IFB Agro outlook stable, says India Ratings

Our Bureau Kolkata | Updated on October 09, 2012 Published on October 09, 2012

India Ratings has affirmed IFB Agro Industries Ltd’s National Long-Term rating at IND BBB+.

The rating agency said the outlook was stable. The affirmation reflects Kolkata-headquartered IFB Agro’s strong financial position, established presence as the only manufacturer of extra neutral alcohol (ENA) in West Bengal, and over 20 years of experience of its founders in the domestic food and beverage industry.

“The ratings also reflect IFB Agro’s strong credit metrics in FY12 as reflected in the significant increase in its interest coverage of 136x (FY11: 16.7x) and its continued low financial leverage (adjusted debt/EBIDTA) of 0.1x (FY11: 0.2x),” it said in a note.

The sharp rise in interest coverage was due to an increase in EBITDA margin to 8.4 per cent (FY11: 7.2 per cent) and a decline in interest expenses.

“The margin improvement and revenue growth by 37 per cent y-o-y to Rs 5,846.3 million in FY12 were due to higher realisations in ENA sales and increased contribution to overall sales from country liquor which is a higher-margin segment,” India Rating stated.

IFB Agro closed its Durgapur bottling plant in Q4FY12 and plans to close two other bottling units to focus on the country liquor segment. India Ratings expected margins to be impacted in FY13 owing to higher employee costs resulting from employee settlements to be incurred in the year due to the closure of the units.

Negative factors

IFB Agro’s negative factors were non-availability of raw material in the State and the company’s limited alcohol market of West Bengal.

India Ratings hoped IFB Agro’s planned Rs 1,200 million capital expenditure in the near term to set up a grain-based rectified spirit distillery would not significantly affect its credit metrics. The rectified spirit will be for captive use.

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Published on October 09, 2012
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