| Expected benefits from slight change in business model :
Previously, around 60-65% of sales were routed through distributors. However, since last financial year, this has reduced to about 34% as MFL has started direct distribution to retailers. To support this, the company has opened depots in Patna (5), Jharkhand (18), and West Bengal (9).This shift has helped reduce distributor commissions and other related costs. It has also improved inventory management, as unsold or damaged products can be returned directly to MFL and redirected to other retailers more quickly. Earlier, returns through distributors took longer, leading to losses due to the short shelf life of bread, which is typically only 3-4 days. The direct distribution model has helped reduce such losses and improve operational efficiency. Acuité believes that MFL's shift to direct distribution is expected to improve its market reach, inventory management, and operational efficiency over the medium to long term. However, the company's ability to improve its profitability and sustain margins will remain a key rating monitorable.
Moderate financial Risk profile:
The financial risk profile of MFL is above average marked by moderate net worth, improved gearing and moderate coverage indicators. Total net worth stood at Rs.27.03 crores in FY 26 (Prov.) as compared to Rs.23.93 crores in FY 25. Gearing has improved to 1.32 times in FY 26 (Prov.) from 1.85 times in FY 25. Debt protection metrics also improved with Interest coverage ratio and debt service coverage ratio stood at 2.56 and 1.82 times in FY 26 (Prov.) as compared to 2.17 and 1.07 times in FY 25. Total outstanding liabilities /total net worth and Debt/EBITDA stood at 1.89 and 2.53 times in FY 26 (Prov.) as compared to 2.53 and 3.22 times in FY 25. Acuite believes that financial risk profile of MFL will remain at similar levels over the medium term.
Efficient Working capital management:
The working capital management of MFL stood efficient marked by improvement in GCA days to 96 days in FY 26 (Prov.) from 115 days in FY 25 driven by improvement in inventory days and debtor days. Inventory days stood at 39 days in FY 26 (Prov.) as compared to 44 days in FY 25, average inventory days stood at 25-30 days, and inventory days are mainly in the form of raw materials. Other current assets stood at Rs. 9.44 crores in FY 26 (Prov.) from Rs.8.19 crores in FY 25 mainly on account of balances with revenue authorities and advance to suppliers. Debtor days also improved to 34 days in FY 26 (Prov.) from 51 days in FY 25 indicating better collection management. Creditor days stood at 67 days in FY 26 (prov) as compared to 66 days in FY 25 mainly on account of year end purchases. Acuite believes the working capital management will remain efficient in the medium term.
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| Steady improvement in Scale of operation with decline in margin:
MFL recorded a revenue growth of 8.82% in FY2026 (Prov.), with operating income increasing to Rs. 141.35 crore from Rs. 129.90 crore in FY2025, primarily driven by higher sales volumes of bread. Bread continues to be the company's principal product, accounting for nearly 94% of total turnover, while the remaining 6% is contributed by the sale of rusks and cream rolls. Further, the company reported gross sales of Rs. 40.46 crore in Q1FY2027 as against Rs. 34.03 crore in the corresponding period of the previous year, indicating sustained growth momentum. Despite the improvement in revenue, MFL's operating profitability moderated, with operating margin declining to 7.66% in FY2026 (Prov.) from 10.35% in FY2025. The decline was primarily attributable to higher employee and depot-related expenses. Employee costs increased owing to the expansion of the company's direct distribution network, which necessitated the recruitment of additional sales personnel, drivers, relievers, and other distribution staff. Depot expenses also increased as part of the company's ongoing transition from distributor-led sales to a direct distribution model. Furthermore, intense competition in the industry has constrained MFL's ability to fully pass on the increase in input and operating costs to customers, thereby exerting pressure on margins. Nevertheless, the company's PAT margin improved to 2.20% in FY2026 (Prov.) from 1.12% in FY2025, supported by profit on sale of assets arising from the sale of a property. Acuite believes that scale of operation may improve in the medium term, however improve in profitability will remain key monitorable.
Presence in a Competitive industry
The company operates in a highly competitive and fragmented FMCG industry, primarily deriving revenue from bread and bakery products in Eastern India, a segment characterized by numerous players and a strong brand-conscious consumer base. The industry is highly competitive with the presence of branded players. Some of these players have a large scale of operations, a pan-India presence and are well-established brands. Apart from these, the company is exposed to competition from a large, local unorganised segment. While this environment presents challenges due to intense competition and economic volatility, the company’s diversified product portfolio and established client relationships help mitigate these risks.
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