ICRA: Janatha Fish Meal And Oil Products: Ratings downgraded to [ICRA]BBB- (Stable)/[ICRA]A3

4 June 2020 Rationale: The ratings revision reflects the weakening financial profile of Janatha Fish Meal And Oil Products (JFM) characterised by decline in operating income (OI) in FY2020, coupled with low operating profits and increased debt levels also resulting in weak coverage indicators. The firm’s turnover decline in FY2020 was owing to the low production levels with unavailability of raw fish, coupled with reduction in the realisation rates. ICRA notes that the business continues to remain vulnerable to changes in the climatic conditions that may affect the material availability, impacting the firm’s revenues.

The ratings continue to be constrained by the limited pricing flexibility owing to its presence in a fragmented and competitive industry coupled with commoditized nature of the product. JFM is also exposed to the foreign currency fluctuation risk as it derives about 20% of its revenues from exports. However, the firm benefits from the natural hedge to the extent of its imports. JFM is also exposed to the inherent risks associated with the partnership nature of the business including risk of capital withdrawal and limited ability to raise funds, among others.

The ratings, however, consider the long experience of the promoters in the fish meal and oil products business, the firm’s reputed client base and the proximity of the unit to India’s west coast thereby facilitating easy and timely procurement of raw materials. Going forward, ICRA will continue to evaluate the impact of COVID-19 induced lockdown on the firm’s operations. Although it is currently able to carry out its operations, any adverse developments impacting its supply chain can affects its operations.

Source: ICRA