In its rationale report, CRISIL said that the upgrade reflects the continuous improvement in the group’s business and financial risk profiles. Group achieved operating income of Rs 3499 Crore in the first nine months of fiscal 2021 compared to Rs 2948 Crore in the first nine months of fiscal 2020, which was aided by higher volumes achieved in both rice and organic business despite the impact of the Covid-19-induced lockdowns on the HORECA segment esp. in the first half of fiscal 2021. Operating margin (earnings before income, depreciation, tax and amortisation [EBIDTA] margin) was also higher at 12.4% for the first nine months of fiscal 2021 compared to 11.5% for the corresponding period of the previous fiscal, aided by higher realisations in the rice business, especially in the first quarter of fiscal 2021 and change of product mix towards high-margin products.
Further, in CRISIL's views, the ratings continue to reflect the LT group's strong market position in its segment i.e. Specialty Basmati Rice and Consumer Food Business, resulting in sales growth, margin expansion and strengthening of financial metrics. The ratings also factor in the group's diversified geographical reach through strong leading brands (Daawat in the Indian market and Royal in the US market), established marketing and distribution network and strengthened financial profile.
Going forward, CRISIL expects the business risk profile to continue to improve over the medium term. The financial risk profile has also improved as is reflected in debt-to-EBIDTA of 2.2 times as of December 31, 2020, which is well below CRISIL Ratings’ expectations of maintaining the aforementioned ratio of 3 times over the medium term. CRISIL Ratings expects the ratio to remain below 2.5 times over the medium term despite the increase in revenues.
At around 2.44 pm, LT Foods was trading at Rs59.50 per piece up 3.75% on Sensex. The stock has touched an intraday high of Rs60.50 per piece in early deals.