| Established track record, experienced management, and reputed clientele
The legacy of GAL dates back to year 1915 when promoter's forefathers were engaged in the business of imports of chemicals for various FMCG and pharmaceutical industries. Later, GAL was established in 1997 by Mr. Vipul Parekh and Mrs. Kaksha Parekh, who possess experience of over two decades in flavour and fragrance industry. The promoters are very well supported by their son, Mr. Yash Parekh who joined the business in 2010 and has helped in developing the presence in international markets, leading to higher export orders. The extensive experience of the promoters has helped GAL to establish a strong market position in Indian as well as international market.
GAL has an elite and enviable customer base having global presence – COLGATE (All 4 global Manufacturing Locations i.e. India, China, USA & Brazil), doTERRA, IP Callison, MANE, Givaudan, Robertet, RCB International, Symrise, Dabur, IFF, Patanjali, Emami etc. No single customer accounts for more than 25% of the revenues. Furthermore, GAL has expanded its customer base by attracting prominent names like Camlin Fine Sciences Limited. Some of these customers have been associated with the company for more than a decade.
Acuité believes that the GAPL promoter’s experience and established market presence in the flavour and fragrance industry will support its business risk profile over near to medium term.
Healthy Financial Risk Profile
The company has a healthy financial risk profile, which is marked by healthy networth, low gearing and healthy debt protection metrics. The net worth of the company stood at Rs. 227.01 crore on March 31, 2024 (Prov.) as against Rs. 177.48 crore on March 31, 2023. The company had issued bonus shares out of its reserves in FY2024. The gearing of the company stood low at 0.37 times on March 31, 2024 (Prov.) as against 0.51 times on March 31, 2023. TOL/TNW stood at 0.46 times on March 31, 2024 (Prov.) as against 0.64 times on March 31, 2023. The Debt-EBITDA improved to 1.08 times on March 31, 2024 (Prov.) as against 1.49 times on March 31, 2023.
The debt protection indicators remain healthy, with Interest Coverage Ratio (ICR) at 14.06 times in FY2024 (Prov.) as against 10.70 times in FY2023. The Debt Service Coverage Ratio (DSCR) stood at 10.15 times in FY2024 (Prov.) as against 8.34 times in FY2023.
GAL is planning a project of setting up new facility at Dahej with a total capacity of ~10,600 MTPA under its wholly owned subsidiary, Krystal Ingredients Private Limited. The project cost is estimated to be Rs. 105.08 crore. The project is expected to be funded through promoters contribution of Rs. 36.78 crore and balance amount through term loan of the total cost of the project, Rs. 86.13 crore has been incurred, which includes promoters contribution of Rs. 17.83 crore. The balance amount required in the form of promoter’s contribution are expected to met through internal accruals of GAL. The facility is expected to be operational from September 2024 onwards.
Acuite believes that the financial risk profile of GAL will continue to remain stable in the near to medium term in absence of any major debt funded capex plan.
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| Working Capital Management
The operations of the company are working capital intensive, marked by GCA days of 206 days on March 31, 2024 (Prov.) as against 210 days on March 31, 2023. The GCA days are driven by inventory days and debtor days. The debtor collection period stood improved at 35 days on March 31, 2024 (Prov.) as against 71 days on March 31, 2023. The inventory holding period increased to 166 days on March 31, 2024 (Prov.) as against 143 days on March 31, 2023. The creditor days stood at 16 days on March 31, 2024 (Prov.) as against 23 days on March 31, 2023.
However, the average bank limit utilization stood moderate at 52.59 percent for twelve months ended March 2024.
Acuité believes that GAPL’s ability to restrict further elongation of working capital cycle will remain a key rating monitorable.
Profitability susceptible to volatility in raw material prices and foreign exchange fluctuation risk
GAPL’s operating profitability is susceptible to volatility in raw material prices of clove, eucalyptus and mint which are procured locally and also imported from Indonesia, Madagascar to name a few. The company also exports its produce to USA, Germany, Brazil, etc thereby exposing itself to foreign exchange fluctuation risk, in turn risking the current operating margin levels. However, the same is mitigated to an extent because of equivalent imports against exports which acts as a natural hedge. Also, the company has a hedging mechanism and does not keep any of its position open.
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