(The following statement was released by the rating agency)
March 01 - Fitch Ratings has assigned India’s Siddhivinayak Poultry Breeding Farm and Hatcheries Pvt Ltd (SPBFHPL) a National Long-Term rating of ‘Fitch B(ind)'. The Outlook is Stable. A list of additional rating actions is provided at the end of this commentary.
The ratings reflect the fragmented nature of the domestic poultry industry, resulting in high competition, and the small scale of SPBHPL’s operations (revenue: INR10.45m in FY11 (financial year ending March)), given the early stages of its business. SPBHPL planned to operate three farms, of which two are operational. The third farm has been delayed; however, funding for the same has been already tied up by the company.
The ratings also reflect the two-decade-long track record of SPBHPL’s founders in the poultry business and the company’s vertical integration with group companies forming the complete poultry value chain. The ratings also factor in steady consumption-led growth expected in the medium-term in the Indian poultry industry. Fitch notes that although the industry is relatively less prone to economic downturns compared with non-food commodities, it remains susceptible to inherent industry risks including disease outbreaks and volatile poultry and feed prices.
A sustained improvement in operations resulting in strong growth in revenues and profitability may be positive for the ratings. On the contrary, any pressure on liquidity or weak operational performance resulting in a significant negative impact on profitability may be negative for the ratings.
Incorporated in 2010, SPBFHPL is engaged in the production of hatchable eggs. In FY11, the company had an EBITDA margin of 18% and a total debt of INR47.98m.
Fitch has also assigned ratings to SPBFHPL’s bank facilities as follows:
- INR123.2m term loan: assigned at ‘Fitch B(ind)’
- INR24.67m unsecured loan: assigned at ‘Fitch B(ind)'