Press Release December 03, 2024 NARAYAN AGRO FOODS LIMITED Rating Reaffirmed & Withdrawn

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	26.69	ACUITE BB | Reaffirmed & Withdrawn	-
Total Outstanding	0.00	-	-
Total Withdrawn	26.69	-	-

Rating Rationale

­Acuite has reaffirmed and withdrawn its long term rating of 'ACUITE BB' (read as ACUITE double B) on the Rs.26.69 Cr. bank facilities of Narayan Agro Foods Limited (NAFL). The rating has been withdrawn on account of the request received from the company along with no objection certificate received from the lender as per Acuité's policy on withdrawal of ratings as applicable to the respective facility / instrument. Rationale for Rating The rating factors the improvement in the company’s scale of operations, marked by an operating income of Rs.152.31 Cr. in FY2024 as against Rs.139.88 Cr. in FY2023. The EBITDA margin and PAT margin of the company stood at 3.91 per cent and 1.02 per cent respectively in FY2024. Further, the company has achieved the revenue of Rs.62.99 Crore till 30th September, 2024. The rating also positively factors in the experienced management in dairy products business. Additionally, the financial risk profile of the company remained moderate marked by gearing which stood at 2.29 times as on March 31, 2024, coverage indicators reflected by interest coverage ratio and debt service coverage ratio which stood at 2.22 times and 1.27 times respectively as on 31st March 2024, adequate liquidity position marked by net cash accruals of Rs.2.99 Crore in FY2024. However, the above mentioned strengths are partly off-set by highly competitive industry and susceptibility to changes in milk prices and government regulations.

About the Company

Incorporated in 1976, Narayan Agro Foods Limited is based in Punjab. It is engaged in manufacturing milk powder (Skimmed Milk Powder, Whole Milk Powder and Dairy Whiteners), Ghee and other milk products like dahi, chhachh, paneer etc. Directors of Narayan Agro Foods Limited are Mr. Neeru Talwar, Mr. Subash Goyal, Mr. Vishal Goyal and Mr. Rabindra Prasad Singh.

Unsupported Rating

­Not Applicable

Analytical Approach

­Acuité has taken the standalone view on the business and financial risk profile of NAFL to arrive at this rating.

Key Rating Drivers

Strengths

­Experience management and established track record of operations NAFL was incorporated in1976 and engaged in manufacturing milk powder (Skimmed Milk Powder, Whole Milk Powder and Dairy Whiteners), Ghee and other milk products like dahi, chhachh, paneer etc. Currently the company is managed by Mr. Neeru Talwar, Mr. Subash Goyal, Mr. Vishal Goyal and Mr. Rabindra Prasad Singh who has an experience in the same industry and has an established track record of operations of more than four decades. Acuité believes that the long operational track record of NAFL and promoters’ extensive understanding and expertise will benefit the company going forward, resulting in steady growth in the scale of operations. Growth in the scale of operations The company have achieved a revenue of Rs.152.31 Crore in FY2024 as against Rs.139.88 Crore in FY2024. The company has an established procurement and distribution network for milk and milk products from farmers. Also, the company has its own brand name i.e. Shakti. Further, the EBITDA margins of the company stood at 3.91% in FY2024 against 3.46% in FY2023. The PAT margin of the company stood at 1.02% in FY2024 against 0.74% in FY2023. Going forward, the company is expected to have better top-line in near to medium term and has achieved the revenue of Rs.62.99 Crore till 30th September, 2024.

Weaknesses

­Working Capital Intensive Operations The working capital operations of the company intensive marked by GCA days which stood at 138 days as on 31st March 2024 as compared to 143 days as on 31st March 2023. The debtor days of the company is moderate and stood at 47 days as on 31st March 2024 against 45 days as on 31st March 2023. Further, the inventory holding stood at 76 days as on 31st March 2024 against 87 days as on 31st March 2023. The creditor days of the company stood at 56 days as on 31st March 2024 against 41 days as on 31st March 2023. Acuité expects that the working capital operations of the company will remain at similar levels in near to medium term. Moderate Financial Risk Profile The financial risk profile of the company is moderate marked by net-worth of Rs.15.09 Crore as on 31st March 2024 against Rs.13.53 Crore as on 31st March 2023. The increase in the net-worth is on an account of accretion of profits into reserves. Further, the total debt of the company stood at Rs.34.48 Crore as on 31st March 2024 against Rs.36.19 Crore as on 31st March 2023. The capital structure of the company is moderate marked by gearing ratio of the company which stood at 2.29 times as on 31st March 2024 against 2.67 times as on 31st March 2023. Further, the coverage indicators of the company improved reflected by interest coverage ratio and debt service coverage ratio of the company which stood at 2.22 times and 1.27 times respectively as on 31st March 2024 against 2.30 times and 1.24 times respectively as on 31st March 2023. The TOL/TNW ratio of the company stood at 3.80 times as on 31st March 2024 against 4.01 times as on 31st March 2023 and DEBT-EBITDA of the company stood at 5.77 times as on 31st March 2024 against 7.46 times as on 31st March 2023. Acuité expects that going forward the financial risk profile of the company will remain moderate in near to medium term. Highly competitive industry and Susceptibility to changes in government regulations and environmental conditions and milk prices 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. Also, ensuring competitive remuneration to the farmers for procurement of milk would be a key sensitivity for maintaining a steady supply chain.  Also, NAFL, 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.

Rating Sensitivities

­Not Applicable

Liquidity Position

Adequate

­The liquidity position of the company is adequate. The company has generated net cash accruals of Rs.2.99 Crore against the debt repayment obligations of Rs.1.76 Crore in the same period. Further, the current ratio of the company stood at 1.15 times as on 31st March 2024 against 1.13 times as on 31st March 2023. The cash and bank balance of the company stood at Rs.0.12 Crore as on 31st March 2024.

Outlook: Not Applicable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	152.31	139.88
PAT	Rs. Cr.	1.56	1.04
PAT Margin	(%)	1.02	0.74
Total Debt/Tangible Net Worth	Times	2.29	2.67
PBDIT/Interest	Times	2.22	2.30

Status of non-cooperation with previous CRA (if applicable)

­­Not Applicable

Any other information

None­

Applicable Criteria

• 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

­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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 01 Dec 2023 Cash Credit Long Term 22.00 ACUITE BB | Stable (Assigned) Term Loan Long Term 2.82 ACUITE BB | Stable (Assigned) Term Loan Long Term 1.87 ACUITE BB | Stable (Assigned)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Punjab National Bank Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 22.00 Simple ACUITE BB | Reaffirmed & Withdrawn Punjab National Bank Not avl. / Not appl. Term Loan 19 Feb 2022 Not avl. / Not appl. 18 Feb 2029 2.82 Simple ACUITE BB | Reaffirmed & Withdrawn Punjab National Bank Not avl. / Not appl. Term Loan 20 Jul 2023 Not avl. / Not appl. 19 Jul 2030 1.87 Simple ACUITE BB | Reaffirmed & Withdrawn

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Contacts

Mohit Jain Senior Vice President - Rating Operations Archita Sharma Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.