Rationale

 ICRA has reaffirmed the ratings assigned to the bank limits and commercial paper of KRBL Limited (KRBL). While reaffirming, the ratings have been removed from Watch with Negative Implications, and Stable outlook has been assigned to the long-term rating. The ratings were earlier placed under Watch with Negative Implications after the company announced, vide its stock exchange notification dated January 31, 2021, that its Joint Managing Director, Mr. Anoop Kumar Gupta, has been detained by the Enforcement Directorate (ED) in connection with the ongoing investigations of the AgustaWestland case. Further to this development, in April 2021, Mr. Gupta was released on bail as per the company's announcement, vide its stock exchange notification dated April 5, 2021. ICRA notes that the ongoing litigations/investigations did not have any material adverse impact on the company's operational and financial profiles, as reflected in the company's healthy financial profile and strong liquidity position in the recent times. Nonetheless, ICRA will continue to monitor the developments in this matter and any adverse impact of the same on the credit profile of the company. The ratings continue to factor in KRBL's strong market position in the basmati rice industry and a comfortable financial position, as reflected by a steady profitability, low leverage and healthy debt coverage metrics. ICRA expects the company to maintain a healthy profitability and strong debt protection metrics in FY2022 as well. KRBL's strong brand presence (both in the domestic and export markets), well established distribution network and diversification of its revenue stream, given its wide geographical presence as well as a steady contribution from its renewable energy business, continue to support the ratings. The favourable location of KRBL's facilities, which ensures easy access to the key raw material, paddy, provides significant comfort to the company's operations. As per ICRA's estimates, the company would continue to record a steady growth in its revenues in the near term, along with a stable profitability. Moreover, healthy accruals and shorter working capital cycle would support its strong liquidity position. However, the ratings are constrained by the stiff competition in the industry and the inherently working capital-intensive nature of operations, driven by high inventory levels required to be maintained owing to the seasonality of Basmati paddy availability (October to December). The sizeable inventory levels expose the company to inventory price risk, owing to the volatility in prices of both basmati paddy and rice, which is cushioned by the premium pricing due to ageing of inventory as well as KRBL's strong brand presence. As exports account for a sizeable part of the revenues, the company is vulnerable to adverse movements in foreign exchange rates and changes in trade policies of key export destinations. Its operations also remain exposed to agro-climatic risks, which affect the availability, quality and pricing of basmati rice/paddy. ICRA notes that the company is also exposed to the risks associated with environmental regulations, which could adversely impact its operations. The Stable outlook reflects ICRA's expectation that KRBL will continue to benefit from its leadership position in the industry, a strong brand presence and adequate financial profile, enabling it to sustain its strong liquidity position.