :
Working capital conversion cycle have been in the range of 21 days over the three fiscals ended March 31, 2022. The conversion cycle days are driven by minimal inventory of around 15 days due to the perishable nature of the products and manageable debtors of around 13 days in fiscal 2022. The firm receives a credit period of around 7-10 days from its suppliers, which bridges the working capital requirements.
Healthy financial profile: :
MFAFPPL’s capital structure have been at healthy level due to lower reliance on external funds yielding gearing of 1.54 time and low total outside liabilities to adj tangible networth (TOL/ANW) of 1.88 for year ending on 31st March 2022. MFAFPPL’s debt protection measures have also been at healthy level due to leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 6.23 times and 0.23 times for fiscal 2021. MFF debt protection measures are expected to remain at similar level over medium term.
Extensive experience of promoters: :
The promoters/ Directors are well experienced in packaged foods & meats industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers both in export and domestic market. MFAFPPL has a fully integrated meat processing plant at Bareilly, Uttar Pradesh having total installed capacity of slaughtering 800 animals per day which provides a competitive edge for both domestic and export market. Corporate guarantee is provided by its group companies AL Sumama Agro Foods Private and Marya Day Agro Foods Pvt. Ltd. to ensure servicing of debt obligations of Marya Frozen Agro Food Products Private Limited. Further the capacity utilization of the plant has remained healthy.
Proximity of manufacturing facilities to source of raw material and Likely Growth in Indian Bovine Exports: :
The Company’s plant is located at Bareilly (Uttar Pradesh), which has a sizable buffalo population, thereby ensuring easy availability of raw material.

With Govt. support the Indian buffalo meat export market is expected to grow in the medium term due to competitive export pricing, a fast-growing urban population globally, an improvement in domestic transportation and storage practices, and the growing popularity of supermarkets. India is a leading buffalo meat exporter in the world due to high buffalo population and low domestic consumption.

Credit Risks:

Modest operating margins: :
The intense competition in the domestic and international markets has kept operating margins modest. Despite improvement in overall realizations, margins are expected at 1.76% in fiscal 2022 as company has started outsourcing work to small entities due to high order flow, therefore constraining the margins. While the company will benefit from its established market position, sustainability of profitability will remain a key monitorable.
Exposure to unfavourable changes in government regulations: :
The processed meat industry is sensitive to unfavourable changes in government policies, global factors and environmental conditions. Like all other meat products, the quality of buffalo meat is also sensitive to adverse environmental conditions, resulting in livestock diseases
Commoditised nature of business and intensely competitive industry: :
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. The buffalo meat processing industry is highly fragmented and competitive because of the presence of large organised players and numerous mid-sized players. The competition is further aggravated by exports from other major meat-exporting countries such as Brazil and Australia. This keeps the pricing flexibility of the industry participants in check and limits profitability.
Inherent business risks because of the sensitive nature of the business and regulatory risk: :
The business is exposed to significant challenges such as disease outbreaks in cattle population. Also, the industry is socially and politically sensitive in the country. Factors such as these can impact the availability and processing of buffalo meat.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the endof this rationale).

RATING SENSITIVITIES

Going forward, the ability of the firm to improve its scale of operations and profitability as envisaged, ensure timely execution of projects, increasein its ongoing projects folio, ensure timely sales and realization of collections, efficiently manage its working capital requirements and strengthenits overall credit profile would be the key rating sensitivities

Positives :

Improvement in scale of operations with improvement in net cash accruals on a sustained basis
Improvement in the business profile with increased sales velocity on a sustained basis for completed projects and timely progress of ongoing projects.

Negatives:

Decline in revenue or profitability thereby impacting cash accruals
Deterioration in financial risk profile on account of stretch in working capital cycle or any large, debt-funded capital expenditure.
Prolonged adverse impact of Covid-19 related disruptions on company operations.

LIQUIDITY INDICATORS - Adequate

The Company has a Cash & Bank balance of INR 0.52 Crs in FY21 (Audited), INR 3.32 Crs in FY22(Provisionals) and INR 3.57 Crs in FY23 (Projections).
The Current Ratio of the company is 1.38x in FY21 (Audited), 1.68x in FY22 (Provisional) , which is above the industry average and 1.67x in FY23 (Projections).
Net Cash Accrual is Rs. 11.11 Crs in FY21 (Audited) against CPLTD of Rs. 1.50 Crs. It is improved to Rs. 12.09 Crs. in FY22 (Provisional) against CPLTD of Rs. 2.23 Crs in FY22 (Provisional). Net Cash Accruals estimates to decrease marginally to Rs. 12.08 Crs in FY23 (Projection) against CPLTD of 2.23 Crs. It indicates that the availability of funds is enough to meet its debt obligations in FY22 and FY23.
Gearing Ratio (Total Debt/TNW) is 1.77x in Fy21 (Audited) and improved to 1.54X in FY22 (Provisionals). It is projected to improve to 1.36x in FY23 (Projections).
DSCR is 3.46x in FY21 (Audited) and improve to 3.76X in FY22 (Provisionals). It is projected to come down to 3.04x in FY23(Projections).
ISCR is 6.10x in FY21 (Audited) and improve to 6.23X in FY22 (Provisionals). It is projected to come down to 5.50x in FY23(Projections).
Cash Credit Account Limit Utilization 64.68%.
Hence, overall liquidity is adequate.

ABOUT THE ENTITY

The Company was incorporated in 2016 and commenced its operations in 2017 having it's plant located in Bareilly, UP. The Company is involved in the business of exporting, supplying, processing, wholesaling, retailing and trading of buffalo meat, buffalo offals, buffalo live. The installed capacity of the plant is 800 buffalo per day and capacity utilization is 100%. It's authorized capital is INR 1.70 Crores and Issued, Subscribed & Paid up capital is also INR 1.70 Crores. Marya Frozen Agro Food Products Pvt. Ltd. is 100% holded by Marya Day Agro Foods Pvt. Ltd.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	778.08	659.77
EBITDA	Rs.Crs.	15.59	12.76
PAT	Rs.Crs.	6.80	7.23
Tangible Net Worth	Rs.Crs.	28.57	18.27
Total Debt/TNW	Times	1.77	1.96
Current Ratio	Times	1.38	1.19

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	41.94	BWR BB+/Stable (Upgrade)	28Oct2021	BWR BB-Stable (Downgrade/ISSUER NOT COOPERATING*)	05Aug2020	BWR BBStable (Upgrade)	20Sep2019	BWR BStable (Assignment)
Fund Based	ST	5.00	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
FB SubLimit	ST	NA	NA	NA	NA	NA	NA	20Sep2019	BWR A4 (Assignment)
Non Fund Based	ST	0.50	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		47.44	(Rupees Forty Seven Crores and Forty Four 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
Yashika Goyal Ratings Analyst yashika.g@brickworkratings.com	Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Marya Frozen Agro Food Products Pvt. 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	State Bank Of India (SBI)	Term Loan	3.88	_	3.88
2	State Bank Of India (SBI)	Term Loan	4.25	_	4.25
3	State Bank Of India (SBI)	Cash Credit	24.50	_	24.50
4	State Bank Of India (SBI)	Export Packing Credit (EPC)	_	2.75	2.75
5	State Bank Of India (SBI)	Foreign Bill Purchase	_	2.25	2.25
6	State Bank Of India (SBI)	Credit Exposure Limit (CEL)	_	0.50	0.50
7	State Bank Of India (SBI)	vehicle loan	0.13	_	0.13
8	State Bank Of India (SBI)	GECL	4.22	_	4.22
9	State Bank Of India (SBI)	GECL	4.96	_	4.96
Total			41.94	5.50	47.44
TOTAL (Rupees Forty Seven Crores and Forty Four lakhs Only)

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