March 23, 2023

Holy-Land Marketing Pvt. Ltd.: Ratings reaffirmed

Summary of rating action

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Issuer Rating 0.00 0.00 [ICRA]BBB(Stable); reaffirmed

Total 0.00 0.00

*Instrument details are provided in Annexure-I

Rationale

The reaffirmation of rating factors in ICRA’s expectations that Holy-Land Marketing Pvt. Ltd. (HMPL) will witness healthy
revenue growth in the current fiscal led by its diverse product portfolio and growing distribution network. HMPL offers a wide
basket of canned fruits, vegetables and other food products under its flagship brand, Golden Crown, which enjoys a moderate
visibility. The rating takes into account the extensive experience of HMPL’s promoters in the processed food industry, coupled
with HMPL’s established track record and diversified end customer base. Moreover, given the limited capital intensity of the
business resulting in low debt dependence, HMPL’s coverage metrics are expected to remain comfortable in the near to
medium term. ICRA also notes the improvement in receivable collection period in FY2022 and the current fiscal, the sustenance
of which remains to be seen.
The ratings are, however, constrained by the highly fragmented nature of the industry with presence of many unorganised
players. The ratings are further constrained by the limited value addition undertaken by the company, which constrains the
earnings and, thus, reserve accretion of the company. The volatility in the food prices also constrains the profitability; however,
this is compensated to an extent by the company’s ability to partly pass on the price increases. Maintaining optimum product
mix to augment the profitability also remains critical. The rating also factors in the company’s vulnerability to risks associated
with foreign exchange (forex) rate fluctuations as it imports some of its raw materials, in the absence of any hedging
mechanism.

The Stable outlook on the [ICRA]BBB rating reflects ICRA’s opinion that HMPL will continue to benefit from the growing market
penetration through expansion in its distribution network and product portfolio.

Key rating drivers and their description

Credit strengths

Experienced promoters with established track record in the industry – The promoters of HMPL have more than two decades
of experience in the industry. The company offers canned fruits and vegetables under its flagship brand, ‘Golden Crown’, with
more than 300 products such as table sauces, juices, jams, pulps and purees, pasta, noodles, ready-to-eat snacks and food
additives. Its established track record has led to established relationships with end-customers, majority of whom are reputed
names in the HoReCa segment.

High customer and geographical diversification – The company has a large distribution network for its retail sales along with
a portfolio of reputed institutional customers. HMPL exhibits healthy customer and geographic diversification. In 9M FY2023,
its top 10 customers contributed ~21% to its total sales. Further, it has multiple customers across various states in India. The
company operates through nine depots spread across the country and has a well spread dealer distribution network, which it
has been expanding over the last few years.

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 Comfortable financial risk profile – HMPL’s financial performance in FY2022 improved in line with expectations after
witnessing substantial deterioration in FY2021 amid the pandemic. In FY2022, the company’s revenue grew at ~69% to
Rs. 297.1 crore on the back of stable demand and repeat orders from its clients. In the current fiscal, the company has already
achieved revenues of ~Rs. 325 crore till December 31, 2022. Moderate margins are expected to result in moderate cash
accruals. Limited fixed and working-capital intensity has also resulted in low indebtedness, which is entirely skewed towards
working capital borrowing. The overall quantum of net worth remains modest at ~Rs. 53 crore as on December 31, 2022, but
the leverage remains comfortable with gearing of 0.6 times during the same period. The coverage indicators stood comfortable
with interest coverage ratio of 8.6 times and DSCR of 6.8 times as on December 31, 2022. In absence of any major debt raising
plans, HMPL’s coverage metrics are expected to be comfortable in the medium term.

Credit challenges

Highly competitive and fragmented industry; susceptible to competition from renowned brands - The company faces stiff
competition in a highly fragmented industry. The competition comes from other reputed brands as well as unorganised players
in the industry. However, the ‘Golden Crown’ brand also has moderate visibility lending pricing flexibility and bargaining power
with customers to a certain extent.

Limited value addition – There is a limited value addition in the overall business operations of the company reflecting in the
modest and range-bound profit margin levels, which can be attributed to the trading nature of operations. In the current fiscal,
the company also offered discounts for early payments to control receivables, which limited its profit growth. Consequently,
reserve accretion in the net worth of the company remains moderate every year. However, going forward, the company is
expanding into new geographies and enhancing the product mix, which would support profit scale up.

Exposure to forex risks as some raw materials are imported – HMPL is exposed to forex risks because it imports a portion of
its raw materials. The company imports certain raw materials from countries like China. In the absence of a hedging
mechanism, any adverse movement in exchange rates could impact its margins. The company’s profitability is also exposed to
increasing raw material prices, as it is not feasible to pass on the entire increase to its clients.

Liquidity position: Adequate

The liquidity position is adequate, supported by moderately healthy operational cashflows. The liquidity is supported by
available cushion in the working capital limits (~68% of the total limits on an average in the last 12 months ending December
2022). The liquidity is further aided by free cash balances of Rs. 5.7 crore as on December 31, 2022. The company does not
have any major capex or debt raising plans and neither does it have any major long-term repayment commitments. ICRA also
notes the improvement in its receivable collection period in FY2022 and the current fiscal, whose sustenance remains to be
seen.

Rating sensitivities

Positive factors – The rating could be upgraded in case of significant scale up in the revenues and profitability, leading to
material increase in net worth. Further, TOL/TNW below than 1.5 times on a sustained basis, may also result in an upgrade.

Negative factors – ICRA could downgrade HMPL’s ratings in the event of a significant deterioration in scale and profitability.
Decrease in interest coverage, on a sustained basis, to less than 2.8 times could result in a rating downgrade.

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 Analytical approach

Analytical Approach Comments

Corporate Credit Rating Methodology
Applicable rating methodologies
Rating Methodology on FMCG
Parent/Group support Not Applicable

Consolidation/Standalone Standalone

About the company

HMPL was incorporated in 1995. The current operations and business activities of the company include production, branding
and marketing of canned fruits and vegetables along with other processed foods and their distribution through company
depots at Delhi, Mumbai, Bangalore, Ahmedabad, Chennai, Hyderabad, Kolkata and Pune from more than a 2,500-strong
dealership network. The company offers canned fruits and vegetables under its flagship brand, ‘Golden Crown’, with more
than 300 products such as table sauces, juices, jams, pulps and purees, pasta, noodles, ready-to-eat snacks and food additives.
HMPL supplies its products to a large customer base, which includes reputed hospitality chains. The company has recently
hired several top management personnel to strengthen the overall organization structure.

Key financial indicators (audited/provisional)

Standalone FY2021 FY2022 9M FY2023*

Operating income 175.3 297.1 324.5
PAT 1.0 9.9 10.7
OPBDIT/OI 1.8% 5.1% 5.1%
PAT/OI 0.6% 3.3% 3.3%
Total outside liabilities/Tangible net worth (times) 1.5 1.3 1.1
Total debt/OPBDIT (times) 9.0 2.0 1.5
Interest coverage (times) 1.4 6.9 8.6
PAT: Profit after tax; OPBDIT: Operating profit before depreciation, interest, taxes and amortisation; Amount in Rs crore *provisional results

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Chronology of rating history

Current rating (FY2023)
for the past 3 years
Amount
Amount Date & rating in Date & rating in Date & rating in Date & rating in
Instrument outstanding
rated FY2023 FY2022 FY2021 FY2020
Type (Rs. crore)
(Rs.
crore) Mar 23, 2023 Mar 04, 2022 Feb 23, 2021 -
Long
1 Issuer Rating 0.00 0.00 [ICRA]BBB (Stable) [ICRA]BBB (Stable) [ICRA]BBB (Stable) -
Term
Source: Company

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 Complexity level of the rated instruments

Instrument Complexity Indicator

Issuer Rating Not Applicable

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here

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 Annexure I: Instrument details

Date of Amount Rated Current Rating and

ISIN Instrument Name Coupon Rate Maturity
Issuance (Rs. crore) Outlook
NA Issuer Rating NA NA NA 0.00 [ICRA]BBB(Stable)
Source: Company

Annexure II: List of entities considered for consolidated analysis – Not Applicable

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 ANALYST CONTACTS
Shamsher Dewan Kinjal Shah
+91 124 4545328 +91 022 61143400
[email protected] [email protected]

Sheetal Sharad Nishant Misra

+91 124 4545374 +91 124 4545862
[email protected] [email protected]

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
[email protected]

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
[email protected]

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

[email protected]

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
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For more information, visit www.icra.in

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