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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.00 | ACUITE BBB- | Stable | Assigned | - |
| Bank Loan Ratings | 161.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Total Outstanding | 168.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs.161.00 crore bank facilities of Govind Milk and Milk Products Private Limited (GMPL). The outlook is 'Stable'.
Acuité has assigned the long term rating of 'ACUITE BBB-'(read as ACUITE triple B minus) on the Rs.7.00 crore bank facilities of Govind Milk and Milk Products Private Limited (GMPL). The outlook is 'Stable'. Rationale for Rating The rating reaffirmation takes into consideration the improvement recorded in GMPL’s operating performance in FY2023 and its continuing moderate financial risk profile. The company's revenue grew to Rs.1067.39 Cr in FY2023 from Rs.831.65 Cr in FY2022. The operating profit margins improved marginally and stood at 2.71 percent in FY2023 against 2.64 percent in FY2022. The financial risk profile is moderate with moderate debt protection metrics and gearing levels. The gearing levels stood at 1.73 times as on March 31, 2023 as against 1.19 times as on March 31, 2022. Further, the rating continues to factor in GMPL’s established track record of operations in the dairy products industry, its strong regional presence and the efficient working capital operations marked by GCA days of 67 days in FY2023 against 69 days in FY2022. The rating is however, constrained due to its susceptibility to changes in government regulations, environmental conditions, exposure to geographical concentration risk and presence in a highly competitive industry. |
| About the Company |
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Phaltan based Govind Milk and Milk Products Private Limited (GMPL)was incorporated in 1996 by Mr. Sanjeevraje Naik Nimbalkar. It is engaged in milk processing, production and marketing of dairy products. The company has facilities based in Phaltan,Yamkanmardi and Mumbai with a processing capacity of 10 lakh litres per day (LLPD).
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has considered the standalone view of the business and financial risk profile of GMPL to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Established player in dairy products with a strong regional presence
GMPL, led by Mr. Sanjeevraje Naik Nimbalkar, has been operating in the diary business for more than 2 decades. The company has an established procurement and distribution network for milk and milk products from farmers. GMPL has over 240 collection centres and 10 chilling centres all over India to cater to the demand. GMPL which has traditionally catered in the Maharashtra, Gujarat, Karnataka and Goa regions backed by a strong brand presence and high demand prospects. Due to increasing consumption of milk products the company has started marketing its products in Northern and North Eastern states such as Haryana, Punjab, Rajasthan, Tripura, Assam, Meghalaya domestically and in the Middle East region by partnering with hypermarket chains like Lulu from FY2021. GMPL has introduced two new CMF depo in Delhi and Ambala to capture the entire North India Market. The company exports to Gulf countries like Bahrain, Qatar, Abu Dhabi, Dubai, Oman, etc. under its own brand name. Acuité believes that GMPL will continue to benefit from the company’s established presence and brand recognition in the industry and among the consumers supporting its business risk profile over the medium term. Moderate business risk profile GMPL's business risk profile is supported by a diversified revenue stream such as packaged milk, cream, butter, ghee, curd, paneer, SMP, flavoured milk, tetra pack lassi and buttermilk. GMPL has introduced new products in FY2024 such as flavoured milkshakes which will aid in to increase the company’s top line and bottom line. The company caters to reputed companies such as Abbott Healthcare Private Limited, Mother Dairy Fruit & Vegetable Private Limited amongst others. The company has started focusing on Middle Eastern region as a source of growth. The company has been able to add several new companies to its customer portfolio such as Baskin Robbins, Ferrero Rocher, Dandy Dairy, Parle Agro and Britannia, to name a few. In the current year, company added new customers such as Mondelez India Foods Pvt. Ltd., Barry Callebaut, Dairy Day Ice Creams, etc. With strong customer's presence, the company’s operating income is improving YoY and stood at Rs.1067.39 crore in FY2023 as against Rs.831.65 crore in FY2022 registering a growth of ~28.35 percent. The increase in revenue is due to an increase in quantity sold and improvement in realisations. Moderate financial risk profile The company has moderate financial risk profile marked by tangible net worth of Rs.96.40 crore as on 31 March, 2023 as against Rs.91.13 crore as on 31 March, 2022. The gearing level of the company moderated to 1.73 times as on 31 March, 2023 from 1.19 times as on 31 March, 2022. The total debt of Rs.166.62 crore consists of working capital borrowings of Rs.94.26 crore, unsecured loan from promoters of Rs.15.50 crore, term loan of Rs.40.97 crore and current maturities of the term loan is Rs.15.89 Cr as on 31 March, 2023. The coverage ratios of the company are moderate with Interest Coverage Ratio (ICR) of 2.23 times in FY2023 against 2.44 times in FY2022. Also, the Debt Service Coverage Ratio (DSCR) stood at 1.03 times in FY2023 against 0.99 times in FY2022. The total outside liabilities to tangible net worth (TOL/TNW) of the company stood at 2.65 times as on March 31, 2023 against 2.00 times as on March 31, 2022. Acuite believes the financial risk profile of GMPL will improve owing to no further major debt funded CAPEX over the medium term. Efficient Working Capital Management The working capital management of the company is efficient marked by comfortable gross current asset (GCA) days of 67 days in FY2023 as compared to 69 days in FY2022. The comfortable GCA days is on account of low debtor days of 9 days for FY2023 compared against 13 days for FY2022 and moderate inventory days of 49 days for FY2023 as against 42 days for FY2022. The creditor days of the company stood at 25 days for FY2023 as against 26 days for FY2022. Further, the working capital limits have been highly utilised at around 93.52 percent in the last twelve months ended November 2023. Acuité believes that the working capital operations of GMPL will remain efficient over the medium term. |
| Weaknesses |
| Susceptibility to changes in government regulations, environmental conditions and milk prices.
GMPL, like all dairy players, is susceptible to government regulations such as ban on skimmed milk powder (SMP) exports and removal of export incentives. Furthermore, it is susceptible to failure in milk production because of external factors such as cattle diseases. At the same time, it is also susceptible to volatile milk prices. The company’s operating profit margin stood at 2.71% in FY2023 and 2.64% in FY2022 as against 4.25% in FY2021. Highly competitive industry The dairy industry is highly fragmented with large number of unorganised players. The company also faces competition from some of the big players such as Amul, Parag, Karnataka Milk Federation, among others in the organised segment. While the dairy segment has attracted significant PE investments in the past, which has supported the companies in the segment, it has also increased the competitive intensity among the players. This limits the company’s ability to significantly improve the margins. Also, ensuring competitive remuneration to the farmers for procurement of milk would be a key sensitivity for maintaining a steady supply chain. |
| Rating Sensitivities |
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| Liquidity Position: Adequate |
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The company has adequate liquidity position marked by moderate net cash accruals to its maturing debt obligations. The company generated cash accruals of Rs.13.78 crore in FY2023 and Rs.11.14 crore in FY2022, while its’ maturing debt obligation were in the range of Rs.12-88 to Rs.11.34 crore for the same period. The cash accrual of the company is estimated to remain around Rs.22.98 crore to Rs.34.58 crore during 2024-26 against repayment obligations of around Rs.15.89-14.19 crore during the same period. The average bank limit utilization stood at around 93.52 per cent for twelve months ended November, 2023. The company maintained unencumbered cash and bank balances of Rs.1.89 crore as on 31 March 2023. The current ratio of the company has stood at 1.04 times as on 31 March 2023.
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| Outlook: Stable |
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Acuité believes that GMPL will maintain a ‘Stable’ outlook in the near to medium term on account of its established presence in dairy industry, experience of the promoters in the business supported by strong procurement capability and distribution network. The outlook may be revised to 'Positive' if the company registers higher-than-expected growth in its scale of operations, while also improving its operating profitability and coverage indicators. Conversely, the outlook may be revised to 'Negative' if the company fails to achieve the scalability amidst intensifying competition in the area of operation, decline in revenues or profitability margins or if the financial risk profile deteriorates due to higher-than-expected increase in debt-funded capex or working capital requirements resulting in deterioration in the overall capital structure.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 1067.39 | 831.65 |
| PAT | Rs. Cr. | 5.11 | 2.91 |
| PAT Margin | (%) | 0.48 | 0.35 |
| Total Debt/Tangible Net Worth | Times | 1.73 | 1.19 |
| PBDIT/Interest | Times | 2.23 | 2.44 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not applicable
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| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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