Rationale

 For arriving at the ratings, ICRA has taken a consolidated view of the four entities – Haldiram Manufacturing Company Private Limited (HMCPL), Haldiram Marketing Pvt. Ltd. (HMPL), Haldiram Products Private Limited (HPPL) and Haldiram Ethnic Foods Private Limited (HEFPL) (together referred to as Group entities), given the strong operational and financial linkages among them. The ratings reaffirmation factors in the expectation of a steady performance by the Group entities over the medium term, aided by strong recognition and customer acceptance of the Haldiram brand in the sweets, savoury snacks (namkeens) and restaurant businesses in North India. The Group’s operating income (OI) witnessed a moderate growth of ~9% to Rs. 1,982 crore in FY2024 from Rs. 1,812 crore in FY2023, aided to an extent by the launch of new outlets. The Group entities plan to continue adding new outlets across locations, going forward, which is likely to aid them in reporting a moderate to healthy growth in revenues. Further, the inherently low working capital intensity of the business (given the cash-and-carry sales and the perishable nature of the inventory) and minimum reliance on external long-term debt obligations have helped maintain comfortable debt protection metrics, as reflected by an interest coverage of 4.9 times, DSCR of 4.2 times and total debt/OPBDITA of 2.0 times for the year ended on March 31, 2024. The credit metrics are likely to remain at similar levels over the medium term, with timely price increases expected to help the Group entities report steady profitability margins, despite exposure to inflationary pressures. The ratings assigned continue to factor in favourably the operational and financial support enjoyed by the entities as part of the Haldiram Delhi Group (with flagship company Haldiram Snacks Private Limited, or HSPL). Over the years, the Group entities have enjoyed extended credit period as well as intermittent extension of loans from HSPL, which has supported their credit metrics. ICRA notes the recent media coverage indicating the acquisition of a stake by a global investment company in the combined entity following the ongoing merger of the Haldiram Delhi and Nagpur Groups (pending regulatory approvals); developments in this regard continue to remain a monitorable. The ratings, however, are constrained by the intense competition in the restaurant business, especially the quick service restaurant (QSR) business that constrain pricing power, and quality-related risks prevalent in the food industry. Further, ICRA notes that given the relatively lower funding requirements of the business, the Group has a track record of using surplus funds to invest in other Group companies as well as make unrelated investments for inorganic growth. Even as investments remain discretionary in nature, the extent of such investments will remain a monitorable. The Stable outlook on the long-term rating reflects ICRA’s expectation that the credit metrics of the Group entities will remain strong, aided by steady profitability and limited reliance on external debt obligations. Any incremental investments in Group.