The credit rating agency has also upgraded the rating on Long-term loans Rs21.24cr and proposed fund-based limits Rs46.76cr to IND BBB+/Stable respectively.
At around 9.26 AM, Manorama Industries Limited was trading at Rs1574.00 per piece up Rs16.95 or 1.09%on the BSE. The stock opened at Rs1593.00 per piece which remains its day's high so far.
Key rating drivers
- Improvement in Liquidity Likely on Issuance of Equity Shares: The upgrade reflects the likely boost the company’s liquidity will witness as the allotment of 7,91,900 preferential equity shares was completed on 11 August 2021 upon the receipt of Rs1,008.88 million towards application money.
- Improved Revenue, Likely to Increase further in FY22: The revenue grew to Rs2,084 million in FY21 (FY20: Rs1,882 million), owing to increased volumes, as the company met the strong demand through its manufactured products. The scale of operations is moderate. The agency expects MIL’s revenue to grow substantially in FY22 owing to the increased utilisation of its installed units. In FY21, the company had an installed capacity of 90,000 metric tonne per annum with a utilisation of 41%.
- Average EBITDA Margin: MIL’s margin contracted to 17.10% in FY21 (FY20: 23.29%), due to increased logistics and raw material costs. Its return on capital employed stood at 12% in FY21 (FY20: 19%).
- Comfortable Credit Metrics: MIL’s credit metrics remained comfortable in FY21 even as its gross interest coverage (operating EBITDA/gross interest expense) deteriorated to 3.4x in FY21 (FY20: 4.5x), due to a fall in the absolute EBITDA to Rs356.46 million (Rs438.47 million). The net financial leverage (adjusted net debt/operating EBITDAR) improved to 2.2x in FY21 (FY20: 2.3x), due to a decline in the net borrowings to Rs848.54 million (Rs1,193.54 million).
- Liquidity Indicator - Adequate: The company’s average maximum utilisation of the fund-based limits was 55.79% during the 12 months ended June 2021. The cash flow from operations and free cash flows turned positive at Rs119.36 million in FY21 (FY20: negative Rs1,020.23 million) and Rs207.96 million (negative Rs977 million), respectively, driven by its improved working capital cycle.
- Strong Counterparty Presence: MIL derives a major of its revenue by supplying to customers from the chocolate and confectionery industry, with a significant portion of the balance revenues coming from the cosmetics industry. Being the only processor of tree-based specialty butter and fats in India, MIL has a reputed clientele including Mondelez India Foods Pvt Ltd, Walter Rau Neusser and BL Agro Industries.
- Early Stage of Own Manufacturing Operations: The company’s nascent stage of manufacturing is a constraining factor. MIL procures, processes and supplies exotic and speciality fats and butters. The company discontinued the trading part of its business in FY19 and started focusing on the procurement and manufacturing of exotic butter and fats.