Akshay Food Impex Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.42.24 Crs. of Akshay Food Impex Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Term Loan - Out-standing Export Packing Credit (EPC) - Sanctioned Foreign Bill Negotiation under Letter of Credit (FBD/FUDBP/FBP/FBDN) - Sanctioned Sub-Limit (Export Bill Discounting) - Sanctioned	10.24 12.00 20.00 (04.00)	Long Term	BWR BB + (Stable)
Sub Total	42.24
Grand Total	42.24	(Rupees Forty Two Crores and Twenty Four lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: Consider EBN as EBD, which is fund based long term. just like as working capital revolving credit. RATING ACTION / OUTLOOK : Stable

BWR believes that Akshay Food Impex Pvt. Ltd. business risk profile 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 the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

Credit Strengths:

• Experienced promoters :

  The promoters have more than a decade of experience in the processing and export of shrimp business, which has enabled the company to build healthy relationships with customers and suppliers.

• Moderate financial risk profile :

  Financial risk profile is moderate with moderate capital structure and debt service coverage metrics. Tangible net worth, gearing, interest service coverage ratio and debt service coverage ratio were around Rs.16.08 Crs, 1.45 times, 2.81 times and 2.33 times respectively as on 31st March 2019.

• Moderate scale of operations and profitability :

  Revenue remains moderate at around Rs 173.70 Crs for FY19 as against Rs.171.53 Crs for FY18. Profitability margins moderate marked by, operating profit margin and net profit margins were around 5.57% and 3.73% respectively, for FY19.

Credit Risks:

• Exposure to Forex Risk and high geographic concentration risk in the revenue stream :

  The Company is exposed to volatility in forex rates as it exports to various countries such as China, USA etc. Although the Company has a forward contract facility limit of Rs.157 Crs to hedge forex risk. The finished processed by AFIPL are being majorly supplied China and USA presently.

• Intense competition, susceptibility of profitability to volatility in raw material prices and highly regulated industry :

  The industry is characterized by low entry barriers and intense competition with a large number of organised and unorganised players. Profitability margins are highly susceptible to fluctuations in shrimp prices. In FY18, the global price level of shrimp declined sharply. Presently, the company has no long term contracts with either buyers or sellers. So, it may have to procure the raw material from the dealers at prevailing market prices. The Company exports mainly to China (~60%) USA (~30%) and Other countries (10%). Any changes in the regulatory environment of these countries could affect the company’s revenue and profitability. Since China is a key importer and consumer of shrimp, there is a decline in demand for seafood from China. The Covid 19 outbreak may also constrain the export to China,  the USA  and any other counrty.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

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

The ability of the company to increase revenues, improve its profitability margins, strengthen its credit risk profile and manage its working capital efficiently would remain the key rating sensitivities.

Positive:

• Sustained improvement in scale of operations with improved profitability margins and capital structure.

• Specific credit metrics that could lead to an upgrade of AFIPL’s rating include (1) Total Debt/tangible net worth below 1.00 time on a continuous basis, (2) DSCR and ISCR greater than 3.0 times on a continuous basis.

Negative:

• Specific credit metrics that could lead to a downgrade if there is a decline in profitability margins,Total Debt/Partners capital exceeding 2.0 times and weakening in debt protection metrics with DSCR and ISCR declining below 1.00 times.

• The Covid 19 virus outbreak may also constrain the export to China, the USA and or to any other country which may result in low turnover.

LIQUIDITY POSITION

Current ratio was adequate at 1.58 times as on 31 Mar 2019. The company does have debt repayment obligations of around Rs.2.00 Crs as against company's cash accruals are expected around Rs.7.73 crore, as on 31 March ended 2019, which gives an adequate cushion on its liquidity. Though working capital facilities were utilised 90% over the last one year.

PROFILE

Akshay Food Impex Pvt. Ltd. was incorporated in 2013 and promoted by Mr. V. Pardha Saradhi and Ms. N. Aparna Devi. The company is engaged in processing and exports of Vannamei shrimps. The company raw material/semi finished goods from the districts of West and East Godavari, Prakasham, Krisha and Nellore. The company initially commenced its operations on leased premises belonging to M/s Bluepark Seafoods Private Limited for an annual processing of shrimps. During April 2018, the company set up its own processing unit with an installed capacity of 6,250 MT/annum. The company has leased land for 12 years with an annual rent of Rs.1,15,200 (from 2014). The company exports Vannamei shrimps primarily to China, U.S.A and other countries. AFPL has its own laboratory for microbiological & anti-biotic analysis which are compliant with international standards maintained by USFDA and European Union (EU) for seafood products. The company operates 2 shifts per day with 300 and 200 permanent and temporary employees respectively. The company has established a customer and suppliers base.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	173.70	171.53
EBITDA	Rs.Crs.	9.68	4.96
PAT	Rs.Crs.	6.47	1.92
Tangible Net Worth	Rs.Crs.	16.08	9.60
Total Debt/Tangible Net Worth	Times	1.45	3.11
Current Ratio	Times	1.58	1.17

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2020)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Term Loan - Out-standing Export Packing Credit (EPC) - Sanctioned Foreign Bill Negotiation under Letter of Credit (FBD/FUDBP/FBP/FBDN) - Sanctioned Sub-Limit (Export Bill Discounting) - Sanctioned	Long Term	10.24 12.00 20.00 (04.00)	BWR BB+ (Stable)	NA	NA	NA
Total			42.24	(Rupees Forty Two Crores and Twenty Four lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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 :

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies

For More Information Contact:

Analytical Contacts	Investor Contacts
Prashanth B Ratings Analyst B : +91 40 2331 0161 / 2331 0071 prashanth.b@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
K Nagaraj Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Term Loan - Out-standing	10.24	_	10.24
2	Export Packing Credit (EPC) - Sanctioned	12.00	_	12.00
Sub-Limit (Export Bill Discounting) - Sanctioned	(4.00)
3	Foreign Bill Negotiation under Letter of Credit (FBD/FUDBP/FBP/FBDN) - Sanctioned	20.00	_	20.00
Total				42.24
TOTAL (Rupees Forty Two Crores and Twenty Four lakhs Only)

Note: Consider EBN as EBD, which is fund based long term. just like as working capital revolving credit.