By Aditya Popuri

India Ratings and Research (Ind-Ra) FIL Industries Ltd’s (FIL) Long-Term Issuer Rating at ‘IND BBB’. The Outlook is Negative. The instrument-wise rating actions are given below:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Fund-based working capital limit

-

-

-

INR438.5

IND BBB/Negative/IND A3+

Affirmed

Term loans

-

-

April 2023

INR123.56

IND BBB/Negative

Affirmed

Non-fund-based working capital limit

-

-

-

INR190

IND A3+

Affirmed

The Negative Outlook reflects Ind-Ra’s view of a likely impact on FIL’s wholly owned subsidiary, Empyrean Skyview Projects Private Limited’s (Empyrean) operating performance in FY21 due to COVID-19-led disruptions. FIL’s ratings continue to be supported by its stable revenue and rangebound margins.

KEY RATING DRIVERS

Stable Revenue over FY17-FY20: FIL’s revenue remained stable around INR2,500 million over FY17-FY20. In FY20, the company’s revenue improved to INR2,590 million from INR2,367.8 million in FY19, majorly as the revenue from the crop protection division (CPD) increased to INR1,812.9 million from INR1,403.7 million, offsetting the decline in the revenue from the controlled atmospheric store division to INR361.6 million from INR540 million. The CPD’s contribution to the total revenue increased to 70% in FY20, up from 59.3% in FY19 while the contribution from the controlled atmospheric store division declined to 14% from 22.8%. The revenue contribution from the CPD is likely to remain high in FY21 due to the improved demand in this segment. 

Rangebound EBITDA Margin:
FIL’s EBITDA margin remained rangebound between 11.5% and 12.5% over FY18-FY20. The margin moderated to 11.5% in FY20 from 12.5% in FY19 (FY18: 12.0%) on the back of increased employee cost. The absolute EBITDA in FY20 was INR298 million (FY19: INR296 million). The EBITDA margin of the company is likely to remain stable in the near term. 

Considerable Promoter Experience; Association with Reputed Brands:
The promoter has over three decades of experience in the agro chemicals and food processing industries. FIL is associated with reputed companies such as Coca-Cola India Private Limited, Indo Gulf Fertilizers (a unit of Grasim Industries Limited (‘IND AAA’/Stable) and Pepsico India, among others, for providing concentrated apple juice. Also, for the crop protection division, the company mainly deals through dealers in the union territory of Jammu and Kashmir and a mix of dealer and distributors for the rest of the country. 

Continued Modest Credit Metrics:
The company’s gross interest coverage moderated to 2.3x in FY20 from 2.5x in FY19 and the net leverage increased (excluding the corporate guarantee extended to its subsidiaries) to 2.9x from 2.7x. The moderation was due to an increase in the total debt (excluding corporate guarantee) with the EBITDA remaining stable. However, the net leverage (including corporate guarantee) improved to 6.1x in FY20 from 6.3x in FY19. The corporate guarantee extended by the company reduced to INR923.7 million in FY20 from INR1,023.7 million in FY19 as one of its subsidiaries (Kohinoor International Private Limited) to which it had extended a corporate guarantee,  was merged with FIL in FY20. 

Liquidity Indicator - Stretched:
FIL’s working capital cycle remained long despite improving to 120 days in FY20 from 155 days in FY19 with an improvement in inventory and receivable days due to improved inventory management and higher realisation of the debtors by the company in FY20. The working capital cycle of the company is likely to remain stable in FY21. FIL’s average maximum utilisation of its fund-based working capital limits was 97.7% for the 12 months ended October 2020. The cash flow from operations of remained positive over FY17-FY20 and improved to INR136 million in FY20 from INR60 million in FY19 due to favourable working capital changes.

Significant Disruptions in Empyrean’s Business Operations: In FY15, FIL incorporated Empyrean to set up a new ropeway project in Patnitop, Jammu, on a build, own, operate and transfer basis. FIL has provided corporate guarantees of INR923.7 million for the term loan facility availed by Empyrean. Empyrean had its soft launch in July 2019; however, it was operational for four months in FY20 and remained closed in 1HFY21 due to the impact of COVID-19. According to the management, Empyrean has restarted its operation during the weekends October 2020 onward; however, the tourist footfall is likely to be muted in FY21.


RATING SENSITIVITIES

Positive: An increase in the revenue and profitability, leading to the interest coverage rising above 2.75x, all on a sustained basis, along with the stable operating performance of Empyrean in FY22 will lead to positive rating action. 

Negative: 
Any decline in the revenue or profitability, leading to the interest coverage falling below 2.75x, or weaker-than-expected operating performance of Empyrean in FY22 will lead to negative rating action.


COMPANY PROFILE

FIL manufactures agro chemicals, ready-to-drink fruit juices and fruit juice concentrates. In addition, it operates controlled atmospheric stores. FIL’s divisions are crop protection, food and beverages, consumer, engineering and warehousing. 

FINANCIAL SUMMARY

Particulars (INR million)

FY20

FY19

Revenue

2,590

2,368

Operating EBITDA

298.0

296

Operating EBITDA margin (%)

11.5

12.5

Gross interest expense

132.0

118

Net income

115

116

Source: Ind-Ra, FIL



RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

25 October 2019

25 July 2018

23 May 2017

Issuer rating

Long-term

-

IND BBB/Negative

IND BBB/Negative

IND BBB/Stable

IND BBB/Stable

Fund-based limits

Long- /short-term

INR438.50

IND BBB/Negative /IND A3+

IND BBB/ Negative /IND A3+

IND BBB/Stable/IND A3+

IND BBB/Stable/IND A3+

Non-fund-based limits

Short-term

INR190

IND A3+

IND A3+

IND A3+

IND A3+

Term loans

Long-term

INR123.56

IND BBB/Negative

IND BBB/Negative

IND BBB/Stable

IND BBB/Stable


COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity levels of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.
 

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

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Applicable Criteria

Analyst Names

  • Primary Analyst

    Aditya Popuri

    Analyst
    India Ratings and Research Pvt Ltd DLF Epitome, Level 16, Building No. 5, Tower B DLF Cyber City, Gurugram Haryana - 122002
    +91 124 6687266

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121