Rationale

 The rating reaffirmation takes into consideration the extensive experience of the promoters of Parmanand and Sons Food Products Private Limited (PSPL) and the company’s established presence in the food processing industry with sizeable milling capacities for besan and chana dal. The rating also reflects PSPL’s well-entrenched distribution network and product portfolio, which supported the company’s steady business growth. The company’s core business of producing besan remained stable amid high realisations, despite some moderation in volumes in FY2024. Further, the company is likely to register a growth in revenue in FY2025, backed by an increased sales volume of besan and introduction of new products in the retail market. The rating also considers PSPL’s comfortable capital structure with no major repayment obligations except flexible short-term loans from the promoters and adequate liquidity position of the company, given the stable cash accruals and moderate utilisation of the working capital limits. The rating reaffirmation also takes into consideration the established presence of the company in both the branded/retail segment through its PAN brand as well as in the bulk sale segment, having reputed large customers. ICRA believes that the company would continue to benefit from the favourable demand prospects as agro-based food products form an essential constituent of the staple Indian diet. The rating is, however, constrained by the intensely competitive industry structure, which restricts the pricing power and exerts pressure on the company’s profitability. Moreover, low value additive nature of the business limits the profit margins of the company. PSPL’s operations and margins are also susceptible to the prevailing agro-climatic conditions and changes in the Government policies. The rating also considers the vulnerability of the operating margins to the fluctuations in the commodity prices, even though the company has been able to pass on the price hikes to its customers in the past years. The Stable outlook on the [ICRA]BBB- rating reflects ICRA’s opinion that PSPL will continue to register a steady growth in its revenue, supported by the extensive experience of its promoters, its strong bulk client base, and growing presence of its retail brand in the food processing industry.