Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 71.23 ACUITE BBB- | Stable | Reaffirmed | Negative to Stable -
Bank Loan Ratings 12.77 - ACUITE A3 | Reaffirmed
Total Outstanding 84.00 - -
 
Rating Rationale

­Acuité has reaffirmed its long-term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) and short-term rating of ‘ACUITE A3’ (read as ACUITE A three) on the Rs.84.00 Cr. bank facilities of Sri Varsha Food Products India Limited (ERSTWHILE SRI VARSHA FOOD PRODUCTS INDIA LIMITED)(SVFPIL) . The outlook has been revised from 'Negativeto 'Stable'.

Rationale for outlook change and reaffirmation:
The reaffirmation and revision in outlook takes into account  moderate improvement in  scale of operations and stable operating margin in FY2023 as compared to FY2022.  The company has reported moderate growth in scale of operations with YOY growth of 14.51 percent as reflected in revenues of Rs.185.10 Cr in FY2023 as against Rs.161.64 Cr in FY2022, the margins during FY2023 stood stable at 6.31 percent against 6.24 percent in FY2022. Revison in outlook also takes into account moderate improvement in the financial risk profile, gearing improved to 1.19 times in FY2023 from 1.54 times in FY2022, Debt – EBTIDA  to 4.82 times in FY2023 from 5.48 times in FY2022. TOL/TNW improved to 1.73 times in FY2023 from 2.12 times in FY2022 and  the expected improvement in EBTIDA margins and leverage ratios  in near to medium term.

The rating reaffirmation takes into account its promoters’ extensive experience in food processing industry, presence of assured orders and moderate financial risk profile. These strengths are partially constrained by intensive nature of working capital operations and susceptibility of profitability to volatility in raw material prices and regulatory risks.

 

About the Company
­Established in 2008 and based in Tirupati (Andhra Pradesh), Sri Varsha Food Products India Limited (SVFPIL) specializes in processing and packaging of natural fruit concentrates and pulp. SVFPIL is promoted by Mr. K. Viswanada Naidu and Mr. V. Pradeep Kumar. SVFPIL has two processing units with total processing capacity of around 32,000 Metric Tons (MT) per annum.
 
Unsupported Rating
­Not applicable
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profiles of the SVFPIL to arrive at this rating.
 
Key Rating Drivers

Strengths
  • ­Promoters’ extensive experience in food processing industry; Established regional player in Andhra Pradesh
SVFPIL is promoted by Mr. K. Viswanada Naidu and Mr. V. Pradeep Kumar who has been associated with the company since its inception; this has helped SVFPIL to establish strong market presence in the state of Andhra Pradesh. Mr. K. Viswanada Naidu looks after the day-to-day operations of the company and is assisted by team of experienced professionals down the line. Mr. Naidu has more than 30 years’ of experience in multiple businesses and has set up the first highly modernized fruit processing unit in the region. Mr. V. Pradeep Kumar has more than 15 years of experience in Fruit Processing industry and developed good understanding in Food and Drug Administration (FDA) rules and Good manufacturing practice(GMP) in Fruit Processing sector. Acuité believes that SVFPIL will continue to derive benefits from its promoter’s experience, its established presence and diversified geographical coverage providing healthy revenue visibility over the medium term.
  • Moderate Financial risk profile
The company’s has moderate financial risk profile is marked by moderate net worth, gearing and  debt protection metrics. The net worth of the company stood at Rs.47.42 Cr and Rs.36.02 Cr as on March 31, 2023 and 2022 respectively. The gearing stood at 1.19 times as on March 31, 2023 against 1.54 times as on March 31, 2022. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 1.78 times and 1.08 times as on March 31, 2023 respectively as against 1.81 times and 1.06 times as on March 31, 2022 respectively. TOL/TNW stood at 1.73 times and 2.12 times as on March 31, 2023 and 2022 respectively. The debt to EBITDA of the company stood at 4.82 times as on March 31, 2023 as against 5.48 times as on March 31, 2022. Acuité believes that  financial risk profile to remain moderate  over the medium to long term period on account of moderate capital structure of SVFPIL.
  • Presence of assured orders; Long standing client relations
SVFPIL has an assured order of around Rs.166.09 Cr as on Jan 31, 2024 from its regular customers with vintage over 10 years. The revenue in a given year wouldn’t deteriorate below Rs.160 Cr as these are assured orders from the existing customers base. There exists a mutual understanding established between these customers and SVFPIL over the years. SVFPIL has assured orders from its customers such as Varun Beverages Limited, Jain Farm Fresh Foods Limited, Nestle Limited amongst others. Despite, the global pandemic, almost all of the assured orders were placed by its existing customers and delivered by SVFPIL. Acuité believes that SVFPIL will continue to derive benefits from these assured orders providing adequate revenue visibility over the near to medium term.
  • VFPIL aiming for diversification in its product line to reduce revenue concentration
SVFPIL’s flagship product has been mango pulp and concentrate over the years since inception. The management in the last few years has been venturing into various other nonseasonal fruits and vegetables to reduce dependence on seasonal fruit i.e. Mango. SVFPIL’s revenue from Green Chilli Paste, Pink Guava Pulp, Red Chilli Paste, Red Papaya Pulp, Tamerind Paste has shown improvement Year-on-Year (YoY) basis.  Acuité believes that SVFPIL’s ability to diversify into other non-seasonal fruits and vegetables will remain key driver for ensuring healthy business risk profile.

Weaknesses
  • ­Working capital intensive operations
The working capital management of the company remained high with high GCA days at 230 days as on March 31, 2023 as against 224 days as on March 31, 2022. The GCA days are majorly marked by high inventory. Inventory days stood at 138 days as on March 31, 2023 as against 108 days as on March 31, 2022. Subsequently, the payable period stood at 50 days as on March 31, 2023 as against 48 days as on March 31, 2022 respectively. The debtor day stood at 48 days as on March 31, 2023 as against 57 days as on March 31, 2022. Further, the average consolidated bank limit utilization in the last twelve months ended December 2023 remained at 85 percent for fund based. Acuité believes that the operations of SVFPIL will remain moderately working capital intensive on account of nature of the food processing industry.
  • Susceptible to volatility in raw material prices and regulatory risks
The food processing and export business is highly fragmented with presence of several small players and dependence on fruits farms for raw material which limits bargaining power. Additionally, the procurement price of fruits depends on the season and availability during a particular period, which exposes SVFPIL to volatility in product prices. The industry has low entry barriers such as low capital, low technical requirements of the business and liberal policy regime. This has resulted in severe competition and inherently thin profitability margins. Furthermore, as a portion of revenue is generated from exports, credit risk profile remains susceptible to volatility in forex rates. Besides, SVFPIL is also exposed to risk arising from regulatory changes and demand pattern in client countries and changes such as levy of antidumping duties by importing countries.
 
 
 
Rating Sensitivities
  • Higher-than-expected improvement in the scale of operations and profitability as envisaged
  • Deterioration in working capital cycle and liquidity profile of the company.
  • Weakening of financial risk profile of the company
 
Liquidity Position: Adequate
­The company’s liquidity is adequate marked by adequate cash accruals in the range of Rs.4.33 Cr in FY2023 as against its maturing long term debt obligations in the range of Rs.3.49 Cr for the same period. The current ratio stood at 1.62 times as on March 31, 2023. Unencumbered cash and bank balances stood at Rs. 0.29 Cr as on March 31, 2023. SVFPL is expected to generate NCA in range of Rs.4.81-6.50 Cr against modest maturing debt obligations in range of Rs.2.50 -2.34 Cr over the medium term. Acuité believes that the liquidity of the company will improve supported by increase in accruals in the medium term.
 
Outlook: Stable
Acuité believes that SVFPIL rating will maintain a ‘Stable’ outlook over the medium term on account of long track record of operations and experienced management in the industry and stable operating margins. The outlook may be revised to ‘Positive’ if SVFPIL registers sustainable improvement in sales volumes and realization per unit of the products offered leading to higher-than-expected revenues and profitability with improvement in financial risk profile. Conversely, the outlook may be revised to ‘Negative’ in case SVFPIL registers lower- than expected revenues and profitability or any significant stretch in its working capital management or larger than expected debt- funded capital expenditure leading to deterioration of its financial risk profile and liquidity.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 23 (Actual) FY 22 (Actual)
Operating Income Rs. Cr. 185.10 161.64
PAT Rs. Cr. 2.02 1.70
PAT Margin (%) 1.09 1.05
Total Debt/Tangible Net Worth Times 1.19 1.54
PBDIT/Interest Times 1.78 1.81
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
• Entities In Manufacturing Sector:- 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.
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
07 Dec 2022 Letter of Credit Short Term 10.00 ACUITE A3 (Reaffirmed)
Letter of Credit Short Term 1.00 ACUITE A3 (Reaffirmed)
Cash Credit Long Term 30.00 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Cash Credit Long Term 5.00 ACUITE BBB- | Negative (Assigned)
Term Loan Long Term 4.17 ACUITE BBB- | Negative (Assigned)
Proposed Long Term Loan Long Term 0.83 ACUITE BBB- | Negative (Assigned)
Working Capital Term Loan Long Term 1.01 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Working Capital Term Loan Long Term 6.26 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Working Capital Term Loan Long Term 3.50 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Working Capital Term Loan Long Term 1.67 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Term Loan Long Term 3.31 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Term Loan Long Term 1.45 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Term Loan Long Term 1.00 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Term Loan Long Term 4.00 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Term Loan Long Term 0.80 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Cash Credit Long Term 8.00 ACUITE BBB- | Negative (Reaffirmed (Stable to Negative))
Cash Credit Long Term 2.00 ACUITE BBB- | Negative (Assigned)
05 Jan 2022 Term Loan Long Term 4.00 ACUITE BBB- | Stable (Assigned)
Term Loan Long Term 0.80 ACUITE BBB- | Stable (Assigned)
Term Loan Long Term 1.00 ACUITE BBB- | Stable (Assigned)
Term Loan Long Term 1.45 ACUITE BBB- | Stable (Assigned)
Term Loan Long Term 3.31 ACUITE BBB- | Stable (Assigned)
Working Capital Term Loan Long Term 1.67 ACUITE BBB- | Stable (Assigned)
Cash Credit Long Term 8.00 ACUITE BBB- | Stable (Assigned)
Working Capital Term Loan Long Term 3.50 ACUITE BBB- | Stable (Assigned)
Working Capital Term Loan Long Term 6.26 ACUITE BBB- | Stable (Assigned)
Working Capital Term Loan Long Term 1.01 ACUITE BBB- | Stable (Assigned)
Cash Credit Long Term 20.00 ACUITE BBB- | Stable (Assigned)
Cash Credit Long Term 10.00 ACUITE BBB- | Stable (Assigned)
Letter of Credit Short Term 1.00 ACUITE A3 (Assigned)
Letter of Credit Short Term 10.00 ACUITE A3 (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)
Complexity Level Rating
State Bank of India Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 1.77 Simple ACUITE A3 | Reaffirmed
Axis Bank Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 15.00 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
State Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 39.00 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 10.00 Simple ACUITE A3 | Reaffirmed
Axis Bank Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 1.00 Simple ACUITE A3 | Reaffirmed
Not Applicable Not avl. / Not appl. Proposed Long Term Loan Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 0.23 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 10 Dec 2026 1.36 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 10 Apr 2025 0.53 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 10 May 2028 2.37 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 10 Apr 2029 3.54 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan 10 Mar 2016 Not avl. / Not appl. 10 Jan 2026 1.84 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan 11 Jan 2021 Not avl. / Not appl. 10 Dec 2026 0.88 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan 11 Jan 2021 Not avl. / Not appl. 10 Jan 2026 0.46 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Small Industries Development Bank of India Not avl. / Not appl. Term Loan 25 Mar 2019 Not avl. / Not appl. 10 Aug 2024 0.15 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
Axis Bank Not avl. / Not appl. Working Capital Term Loan Not avl. / Not appl. Not avl. / Not appl. 30 Sep 2026 1.53 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
State Bank of India Not avl. / Not appl. Working Capital Term Loan Not avl. / Not appl. Not avl. / Not appl. 31 Jul 2024 1.13 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable
State Bank of India Not avl. / Not appl. Working Capital Term Loan Not avl. / Not appl. Not avl. / Not appl. 01 Oct 2026 3.21 Simple ACUITE BBB- | Stable | Reaffirmed | Negative to Stable

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