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CRISIL Rating for GCMMF

Credit Rating Report
Gujarat Cooperative Milk Marketing Federation Limited

Rs.229 Million Cash CreditCRISIL AAA/Stable (Reaffirmed)
Rs.5 Billion Bill Discounting *CRISIL A1+ (Reaffirmed)
Rs.300 Million Short-Term Bank Facility CRISIL A1+ (Reaffirmed)
Rs.80 Million Inland GuaranteesCRISIL A1+ (Reaffirmed)
Rs.80 Million Inland/Import Letter of CreditCRISIL A1+ (Reaffirmed)

*Interchangeable with short-term advances

Rating Drivers
Strengths

  • Dominant position in domestic dairy industry
  • Strong control over procurement price
  • Strong financial risk profile

Weakness

  • Exposure to risks relating to unfavourable government regulations and environmental conditions, including epidemics

Rating sensitivity factors

  • Impact of bovine diseases on milk production
  • Degree of fluctuations in input costs
  • Availability of liquid milk for production
  • Level of financial support to district unions

Outlook: Stable
CRISIL believes that Gujarat Cooperative Milk Marketing Federation (GCMMF) will maintain its dominant position in the dairy industry over the medium term, supported by its strong milk procurement capability and distribution network. GCMMF’s financial risk profile is also expected to remain strong over the medium term, supported by negligible debt and healthy cash flows. The outlook may be revised to ‘Negative’ if GCMMF’s procurement of raw materials gets disrupted because of adverse environmental conditions or any significant pressure on cash flows because of competition.

Liquidity
GCMMF has ample liquidity. As on March 31, 2011 the federation has healthy cash surpluses of Rs.960 million against debt of Rs.72 million. The bank limit of Rs.230 million also remains unutilised. GCMMF’s cash accruals of more than Rs.400 million per annum are adequate to meet its moderate capital expenditure (capex) plans and working capital requirements.

Rationale
Established in 1973, GCMMF is India’s largest dairy products marketing organisation. It procures milk from 3.03 million farmers who are its members. The federation has 15,712 active village dairy cooperative societies under it. It is the apex marketing federation of 13 district cooperative milk unions in Gujarat. The products of its member unions are marketed and distributed under the brand, Amul. The federation is the largest exporter of dairy products in India.

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