Press Release

Haldiram Bhujiawala Limited (Revised)

April 06, 2023

Facilities Amount (₹ crore) Rating1 Rating Action

115.83
Long Term Bank Facilities CARE BBB+; Stable Reaffirmed
(Enhanced from 88.89)

Short Term Bank Facilities 3.50 CARE A3+ Reaffirmed

Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

The ratings assigned to the Bank Facilities of Haldiram Bhujiawala Limited (HBL) continue to derive strength from HBL’s established
market position in the packaged foods industry stemming from long presence, established brand name of ‘Prabhuji – House of
Haldirams’ and rebranding initiative for focussing on ‘Prabhuji-Pure Food’ brand in Eastern India and established selling and
marketing network. The ratings further take note of satisfactory financial performance in FY22 (refers to the period April 1 to
March 31) and 9MFY23. The ratings are, however, constrained by elongated inventory holding period, high utilisation of working
capital limits, moderate capital structure, exposure of HBL to competition from branded as well as unorganized packaged foods
players, geographically concentrated operations, exposure to raw material price fluctuation risk, and susceptibility to quality
failures.

Rating sensitivities: Factors likely to lead to rating actions.

Positive factors
• Improvement in scale of operation with sustained operating margin
• Improvement in inventory holding period along with overall gearing ratio below 1.00x on a sustained basis.
Negative factors
• Any debt laden capex impacting overall gearing ratio beyond 1.80x
• Decline in revenue coupled with PBILDT margin below 7%

Analytical approach: Standalone

Outlook: Stable
Stable outlook reflects that the entity is likely to maintain its brand presence in packaged snacks and sweets segment, which
coupled with stable demand scenario shall enable it to sustain its operational performance.

Key strengths
Long experience of promoters
The promoters have more than six decades of experience in the manufacturing of ready-to-eat packaged snacks and sweets. The
promoters have been in the business of manufacturing of such food products for more than five decades through the formation
of a sole proprietorship firm namely Haldiram Bhujiawala in 1958.

Rebranding initiative for focussing on the “Prabhuji-Pure Food” brand

Prabhuji- from House of Haldiram’ enjoys strong brand presence and recognition in the packaged food business; a result of having
its lineage in the domestic market for over six decades. Haldiram's itself has succeeded as a national brand although the business
is broken into three distinct geography-based groups among the family members. The Company is gradually re-positioning itself
under the brand Prabhuji, which was originally Haldiram’s Prabhuji, then changed to Prabhuji – House of Haldiram to the current
brand of Prabhuji –Pure Food. Further, this is also expected to provide access to the States where earlier it could not enter due
to the brand conflict of Haldirams’.

Established selling and marketing arrangements.

The company has a distribution network of over 1900 distributors in the country which in turn services more than 2 lakh retailers.
This apart, HBL also sells under retail mode through 22 retail outlets and 50 franchisees. Furthermore, the company also
undertakes various promotional activities particularly during the festive occasions in order to push its sales. During FY22 and

1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications

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FY21, the company’s selling and distribution cost stood at ₹13 crore and ₹8 crore respectively, which was lower on account of
reduced expenses during pandemic. Furthermore, for the re-branding initiative, the Company ramped up its advertisement and
promotion expenses to ₹40 crore in FY23 (estimated) and roped in Mr Shah Rukh Khan for endorsing its brand. Nonetheless this
brand building of ‘Prabhuji-Pure Food’ is expected to lead to significant revenue growth going forward. The selling and distribution
expenses as a % of TOI is estimated at 8.3% in FY23 (6.7% in FY19 and 4.5% in FY20).

Particulars FY18 FY19 FY20 FY21 FY22 9MFY23 FY23

Selling and distribution expenses (₹ crore) 15.38 26.49 16.73 8.01 13.07 21.97 40.00
As a % of sales 4.65 6.72 4.54 2.66 3.48 5.91 8.32

Satisfactory financial performance in FY22 and 9MFY23

Financial performance of HBL remained satisfactory in FY22 with total operating income showing growth of around 25% from Rs
302.41 crore in FY21 to Rs 377.93 crore in FY22. The increase is largely restoration of scale of operations wherein FY21 remained
impacted on account of Covid-19 induced disruptions leading to curtailment of discretionary spending of the consumers. The
operating profit margin has also normalised to earlier levels with operating profit margin for FY22 at 11.95% against 13.74% in
FY21. The average operating margin for the company remained in the range of 9.5%-11.5% while for FY21 the company saved
on account of reduction in employee cost, power cost and selling expenses. PAT margin of the company remained steady at
3.27% in FY22 against 3.55% in FY21.
In 9MFY23, the company reported an improvement in the total operating income by 22% y-o-y to ₹371 crore from Rs 305 crore
in 9MFY22. Further the PBILDT is estimated around Rs 31.54 crore in 9MFY23 as against Rs 43.35 crore in 9MFY22. The decline
in PBILDT is largely on account of increased advertisement expenditure and onboard of SRK for branding.

Key weaknesses
Geographically concentrated operations and intense competition in a fragmented snacks industry
HBL being the flagship company of the Haldiram Kolkata group derives around 50% of its revenue from West Bengal alone and
the balance 50% is derived from the other states (majorly Bihar, Jharkhand and North-eastern regions) thus making it
predominantly a regional player. Many small regional players have mushroomed across the country which has added to
competitive intensity of the industry. Hence, the biggest challenge for the industry players would be scaling up regional presence
to a national level while maintaining highest quality standards.
The company also has invested in the convertible debenture of Pan India Food Solutions Private Limited (PIFSPL). The acquisition
led to diversification of the group’s existing product portfolio and gave the group a pan – India presence, which is currently
concentrated to Eastern India. The promoters of HBL control the operational ice cream (Italiano Gelato; IG) and coffee (The
Coffee Bean and Tea Leaf; CBTL) business along with other non-operational restaurant business (Noodle bar, Spagetti Kitchen)
of PIFSPL

Susceptibility of profitability to volatility in prices of agro commodities

The major raw materials purchased by the company are pulses, gram flour, spices and edible oils. Since the company procures
raw materials from the open market, it is exposed to price fluctuations as the supply of such agro commodities are exposed to
vagaries of nature along with hoarding problems and lack of storage infrastructure. Moreover, the prices of these commodities
are dependent upon various factors including climatic conditions in the growing regions, substitutes for the crop (for farmers),
government regulations, as well as alternate demand drivers. However, the price risk is mitigated as the company’s established
market position enables it to pass on the price increase to consumers. Further, to mitigate the risk of loss of production due to
seasonal availability of raw material, the company has set up cold storage unit in Singur to store inventory to ensure uninterrupted
availability of raw material.

Susceptibility to quality failures

While the company has been able to retain its quality focus over the years, being part of the food business, maintaining food
quality remains a key sensitive factor for HBL.

Moderate capital structure and elongated inventory holding period.

Overall gearing ratio remained stable at 1.37x as on March 31, 2022 (1.38x as on March 31, 2021). The company has been
incurring continuous capex towards modernization and upgradation of plant in Singur which remains partially debt funded. The
debt protection metrics continue to remain adequate with interest coverage of 2.88x in FY22 as against 2.42x in FY21.
Furthermore, the total debt by GCA also improved to 7.97x as on March 31, 2022 as against 8.38x as on March 31, 2021 backed
by improved GCA.

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Currently, the company is adding a peanut line along with other necessary modernization at an outlay of ₹15 crore-₹20 crore.
The overall gearing ratio as on December 31, 2022, stood at 1.40x.
The average operating cycle of the company continues to remain moderate with operating cycle of 84 days in FY22 as against 85
days in FY21. The average inventory holding period in FY22 stood at 110 days slightly better than 136 days in FY21. Any further
increase in inventory holding period without adequate sales growth shall remain key monitorable.

Liquidity: Adequate
The company reported GCA of ₹24.98 crore in FY22 against debt repayment obligation of ₹ 18.30 crore. In FY23, the company
has debt repayment obligations of Rs 23.18 crore against which the company is estimated to have adequate accruals. The
company had cash and cash equivalant balance of ₹10.96 crore as on March 31, 2022 and ₹2.72 crore as on December 31, 2022.
The average working capital utilisation of the company stood high at 88% for the 12 months ended February 28, 2023. The fund
based utlization levels have remained high on account of increased scale of operations along with increased inventory level.

Applicable criteria
Policy on default recognition
Financial Ratios – Non financial Sector
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Credit Watch
Short Term Instruments
Manufacturing Companies
Policy on Withdrawal of Ratings

About the company and industry

Industry Classification
Macro-Economic Indicator Sector Industry Basic Industry
Fast Moving Consumer Goods Fast Moving Consumer Goods Food Products Other Food Products

HBL was incorporated as a private limited company in September 1992 post which it acquired its current form in March 2001.
HBL is primarily engaged in manufacturing of various kinds of packaged snacks and sweets like Bhujia, Papad, Namkeens,
Rasgulla, Gulab-jamun, Soan-papri etc. They also have set up restaurants where all types of Indian food items are served. HBL
markets its products under “Prabhuji- Pure Food” brand name which enjoys strong brand recognition in Eastern India and has
three manufacturing facilities with an aggregate installed capacity to produce and package 6035 Metric Tonnes Per Annum (MTPA)
of snacks and sweets. Moreover, the company also operates restaurant facility (cumulative 325 seats spread across 3 locations)
and banquet hall (capacity of 400 people). HBL is a closely held company and its day to day activities are managed by Mr. Prabhu
Shankar Agarwal and his son Mr. Manish Agarwal. HBL belongs to the Haldiram’s Prabhuji group, the other Haldiram groups being
Haldiram Delhi and Haldiram Nagpur groups which are being managed by the extended family members of the promoter.

Brief Financials (₹ crore) March 31, 2021 (A) March 31, 2022 (A) 9MFY23 (UA)
Total operating income 302.41 377.93 371.48
PBILDT 41.54 45.14 31.54
PAT 10.74 12.38 13.17
Overall gearing (times) 1.38 1.37 1.40
Interest coverage (times) 2.42 2.88 3.90
A: Audited; UA: Unaudited; Ratios are classified as per CARE Ratings Standards

Note: ‘the above results are latest financial results available’

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating history for the last three years: Please refer Annexure-2

Covenants of the rated facilities: Detailed explanation of the covenants of the rated facilities is given in Annexure-3

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Complexity level of the various instruments rated: Annexure-4

Lender details: Annexure-5

Annexure-1: Details of facilities

Rating
Date of
Maturity Size of the Assigned
Name of the Issuance Coupon
ISIN Date (DD- Issue along with
Facilities (DD-MM- Rate (%)
MM-YYYY) (₹ crore) Rating
YYYY)
Outlook
Fund-based - CARE BBB+;
- - - 38.50
LT-Cash Credit Stable

Fund-based - CARE BBB+;

- - 07-10-2032 77.33
LT-Term Loan Stable
Fund-based -
ST-Bank - - - 1.50 CARE A3+
Overdraft
Non-fund-
based - ST-
- - - 2.00 CARE A3+
Bank
Guarantee

Annexure-2: Rating history for the last three years

Current Ratings Rating History

Date(s) Date(s) Date(s) Date(s)

Name of the
and and and and
Sr. No. Instrument/Bank Amount
Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹ crore)
in 2022- in 2021- in 2020- in 2019-
2023 2022 2021 2020
1)CARE 1)CARE
BBB+; BBB+;
Stable Stable
(16-Mar- 1)CARE (09-Sep-
CARE 22) BBB+; 19)
Fund-based - LT-
1 LT 77.33 BBB+; - Stable
Term Loan
Stable 2)CARE (07-Apr- 2)CARE
BBB+; 20) BBB+;
Stable Stable
(05-Apr- (05-Apr-
21) 19)
1)CARE 1)CARE
BBB+; BBB+;
Stable 1)CARE Stable
CARE (16-Mar- BBB+; (09-Sep-
Fund-based - LT-
2 LT 38.50 BBB+; - 22) Stable 19)
Cash Credit
Stable (07-Apr-
2)CARE 20) 2)CARE
BBB+; BBB+;
Stable Stable

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(05-Apr- (05-Apr-
21) 19)
1)CARE 1)CARE
A3+ A3+
(16-Mar- (09-Sep-
1)CARE
22) 19)
Non-fund-based - CARE A3+
3 ST 2.00 -
ST-Bank Guarantee A3+ (07-Apr-
2)CARE 2)CARE
20)
A3+ A3+
(05-Apr- (05-Apr-
21) 19)
1)CARE
A3+
(16-Mar-
1)CARE 1)CARE
22)
Fund-based - ST- CARE A3+ A3+
4 ST 1.50 -
Bank Overdraft A3+ (07-Apr- (09-Sep-
2)CARE
20) 19)
A3+
(05-Apr-
21)

Annexure-3: Detailed explanation of the covenants of the rated instruments/facilities- Not Applicable

Annexure-4: Complexity level of the various instruments rated

Sr. No. Name of the Instrument Complexity Level

1 Fund-based - LT-Cash Credit Simple

2 Fund-based - LT-Term Loan Simple
3 Fund-based - ST-Bank Overdraft Simple
4 Non-fund-based - ST-Bank Guarantee Simple

Annexure-5: Lender details

To view the lender wise details of bank facilities please click here

Note on the complexity levels of the rated instruments: CARE Ratings has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any
clarifications.

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Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
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and capital market instruments, including commercial papers, corporate bonds and debentures, and structured credit.

Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant facto₹ CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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