CRISIL has reaffirmed 'A+/Stable/A1+' ratings on the bank facilities and commercial paper programme of Agro Tech Foods (Agro Tech) continue to reflect Agro Tech's established position in the branded edible oils market, and its healthy financial risk profile, supported by a comfortable capital structure. The ratings also factor in the business and financial support the company receives from its parent, ConAgra Foods (ConAgra; rated 'BBB-/Stable/A-3' by Standard & Poor's [S&P]).
These rating strengths are partially offset by Agro Tech's low, albeit improving, profitability (before interest, tax, depreciation and amortization) because of larger proportion of sales from edible oils segment, and exposure to risks associated with the agro-based nature of its major products.
CRISIL believes that Agro Tech will maintain its business risk profile over the medium term, supported by its expanding product profile and improving operating margin. Its financial risk profile is also expected to remain healthy over the medium term, supported by minimal debt levels. The outlook may be revised to 'Positive' in case of substantial increase in Agro Tech's scale of operations, most likely driven by a significant improvement in its market position in the branded food and oil segments, along with sustainability in margins.
Conversely, the outlook may be revised to 'Negative' in case of a significant decline in the company's profitability, or if it undertakes any large debt-funded capex programme or acquisition. Also, any revision in the rating on ConAgra by S&P may lead to a similar revision in CRISIL's rating on Agro Tech.
