Nila Sea Foods Pvt. Ltd.

Brickwork Ratings assigns the long term rating and reaffirms the short term rating for the Bank Loan Facilities of Rs. 143.27 Crs. of Nila Sea Foods Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (06 Oct 2020)	Present
Fund Based	0.00	2.77	Long Term		BWR BBB - /Stable Assignment
	140.00	140.50	Short Term	BWR A3 Upgraded	BWR A3 Reaffirmation
	(45.00)	(45.00)
	(35.00)	(40.00)
Grand Total	140.00	143.27	(Rupees One Hundred Forty Three Crores and Twenty Seven 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

BWR assigns the BWR BBB- with 'Stable' outlook for the long term and reaffirms short term rating at BWR A3 for bank loan facilities of Nila Sea Foods Pvt. Ltd.

The ratings take into consideration the industry experience of the management, long standing supplier and customer relationships, moderate financial risk profile and locational advantages in terms of proximity to the international sea route. However, the ratings are partially offset by susceptibility to risks inherent in the seafood industry, geographical concentration, volatility in shrimp prices and availability, competitive shrimp export market, vulnerability of shrimp exports to variance in climatic conditions and disease outbreaks consequently impacting sales, exposure to regulations of importing countries and foreign exchange fluctuation risk.

Outlook: BWR believes NSFPL will continue to benefit from the extensive industry experience of the promoters.

KEY RATING DRIVERS

Credit Strengths:

Promoters’ extensive experience in the shrimp export business: :

Experience of over two decade has helped the promoters gain insight into the industry, diversify the customer base, and modify the business policy in line with the changing market dynamics.The promoters are focusing on increasing the volume of the Vannamei variety shrimp, the demand for which is healthy.
Comfortable revenue and Moderate financial risk profile :
Despite operating at a capacity of ~ 60-65% throughout FY21, under pandemic conditions, the company till mid-March 2021 registered a revenue of Rs 284.47 Cr on a standalone level which is ~ 80% of the FY20 standalone performance. The company has achieved revenue of Rs. 240 Crs from Apr 2021 to Oct 2021 and the company has a continuous flow of orders providing sufficient revenue visibility for the current fiscal year of 2022

The financial risk profile is supported by a comfortable capital structure and above-average debt protection metrics. Networth is reported at Rs. 51.68 Crs as on 31 Mar 2021 against Rs. 47.38 Crs as on 31 Mar 2020. Debt Service Coverage of the company is at a satisfactory level marked by ISCR and DSCR of 1.78 times and 1.96 times respectively in FY 21.
Locational advantages :

The Company's processing unit is situated in Tuticorin, Tamil Nadu near Gulf of Mannar. It is located close to the International sea route and Cape Comorin. The company exports sea caught fresh marine products which are available at large in the vicinity and having proximity to port, the company is able to source raw materials from other hubs like quilon and in eastern territories. Further exports are easier due to international sea trade connectivity.

Credit Risks:

Exposure to the risk of regulatory changes and intense competition :
The marine export industry faces risks arising from regulatory changes in client countries and the high quality standards of customers. Changes in regulations such as levy of anti-dumping duties by importing countries could impinge on the profitability and business of the entire industry. Furthermore, food product imports are subject to high quality standards in developed countries.

Intense competition in the shrimp processing and export business limits bargaining power. Competition from neighbouring countries, such as Thailand, China, and Vietnam, also persists.
Susceptibility to volatility in raw material prices and forex rates :

The procurement price of shrimp depends on catch and availability, and the company is susceptible to volatility in product prices. Furthermore, as the entire revenue comes from exports, the credit risk profile remains susceptible to fluctuations in forex rates.
Foreign exchange volatility risk :
: As entire sales of NSFPL are derived from exports, the company is more susceptible to foreign exchange fluctuation risk. Although the company enjoys a natural hedge along with forward contracts, it is still exposed to geo-political risks and significant geographical concentration risks

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward the firm's ability to increase revenue, profitability and capital structure and maintaining overall financial risk profile will be the key rating sensitivities.

Upwards:

Increase in scale of operations and profitability on a sustained basis
Improvement of financial risk profile

Downwards:

Deterioration in scale of operations and/or EBITDA margins due to industry or company-specific factors, leading to a significant deterioration in the credit metrics and liquidity, all on a sustained basis, would be negative for the ratings.
Specific credit metrics which may result in a rating downgrade include DSCR and ISCR declining to below unity, consistently.

LIQUIDITY INDICATORS - Adequate

The company has an adequate liquidity position. There are long-term secured borrowings from banks, amounting to Rs. 2.95 Crs, as on 31 March 2021 against a current portion of long term debt (CPLTD) of Rs 1.42 Crs in FY21, the company had cash accruals of Rs. 2.30 Crs in FY21. The company projected to generate cash accruals of Rs.7.70 Crs in FY22 against a CPLTD of Rs. 1.00 Crs, thereby indicating an adequate liquidity position. The average utilization of working capital bank limits of the company stood around 84% for the last 3 months ending 31 October 2021. BWR notes that the company has not availed the moratorium benefits from its lenders and has been consistently servicing the interest obligations during Covid times.

ABOUT THE ENTITY

NSFPL was incorporated in 1992 in Tuticorin. It is engaged in processing and export of marine products. The plant is situated in Tuticorin near Gulf of Mannar and has a capacity of 50 tonnes per day. The Company mainly processes and exports L. vannamei shrimps, sea caught shrimps and thondi squids. It sells its products under brand names Nila and Nila Silk. The Company exports almost 100% of its processed products. Only a small quantity of chilled shrimp, rejected as non-export quality, is sold locally. Most of the product is exported to countries like Japan, USA and Canada.

The Company operates a windmill with installed capacity of 850 kW, situated in Mallal village, Sangli, Maharashtra.

NSFPL is part of the Nila Group founded by Late Mr. D. Chandran (Since expired) and family in 1992. Presently, the company is being managed by Mr. C. Selwin Prabhu, Managing Director, Mrs. C. Nilavathi, Chairman and Mr. C. Aminath Prabu Emmanuvel, Director.

The other members of Nila Group are: Amulya Sea Foods , Nila Sea Foods Exports and Nila Cold Storage Pvt. Ltd. The group entities are also engaged in a similar line of business.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	284.47	354.68
EBITDA	Rs.Crs.	9.01	7.37
PAT	Rs.Crs.	2.30	4.15
Tangible Net Worth	Rs.Crs.	51.68	47.38
Total Debt/Tangible Net Worth	Times	2.33	1.72
Current Ratio	Times	1.12	1.22

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	2.77	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Fund Based	ST	140.50	BWR A3 (Reaffirmation)	06Oct2020	BWR A3 (Upgraded)	30Dec2019	BWR A4+ (Assigned )	NA	NA
FB SubLimit	ST	(45.00)	BWR A3 (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(40.00)	BWR A3 (Reaffirmation)	NA	NA	NA	NA	NA	NA
Grand Total		143.27	(Rupees One Hundred Forty Three Crores and Twenty Seven 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
Lakshmi Verma Tamada Rating Analyst lakshmi.vt@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Nila Sea Foods 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	South Indian Bank	Packing Credit (PC) - Sanctioned	_	90.00	90.00
	Sub-Limit (Packing Credit in Foreign Currency ) - Sanctioned		(45.00)
2	South Indian Bank	Foreign Bill Purchase - Sanctioned	_	50.50	50.50
	Sub-Limit (Foreign Bill Purchase (Non LC) ) - Sanctioned		(40.00)
3	Tamilnadu Mercantile Bank Limited	Term Loan - Sanctioned	2.77	_	2.77
Total			2.77	140.50	143.27
TOTAL (Rupees One Hundred Forty Three Crores and Twenty Seven lakhs Only)

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