RATING RATIONALE
17 Mar 2021
Aneja Food Products
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.24.28 Crs. of Aneja Food Products
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 24.28 | Long Term | BWR BBB - (Stable) |
| Sub Total | 24.28 | ||
| Grand Total | 24.28 | (Rupees Twenty Four Crores and Twenty Eight lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR has assigned the ratings of Aneja Food Products to BWR BBB- (Stable). The assignment of the rating reflects the Experience of the promoters, moderate net worth, Moderate financial risk profile and sustained demand for milk and Milk products. The rating is, however, constrained by Risk of weather conditions and environmental factors, Highly competitive and unorganised sector, Risk associated with Partnership firm, High working capital intensive nature of business and Impact of Covid- 19.
KEY RATING DRIVERS
Credit Strengths:
-
Experience of the Promoters: :
Mr. Gaurav Aneja and Mr Aman Aneja are the key promoters of the Firm. Both of them have the experience of 25 and 30 years respectively in dairy business which has enabled them to understand the intricacies of the business.
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Moderate Net worth: :
The networth of the firm is Rs.38.02 Crs. which has consistently increased over the years due to retention of profits.
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Moderate Financial Risk Profile : :
The firm has reported low gearing at 0.61X in FY20. Debt Protection Metrics are healthy i.e. ISCR and DSCR at 30.21X and 19.16X in FY20. The firm has reported a Net Profit Margin of 6.59% and OPM of 10.69% respectively in FY 20 as compared to 4.55% and 7.53 in FY 19. The current ratio of the firm is above the benchmark at 1.86 times for FY 20. The liquidity of the firm is adequate.
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Sustained demand for health products in the FMCG market: :
Demand for ghee and milk products in Indian households is increasing because of increased health awareness among masses. The spurt in demand augurs well for firms like Aneja Food Products which have established distribution networks across Jammu & kashmir, Punjab and west bengal under the brand name of “SIFTI”.
Credit Risks:
-
Risk of weather Conditions and environmental factors: :
A temperate weather is more conducive to higher milk production – The raw milk availability declines during summers. A drought or a rainfall deficit results in increased cost of cattle feed and reduced availability of cattle fodder thereby constraining milk supply. Such adverse weather and seasonal conditions may lead to a spike in raw milk prices.
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Highly competitive & unorganized sector: :
The Indian dairy industry is characterized by predominance of unorganized players. In the organized sector, the Firm faces tough competition from various well-established brands such as Mother Dairy, Amul etc.
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Impact of COVID-19 outbreak :
Due to outbreak of the pandemic coronavirus COVID-19 in March 2020 which has triggered a nationwide lockdown may disrupt the supply and demand in the short term. Although the Firm deals in an essential commodity, it is exempted from various restrictions but the revenues of the firm have been affected due to shut down of hotels, halls and postpone of marriages etc for the period of 3 months from Apr to June.
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Risks associated with Partnership firm: :
Being a partnership firm, it is exposed to inherent risk associated with capital being withdrawn by the partners at a time of personal exigencies which may affect the business operations of the firm. Besides, there are limited avenues available for raising capital.
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High working capital-intensive nature of the business: :
Milk production during the lean period i.e from April till September is low and in view of the longer shelf life of the products, the firm maintains high inventory levels at the year end for the continuous supply of finished goods. This results into high working capital requirements.
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 firm to improve its scale of operations and Product mix would be the key rating sensitivities.
Positive: The rating may be upgraded if the firm reports sustained and significant revenue growth while maintaining sound credit metrics and Favourable product mix would be key monitorable.
Negative: The rating outlook may be downgraded if the firm reports further decline in revenues.
LIQUIDITY POSITION
Cash and cash equivalents is Rs. 0.59 Cr for FY 20. The Current ratio of the firm is moderate at 1.86 times and gearing ratio of the Firm is comfortable at 0.61 times for FY 20. The debt protection metrics are also comfortable at ISCR at 30.21x and DSCR at 19.16x for FY 20. Average credit utilization for peak season is 72% and during lean season, it remains in credit balance. The firm’s cash accruals are Rs.13.27 Crores for FY20 without any major long term debt repayment obligations. The Firm is expected to generate cash accruals in upward of Rs.13.75 Crores in the current fiscal FY 21.
Therefore, the overall liquidity position is adequate.
PROFILEAneja Food Products was established as a partnership firm on 01/04/2000 in Kathua, Jammu & kashmir. The firm was started by Mr. Sh. Gaurav Aneja and Sh. Aman Aneja and is into processing and manufacturing of milk and milk products like Skimmed Milk Powder (SMP), Whole milk powder, dairy whitener, Dairy Mix, Desi Ghee and Cream. The firm sells its products in domestic market under the brand name of “Sifti”. AFP’s processing unit is located in Kathua in Jammu and Kashmir.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 194.97 | 134.23 |
| EBITDA | Rs.Crs. | 20.85 | 10.10 |
| PAT | Rs.Crs. | 12.85 | 6.11 |
| Tangible Net Worth | Rs.Crs. | 38.02 | 29.97 |
| Total Debt/Tangible Net Worth | Times | 0.61 | 0.73 |
| Current Ratio | Times | 1.86 | 1.88 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2021) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2020 | 2019 | 2018 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - Sanctioned | Long Term | 24.28 | BWR BBB -(Stable) | NA | NA | NA | |||
| Total | 24.28 | (Rupees Twenty Four Crores and Twenty Eight 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.
For More Information Contact:| Analytical Contacts | |
|---|---|
|
Sanskriti Jain Rating Analyst sanskriti.j@brickworkratings.com |
Satvinder Kumar Gakhar Associate Director - Ratings B : +91 11 2341 2232 satvinder.g@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 24.28 | _ | 24.28 |
| Total | 24.28 | 0.00 | 24.28 | |
| TOTAL (Rupees Twenty Four Crores and Twenty Eight lakhs Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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