Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Rating Rationale
Acuite has upgraded the long term rating of 'Acuite BB' (Read as Acuite Double B) from 'Acuite BB-' (Read as Acuite Double B Minus) on Rs. 33.18 crore facilities of Ali Afzal Flour Mill Limited. The Outlook remain 'Stable'.
Further Acuite has assigned the long term rating of 'Acuite BB' (Read as Acuite Double B) on Rs. 5.60 crores facilities of Ali Afzal Flour Mill Limited. The Outlook is 'Stable'.
Rationale for upgrade:
The rating upgrade factors in the improvement in the financial risk profile of the company in FY2026 (Prov.), marked by an increase in net worth following the subordination of unsecured loans amounting to Rs. 5.64 crore, which have been treated as quasi-equity. This has resulted in an improvement in the company's gearing . Further, the company continues to maintain efficient working capital management. The rating also derives comfort from the company's established track record of operations. The liquidity position remains adequate, supported by sufficient net cash accruals against debt repayment obligations and moderate utilization of bank limits. However, the rating remains constrained by the stagnant scale of operations in both FY2026 (Prov.) and FY2025, along with volatility in operating profitability.
About the Company
Ali Afzal Flour Mill Limited (AAFML), incorporated in 2016 and based in Barabanki, Uttar Pradesh, operates in the food processing industry. The company is engaged in the milling and processing of wheat and has installed a roller flour mill with a processing capacity of 400 tonnes per day (TPD) along with a Pesa (Atta) mill having a capacity of 130 TPD.AAFML manufactures a range of wheat-based products, including Maida, Atta, Chakki Atta, Suji, and Dalia, which are marketed under its unregistered brand name, “Lal Gulab.” The company's products are distributed on a pan-India basis, catering primarily to wholesalers. Sales are largely routed through brokers, who facilitate the company's market reach and customer acquisition.
Unsupported Rating
Not Applicable
Analytical Approach
Acuité has considered the standalone business and financial risk profile of AAFML to arrive at the rating.
Key Rating Drivers
Strengths
Established track record of operations and experienced management.
The company is promoted by Mr. Abdul Mannan (Managing Director), Mrs. Nazmeen Akhtar and Mr. Mohd Monis with over two decades of experience in the flour milling industry. This has resulted into healthy relationship with suppliers and repetitive orders from its customers. Acuite believes that the experience of the promoters coupled with relationship with their customers will benefit the company going forward.
Improved Financial Risk profile:
The Financial risk profile marked average supported by improvement in net worth and coverage indicators. The Tangible Net Worth (TNW) stood at Rs. 19.11 crore in FY26 (Prov.) as against Rs. 11.47 crore in FY25 on account of unsecured loans amounting to Rs. 5.64 crore in FY26 (Prov.) have been considered as subordinated to debt and, accordingly, have been treated as part of the net worth. Total borrowing has been reduced to Rs. 14.84 crores in FY 26 (Prov.) as compared to Rs. 22.62 crores in FY 25 resulting improvement in gearing at 0.78 times in FY 26 (Prov.) from 1.97 times in FY 25. Debt protection metrics has improved with Interest coverage ratio and DSCR stood at 4.96 and 1.61 times in FY 26 (Prov.) from 2.59 and 1 times in FY 25. ToL/TnW and Debt/EBITDA further improved to 0.91and 2.57 in FY 26 (Prov.) from 2.30 and 3.62 times in FY 25.Acuite believes that financial risk profile expected to improve on account of coverage indicators.
Efficient Working Capital Management:
The Working Capital management marked efficient supported by GCA days stood at 44 days in FY 26 (Prov.) as compared to 44 days in FY 25. Debtor days improved to 30 days in FY 26 (Prov.) from 34 days in FY 25 almost in line with their average collection period for the same is 20-25 days. Inventory days stood at 10 days in FY 26 (Prov.) as well as in FY 25 indicates efficient inventory management. Creditor days stood at 2 days in FY 26 (Prov.) as compared to 4 days in FY 25 indicates efficient payable management. Acuite believes working capital will remain efficient in the medium term due to nature of their operation.
Weaknesses
Stagnant scale of operation with volatility in margin:
The company reported revenue of Rs. 217.59 crore in FY2026 (Prov.) as against Rs. 214.84 crore in FY2025. Despite an increase in sales volumes, revenue growth remained subdued during FY2026 due to lower realizations. However, the company has exhibited improved business performance in FY2027, with total sales of Rs. 69.92 crore recorded in Q1FY2027 compared to Rs. 43.82 crore in Q1FY2026.The operating margin moderated marginally to 2.64% in FY 26 (Prov.) from 2.89% in FY2025 owing to an increase in raw material costs. Given the intense competitive environment, the company was unable to fully pass on the higher input costs to its customers, thereby impacting profitability. Despite the moderation in operating margins, the company's PAT margin improved to 0.91% in FY2026 (Prov.) from 0.57% in FY2025. The improvement was primarily driven by the receipt of an interest subsidy amounting to Rs. 1.03 crore during FY2026, which supported the overall increase in net profitability. Acuite believes the company's operating performance is likely to improve over the medium term, supported by the revenue growth witnessed in Q1FY2027. However, the company's ability to enhance its profitability in a highly competitive operating environment, while sustaining revenue growth, will remain a key rating monitorable.
Vulnerability to governmental rules and agroclimatic risk
The primary ingredient used to make sooji, maida, and aata is wheat. Agroclimatic conditions are the primary determinant of wheat production. Any unfavourable shift in the agroclimatic conditions could cause the supply chain for wheat to break. Furthermore, the government's strict regulation of wheat prices through the Minimum Support Price (MSP) could put pressure on AAFML's profitability. The Company also faces competition from both the organised and unorganised business in this industry which tends to put pressure on the margins of the Company
Rating Sensitivities
Potential triggers (individual or collective) for an upward rating action:
1. If the revenue increases by 30% and profitability by 1-2%
2. Sustenance of financial risk profile
Potential triggers (individual or collective) for a downward rating action:
If revenue declines to Rs.180 cr or less and decline in profitability
Any deterioration in financial risk profile
Liquidity Position
Adequate
The Liquidity of the Company marked adequate supported by net cash accruals of Rs. 3.86 crores against the long-term debt repayment of Rs. 1.96 crores for FY 26 (Prov.) The NCA is expected to be in range of Rs.3.50 -4.00 crores against 0.20-0.25 Cr. of debt repayment of obligation. The Current ratio stood at 1.51 times in FY 26 (Prov.) Cash and bank balance stood at Rs. 2 crores in FY 26 (Prov.) Bank limit utilization stood at 67% for six month ended June 26. Recently their CC limit has also enhanced from. 28 Cr. to Rs.38 crores further helps their smooth working capital management. The Company is going to undertake a capex for new unit at a cost of Rs. 50 Cr. to be funded by term loan of Rs.30 crore in FY28, but the same is at a nascent stage of planning. Acuite believes liquidity is expected to adequate supported by net cash accruals against the long-term debt repayment and absence of capex plan in near term.
Outlook: Stable
Other Factors affecting Rating
None
Particulars
Unit
FY 26 (Provisional)
FY 25 (Actual)
Operating Income
Rs. Cr.
217.59
214.84
PAT
Rs. Cr.
1.99
1.22
PAT Margin
(%)
0.91
0.57
Total Debt/Tangible Net Worth
Times
0.78
1.97
PBDIT/Interest
Times
4.96
2.59
Status of non-cooperation with previous CRA (if applicable)
Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
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List of instruments and names of regulators of the instruments
