Rationale

The ratings assigned consider the extensive track record of Shree Rameshwar Lal Foods Private Limited’s(SRL Foods) promoters in the rice milling industry and ease in paddy procurement owing to the proximity of its plant to a major rice growing area of Uttar Pradesh. The company’s business continues to derive comfort from the favourable demand prospects of the industry as India is the second largest producer and consumer of rice, globally. The company’ scale is moderate, however, the same remains largely stable with revenues of around Rs. 354 crore in FY2025, an increase from Rs. 342 crore in FY2024. The ratings are, however, constrained by SRL Foods’ modest debt coverage indicators, given its thin operating margins and high working capital requirements, inherent in the rice milling industry. The debt coverage metrics remained modest with an interest coverage of around 1.3 times and Total Debt/OPBDITA of around 10 times in FY2025 due to high reliance on working capital debt and low earnings. Going forward, the financial risk profile is expected to remain under pressure due to high working capital intensity and low earnings. The ratings also remain constrained by limited pricing flexibility and the fragmented nature of the rice milling industry due to intense competition in the industry. The ratings also factor in the agro-climatic risks that can impact paddy availability in adverse weather conditions, as well as susceptibility to regulatory changes and Government policies. The Stable outlook on the long-term rating reflects ICRA’s opinion that SRL Foods will continue to benefit from the extensive experience of its promoters in the rice milling industry and presence of the mill in a major rice growing area, which supports its business, scale and earnings.