Uno Feeds Revised

February 05, 2018

Summary of rated instruments

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Fund Based/CC 25.00 25.00 [ICRA]BBB-(Stable) Reaffirmed;
Non Fund Based 0.23 0.00 Removed from ‘Issuer Not Co-
Unallocated 2.77 3.00 operating category’
Total 28.00 28.00

Rating action
1
ICRA has reaffirmed the long-term rating at [ICRA]BBB- (pronounced ICRA triple B minus) to the Rs. 25.00-crore cash
2
credit and Rs. 3.00-crore unallocated limits of Uno Feeds (UF) . The outlook on the long-term rating is ‘Stable’. The rating
has also been removed from the ‘Issuer Not Co-operating’ category.

Rationale
The rating factors in significant experience of the promoters in the aqua feed industry through its group companies
operating in similar lines of business. The rating also factors in the healthy revenue growth on the back of higher demand
leading to increase in capacity utilization and volume growth of ~9% in FY2017. ICRA also notes the improvement in
operating margins of the company on the back of higher realizations during FY2017. The assigned rating also considers
the favorable demand outlook for the extruded fish feed sold under the established brand name ”UNO Feeds” and
benefits arising from the favorable location of the firm’s manufacturing facility in proximity to the major aquaculture belt
of Andhra Pradesh.

However, the assigned rating continues to be constrained by high customer concentration with the top three customers
accounting for 67% of the total sales in FY2017. The assigned rating is also constrained by the vulnerability of profitability
indicators to the fluctuation in key raw material prices of soya and maize as they contribute major portion of cost of
production. Moreover, the rating is constrained by the risks arising from the partnership nature of the firm with frequent
capital withdrawals during the past five years and inherent risks in the sea food industry including susceptibility to
diseases, government policies and climate change risks.

Outlook: Stable
ICRA believes Uno Feeds will continue to benefit from the extensive experience of its promoters, established brand and
customer relationships. The outlook may be revised to 'Positive' if substantial growth in revenue and profitability, and
better working capital management, strengthens the financial risk profile. The outlook may be revised to 'Negative' if
cash accrual is lower than expected, or if any major capital expenditure, or stretch in the working capital cycle, weakens
liquidity.

1
100 lakh = 1 crore = 10 million
2
For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications

1
Key rating drivers

Credit strengths
Significant Experience of promoters - The promoters have rich experience in the aqua feed industry through its group
companies – Navkiran Techno Feeds (NTF) - rated [ICRA]BB (Stable) - and Kalyani Uno’s Aqua Feeds Private Limited
(KAFPL) with a capacity of 78000MTPA and 48000MTPA respectively. The promoters have an experience of more than
two decades in the industry.

Favorable location of the firm’s facilities - The processing plant is located in Bhimavaram, West Godavari District which
is in a major aqua-culture belt of Andhra Pradesh. The firm generates majority of its revenues from traders and farmers
in Andhra Pradesh and the remaining from surrounding coastal states of West Bengal and Orissa.

Improvement in revenues and margins during FY2017 - The operating income witnessed a healthy growth of 15% to Rs.
243.44 crore on the account improved sales volumes (9% growth) owing to increased demand for fish feed. The firm’s
capacity utilisation has also improved from 79% in FY2016 to 86% in FY2017. However, firm’s revenues are expected to
witness de-growth in the near term with decrease in capacity utilisation owing to a shift of a portion of production to the
group firm – NTF. The firm has witnessed an increase in average realizations across from Rs. 27,819 per MT in FY2016 to
Rs. 29,475 per MT in FY2017 resulting in an increase in operating margin from 7.98% in FY2016 to 8.39% in FY2017.

Favorable demand for extruded fish feed under the well-established brand name “UNO Feeds” – There is high demand
for extruded feed owing to its advantages over traditional feed as it ensures efficient nutrient delivery, lower feed
conversion ratio and low disease occurrence. Also, “Uno Feeds” is a well-established brand in the region resulting in
pricing flexibility of the firm.

Credit weaknesses
High customer concentration - The firm faces high customer concentration risk with top three customers accounting for
67% of the total sales in FY2017. The firm’s customers majorly include aqua feed traders based out of East Godavari and
Krishna District who in-turn sell to farmers in the region. The firm also sells directly to the farmers, who account for a
small portion of the revenues.

Inherent risks in the sea food industry - The aqua culture activity is dependent on climatic conditions prevailing every
season which are unpredictable. Natural calamities like floods, cyclones during the culture season can have serious
impact on the prospects of successful culture. Despite technical advancement, the possibility of fish getting affected by
virus or diseases cannot be ruled out. Also, change in government policies will have an impact on the demand for the
firm’s products.

Exposed to fluctuations of raw material prices - The key raw materials required for the production of fish feed are soya
meal, deoiled rice bran cake, maize and jowar. Any adverse movement in the soya or maize prices can affect the earnings
of the company considering they account for a major portion of the cost of production.

Risks arising from partnership nature of the firm - Given UF’s constitution as a partnership firm, it is exposed to risks
including the possibility of withdrawal of capital by the partners as witnessed over the years. The partners have
withdrawn Rs. 12.52 crore of capital in FY2017.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.

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Links to applicable criteria:

Corporate Credit Rating Methodology

About the company:

Established as a partnership firm in 2008, UNO Feeds is engaged in the manufacturing of floating fish feed through
extrusion technology with an installed capacity of 96000 Metric Ton per annum. The manufacturing facility is located in
Bhimavaram, West Godavari district of Andhra Pradesh. Mr. K. Radhakrishna Murthy and Mr. T.S.V.S.N.R. Mani Manjari
are the partners of the firm.

In FY2017, the company reported a net profit of Rs. 14.14 crore on an operating income of Rs. 243.44 crore, as compared
to a net profit of Rs. 11.95 crore on an operating income of Rs. 211.00 crore in the previous year.

Key Financial Indicators

FY 2016 FY 2017
Operating Income (Rs. crore) 211.00 243.44
PAT (Rs. crore) 11.95 14.14
OPBDIT/ OI (%) 7.98% 8.39%
RoCE (%) 35.54% 32.78%

Total Debt/ TNW (times) 1.64 1.66

Total Debt/ OPBDIT (times) 2.10 1.89
Interest coverage (times) 4.16 3.84
NWC/ OI (%) 23.90% 22.02%

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

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Rating history for last three years:
Chronology of Rating History for the past 3
Current Rating (FY2018) years
Date & Date &
Date & Date & Rating in Rating in Rating in
Amount Amount Rating FY2018 FY2016 FY2015
Rated Outstanding February November Spetember June
Instrument Type (Rs. crore) (Rs Crore) 2018 2017* 2016 2015
1 Cash Credit Long 25.00 NA [ICRA]BBB-
Term [ICRA]BBB- (Stable) [ICRA]BBB- [ICRA]BB+
(Stable) ISSUER NOT (stable) (Stable)
COOPERATING
2 Non Fund Long 0.00 NA [ICRA]BBB-
Based Term (Stable) [ICRA]BBB- [ICRA]BB+
-
ISSUER NOT (stable) (Stable)
COOPERATING
3 Unallocated Long 3.00 NA [ICRA]BBB-
Term [ICRA]BBB- (Stable) [ICRA]BBB- [ICRA]BB+
(Stable) ISSUER NOT (stable) (Stable)
COOPERATING
*ICRA has moved the rating of UF to the ‘ISSUER NOT COOPERATING’ category due to non-submission of monthly ‘No
Default Statement’ (“NDS”) by the entity in November 2017.

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument Details
Date of Amount
Issuance / Coupon Maturity Rated Current Rating and
ISIN No Instrument Name Sanction Rate Date (Rs. crore) Outlook

NA Cash Credit NA NA NA 25.00 [ICRA]BBB- (Stable)

NA Unallocated NA NA NA 3.00 [ICRA]BBB- (Stable)
Source: Uno Feeds

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Corrigendum
Document dated February 05, 2018 has been corrected with revisions as detailed below:

 Revision on page number 3, under Rating history for last three years: The date for the previous rating action in
FY2016 was mentioned as August 2016. However, the same has been revised to September 2016.

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ANALYST CONTACTS
K Ravichandran Srinivasan R
+91 44 4596 4301 +91 44 4596 4315
ravichandran@icraindia.com r.srinivasan@icraindia.com

Sai Kireeti S K
Nithya Debbadi +91 40 4067 6530
+91 40 4067 6515 sai.thirumala@icraindia.com
nithya.debbadi@icraindia.com

RELATIONSHIP CONTACT
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+91 80 4332 6401
jayantac@icraindia.com

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Ms. Naznin Prodhani
Tel: +91 124 4545 860
naznin.prodhani@icraindia.com

Helpline for business queries:

+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

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