Revenues grew by 12% on-year in fiscal 2023 to Rs 566 crore, driven by higher realisations in products like gelatin and di-calcium phosphate (DCP), while volumes continued its modest growth. This, coupled with steady raw material prices led to an all-time high operating profitability of 20.8% for the fiscal as compared to 13.5% in the previous year. This trend continued in the first quarter of fiscal 2024, with the company reporting around 30% operating margins. While margins could soften going forward as the global demand-supply gap eases, supported by improved operating efficiencies, overall profitability is expected to range between 12-14% over the long term. With customers becoming more health conscious, demand prospects for gelatin and other protein-based products is expected to remain comfortable.
The company budgets to incur ~Rs. 200 crore of capital expenditure over fiscals 2024 and 2025, mainly to undertake capacity expansions in its gelatin and peptide unit. While this could be partly debt-funded, the financial risk profile of the company is nevertheless expected to remain comfortable, supported by annual cash accruals expected of over Rs 50 crore.
The ratings continue to reflect the established position of the NGIL group in the gelatin industry, steady support from joint venture (JV) partner, Nitta Gelatin Inc, Japan (NGI), and the strong financial risk profile. These strengths are partially offset by susceptibility to fluctuations in input prices and foreign exchange (forex) rates, and probability of disruption of operations or sub-optimal capacity utilisation due to pollution concerns.
– Source: CRISIL Ratings, September 01, 2023
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