LT Foods gains after credit ratings upgrade

March 03,2021

CRISIL Ratings has upgraded its rating on the bank facilities of LT Foods to 'CRISIL A/Stable/CRISIL A1' from 'CRISIL A-/Positive/CRISIL A2+'. The short-term rating on the company's bank facilities have also been upgraded from 'CRISIL A2+' to 'CRISIL A1'.

The credit ratings agency said that the upgrade reflects continuous improvement in group's business and financial risk profiles. Group achieved operating income of Rs 3499 crore in first nine months of fiscal 2021 compared to Rs 2948 crore in first nine months of fiscal 2020.

Operating 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. Going ahead, CRISIL Ratings expects 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 on December 31, 2021 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 increase in revenues.

The ratings continue to reflect the LT group's strong market position in the basmati rice industry, resulting in sales growth and stable profitability. The ratings also factor in the group's diversified geographical reach through strong brands, established marketing network and improving financial risk profile.

These strengths are partially offset by large working capital requirement, susceptibility to volatile raw material prices and changes in trade policies of key importing countries.

LT Foods is a branded specialty foods company. The company is engaged in milling, processing and marketing of branded and non-branded basmati rice, and manufacturing of rice food products in the domestic and overseas market. Its geographical segments include India, North America and Rest of the world.

The company's consolidated net profit increased by 46.1% to Rs 66.33 crore on a 7.9% rise in net sales to Rs 1074.98 crore in Q3 FY21 over Q3 FY20.

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