LT Foods Limited - Long-term rating upgraded to 'CRISIL A+/Stable', Short-term rating reaffirmed

CRISIL Ratings has upgraded ratings on the long-term bank facilities of LT Foods Limited (LTF; a part of the LT group) to 'CRISIL A+/Stable' from 'CRISIL A/Positive' and has reaffirmed the short-term rating at 'CRISIL A1'.

The rating upgrade reflects continuous improvement in the LT group's business risk profile backed by group's strong market position in the basmati rice industry, healthy brand recall, diversified geographical presence in 60plus countries, established marketing network and robust financial risk profile. Operating income increased to Rs.5114 crore in the first nine months of fiscal 2023 from Rs 3,901 crore in the corresponding period of fiscal 2022 and is expected to be more than Rs. 6500 cr. for the full fiscal 2023, the growth is driven by both increased volumes and improved price realisation. Moreover the healthy revenue growth is supported across all product segments (basmati rice and other specialty rice segment, organic and health & convenience segment); However, the operating margin (earnings before income, depreciation, tax and amortisation [EBIDTA] margin) declined to 9.86% in 9MFY23 from 11.38 from the 9MFY22 primarily due to the increase in the freight cost which has increased exponentially in FY22 and some part of FY23 as well and increase in the input cost. Operating profitability is expected to sustain at around 11% supported by stabilisation in the overall freight cost and continuous healthy realization in basmati rice segment backed by better bargaining power with brands such as Daawat and Royal.

The rating also reflects continuous improvement in the financial and liquidity risk profiles of the group, reflected by debt-toEBIDTA ratio of ~1.8 times as on Sep 2022 and 1.65 times as on FY 22; the ratio is expected at 1.6-1.8 times over the medium term despite increase in revenue, backed by the reducing dependency on working capital debt and absence of any large, debt-funded capital expenditure (capex). Liquidity is supported by robust cash accrual and healthy unencumbered cash and bank balance of Rs 39 crore as on September 30, 2022.

The ratings continues to reflect strong market position in the basmati rice industry, diversified geographical reach through strong brands (Daawat in the domestic market and Royal in the US market), established marketing network along with product Diversification and improving financial risk profile. These strengths are partially offset by susceptibility to volatile raw material prices, changes in trade policies of key importing countries and high working capital intensity in the basmati rice business.

Shares of LT Foods Limited was last trading in BSE at Rs. 99.06 as compared to the previous close of Rs. 96.80. The total number of shares traded during the day was 73441 in over 1258 trades.

The stock hit an intraday high of Rs. 99.46 and intraday low of 97.20. The net turnover during the day was Rs. 7235499.00.

Source : Equity Bulls

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