India Ratings and Research (Ind-Ra) has assigned NHC Foods (NHCFL) a Long-Term Issuer Rating of 'IND BBB-'. The outlook is stable.

The ratings reflect NHCFL's moderate credit metrics and continued revenue growth since FY12. Revenue stood at Rs 1,473 million in FY15 and grew at a CAGR of 12.27% over FY12-FY15. Net leverage was 3.6x in FY15 (FY14: 3.4x), EBITDA interest cover was 1.9x (1.9x) and EBITDA margin was 2.5% (3.3%).

Ind-Ra expects sustained top-line growth and a 50bp-60bp margin expansion to improve the credit metrics for FY16, in the absence of substantial capex plans (Rs 5 million-Rs 7.5 million in FY16). The margin expansion will be driven by NHCFL’s introduction of a packing division for its retail products during FY16. The net leverage is likely to improve to around 3.0x by FYE16.

The ratings also factor in NHCFL's adequate liquidity position and its promoters' over three decades of experience in processing spices. The company's average utilisation of the fund-based working capital facilities was 97.2% over the 12 months ended August 2015.