Press Release

3F Oil Palm Agrotech Private Limited

February 27, 2020
Ratings
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Facilities Amount (Rs. crore) Rating Rating Action
54.10 CARE BBB; Stable
Long term Bank Facilities Reaffirmed
(reduced from 57.46) (Triple B; Outlook: Stable)
CARE A3+
Short-term Bank Facilities 0.40 Reaffirmed
(A Three Plus)
54.50
Total facilities (Rupees Fifty four crore and
fifty lakhs only)
Details of facilities in Annexure-1
Detailed Rationale& Key Rating Drivers
The ratings assigned to the bank facilities of 3F Oil Palm Agrotech Private Limited (3FO) continues to derive comfort from
experienced promoters and business synergy derived from established track record of the 3F group, marquee clientele,
steady financial and operational performance of the company during FY19 (refers to the period April 01 - March 31)
manifested by growth in revenue and profitability margins during the period, adequate liquidity profile and stable industry
growth prospects. The ratings strengths are, however, partially offset by leveraged capital structure albeit improved
during FY19, long gestation period of palm tree plantation, operations susceptible to climatic conditions and presence in a
regulated industry.

Key Rating Sensitivities

Positive Sensitivities
 Ability of the company to improve the scale of operations by 15% and maintain PBILDT margins over 10% on
sustained basis.
 Ability of the company to withstand any change in regulatory environment affecting the company.

Negative sensitivities
 Undertaking any debt funded capex resulting in the deterioration of overall gearing ratio beyond 1.5x in any of
the projected period.

Detailed description of the key rating drivers

Key rating Strengths
Experienced promoters with business synergy derived from established track record of the 3F group: The company is a
100% subsidiary of 3F Industries Limited (3FI), which is promoted by Mr. Bal Kishan Goenka and his family members. 3FI is
the flagship company of 3F group and is engaged in the processing & refining of edible oils, specialty fats for the bakery
and confectionery segment and fatty acids (used in soap manufacturing), glycerine, stearines, olines, etc.

Reputed clientele albeit high concentration risk: 3FO has established long-standing business relations with a reputed clientele
comprising of few reputed names in the edible oil industry for sale of its CPO and CPKO. The company has a network of nearly
10-15 clients for sale of CPO and CPKO. However, the company is susceptible to client concentration risk as the top 3 clients
contributing to around 61% and 10 clients contribute 80% of its total sales.

Improved operational performance in FY19: 3FO is majorly engaged in manufacturing of Crude Palm Oil (CPO) and Crude
Palm Kernel Oil (CPKO) by crushing the Palm Fresh Fruit Bunches (FFB) cultivated by the farmers on land parcels which
come under 3FO’s ambit. The capacity utilization of the unit has been optimal at about 45-50% in the last three years
FY17-FY19. Further, company’s sales volume as well as the sales realization improved during FY19 which resulted in
growth in revenue for the same period.

Improved financial performance of the company during FY19: 3FO’s financial performance witnessed y-o-y improvement
marked by a 28% growth in the total operating income (TOI) from Rs. 181.19 crore during FY18 to Rs. 232.18 crore in
FY19 on back of increase in the sales volumes and improved sales realizations. Consequently, the company’s PBILDT
margin increased by around 150 bps to 8.32% and PAT margin increased to 2.73% (1.35% in FY18).

Improvement in capital structure during FY19: The overall gearing of the company has improved from 1.73x as on March
31, 2018 to 1.48x as on March 31, 2019 in line with accretion of profits to networth. Further, the debt coverage indicator

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Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.
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 Press Release

improved significantly with TDGCA improving from 7.82x during FY18 to 4.73x during FY19 at the back of higher GCA
levels during the year.

Long-standing relations with a marquee clientele: 3FO has a reputed clientele comprising of few reputed names in the
edible oil industry for sale of its CPO and CPKO. The company has a network of nearly 10-15 clients for sale of CO and
CPKO.

Stable Industry Growth Prospects: The long-term outlook of edible oil demand in India is stable on expectation of
increasing population, increase in per capita consumption which in turn would be driven by changing lifestyles, growing
urbanization, steadily rising affluence levels and continued government support to the sector.

Key Rating Weaknesses

Long gestation period of palm tree plantation: 3FO is one the very few companies engaged in palm fruit cultivation in
India. The company procures the seeds (sprouts) either through imports/domestic market and nurtures the palm saplings
at its nurseries for one year, which is supplied to farmers. The plants start yielding fruits only from third year onwards,
resulting in relatively long gestation period.

Exposure to Agro-climatic risk: As the company operates in agro based industry, business is vulnerable to adverse
climatic conditions and remains exposed to risk of crop failure and consequently revenue and profitability risk.
Nevertheless, the company has its farms in over six states across diverse geographies which mitigates the risk to some
extent.

Regulated nature of industry: The company is an agro commodity player and the industry is exposed to various
government regulations in terms of Minimum selling price (MSP), ban on imports/exports or duties levied on Crude palm
oil and refined palm oil based on the demand and supply situation of the crop etc. thereby having an impact on the profit
margins of the players in the industry. Nevertheless, given the formula based price fixation of raw materials based on the
selling price; the profitability margins of the players are protected to a large extent.

Liquidity Analysis: Adequate: The liquidity profile 3FO is adequate characterized by sufficient cushion in accruals vis-à-vis
repayment obligations and moderate cash balance as on March 31, 2019. Its bank limits are utilized to the extent of
71.36% for the last 12 months ended June 2019, which is sufficient to meet the company’s growing business needs.

Analytical approach: Standalone

Applicable Criteria
Criteria on assigning Outlook to Credit Ratings
Consolidation and Factoring Linkages in Ratings
Criteria for Short Term Instruments
CARE’s Policy on Default Recognition
Rating Methodology-Manufacturing Companies
Financial ratios – Non-Financial Sector

About the Company

Incorporated on July 20, 2010; 3F Oil Palm Agrotech Private Limited (3FO) is a 100% subsidiary of 3F Industries Limited,
promoted by Mr. Bal Kishan Goenka and family. 3FO was formed by hiving-off of the oil palm division of 3FI, which is
operational since 1995. 3FO is engaged in palm cultivation and solvent extraction i.e., extraction of Crude Palm Oil (CPO)
and Crude Palm Kernel Oil (CPKO) from Palm Fresh Fruit Bunches (FFB).

Brief Financials (Rs. crore) FY18 (Audited) FY19 (Audited)

Total operating income 181.19 232.18
PBILDT 12.36 19.32
PAT 2.44 6.34
Overall gearing (times) 1.73 1.48
Interest coverage (times) 3.67 3.49
Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

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 Press Release

Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Rating assigned

Instrument Issuance Rate Date Issue along with Rating
(Rs. crore) Outlook
Fund-based - LT-Term - - Dec 2022 19.10 CARE BBB; Stable
Loan
Fund-based - LT-Cash - - - 35.00 CARE BBB; Stable
Credit
Non-fund-based - ST- - - - 0.40 CARE A3+
Letter of credit

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history

No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Rating(s) Date(s) & Date(s) &
Facilities Outstanding Rating(s) assigned in 2018- Rating(s) Rating(s)
(Rs. crore) assigned in 2019 assigned in assigned in
2019-2020 2017-2018 2016-2017
1. Fund-based - LT-Term LT 19.10 CARE 1)CARE BBB; 1)CARE BBB-; Stable; 1)CARE BBB; 1)CARE BBB;
Loan BBB; Stable ISSUER NOT Stable Stable
Stable (05-Sep-19) COOPERATING* (23-Mar-18) (12-Jan-17)
(27-Mar-19)
2. Fund-based - LT-Cash LT 35.00 CARE 1)CARE BBB; 1)CARE BBB-; Stable; 1)CARE BBB; 1)CARE BBB;
Credit BBB; Stable ISSUER NOT Stable Stable
Stable (05-Sep-19) COOPERATING* (23-Mar-18) (12-Jan-17)
(27-Mar-19)
3. Non-fund-based - ST- ST 0.40 CARE 1)CARE A3+ - - -
Letter of credit A3+ (17-Sep-19)
*based on best available information

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity.
This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome
to write to care@careratings.com for any clarifications.

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 Press Release

Contact us
Media Contact
Mradul Mishra
Contact no. – +91-22-6837 4424
Email ID – mradul.mishra@careratings.com

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Group Head Name – Mr. D Naveen Kumar
Group Head Contact no- +91-4040102030
Group Head Email ID- dnaveen.kumar@careratings.com

Relationship Contact
Name: Mr. Ramesh Bob
Contact no.: + 91 90520 00521
Email ID: ramesh.bob@careratings.com

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