Rating Rationale
August 2018
Gujarat Co-operative Milk Marketing Federation Ltd
Rating Reaffirmed


Total Bank Loan Facilities RatedRs.568.9 Million
Long Term RatingCRISIL AAA/Stable(Reaffirmed)
Short Term RatingCRISIL A1+(Reaffirmed)

*(Refer to Annexure 1 for details on facilities)

Detailed rationale

CRISIL has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the bank facilities of Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF).

The ratings continue to reflect GCMMF’s dominant market position in the Indian dairy industry, driven by a strong brand, diverse product portfolio, and robust distribution network. The ratings also factor in the federation’s satisfactory financial risk profile because of strong financial flexibility and adequate debt protection metrics. These strengths are partially offset by exposure to government regulations, epidemic and environmental factors that influence agriculture-related sectors, and risks related to milk supply on account of volatility in global milk powder prices.

In fiscal 2018, revenue rose 8% year-on-year, supported by growth across the product portfolio, including pouch milk, butter, ice cream, and dairy whitener. Milk procurement, however, was relatively higher, resulting in increase in fat and powder inventory at year-end. Consequently, debt was higher than anticipated as of March 31, 2018. Excess inventory is expected to be liquidated in fiscal 2019, driven by steady demand for milk and milk products, and initiatives taken by the state government to help reduce powder inventory. Capital expenditure (capex) of about Rs 100 crore is expected to be undertaken per annum over the medium term towards expansion of capacities at the Gandhinagar plant (Amulfed Dairy). Favourable demand for milk and milk products, and steady scale up in operations at the new capacities are expected to drive growth in revenue (expected at 10-12% over the medium term).

Analytical approach

The rating is arrived at on a standalone basis, with GCMMF’s debt adjusted for the debt of district cooperative milk unions guaranteed by, or routed through, the federation. CRISIL also factors in the financial flexibility that the federation enjoys on account of the two-step price payment mechanism.

Key rating drivers


  • Dominant position in the dairy industry: GCMMF remains the largest dairy product marketing organisation in India, with superior brand equity, wide product portfolio, well-spread distribution network, and an aggressive marketing strategy.

  • Strong control over procurement price: The federation is part of a cooperative structure, wherein farmers are owners and suppliers to district cooperative milk unions that supply milk and milk products to GCMMF for marketing. It follows a two-step price payment mechanism, with the final price at year-end, reflecting strong control over the effective price paid to unions.

  • Satisfactory financial risk profile: Networth is moderate on account of the business model followed, wherein the provisional price is paid periodically and the balance is distributed at year-end. However, the federation has strong financial flexibility, driven by control over the effective price paid to district cooperative milk unions, and healthy liquidity to meet financial obligation.


  • Susceptibility to changes in government regulations, and environmental conditions: GCMMF, like all dairy players, is susceptible to government regulations—such as ban on skimmed milk powder (SMP) exports in the past, and removal of export incentives. Furthermore, it is also susceptible to failure in milk production because of external factors such as cattle diseases.

  • Exposure to risks related to volatility in global milk powder prices: Exposure to risks related to volatility in global milk powder prices are inherent in the dairy industry. For instance, the global crash in SMP prices in fiscal 2018 led to surplus procurement, which translated into large inventory, leading to an increase in working capital debt.

Outlook: Stable

CRISIL believes GCMMF will continue to benefit from its dominant market position in the dairy industry over the medium term, supported by its strong milk procurement capability and distribution network. Financial risk profile is also likely to remain adequate going forward, backed by high financial flexibility and healthy cash flow.

Downside scenario

  • Weakening of financial risk profile due to larger-than-expected capex or stretch in working capital requirement

  • Significant increase in financial support to district cooperative milk unions

  • Disruption in raw milk procurement because of adverse environmental conditions, constraining revenue

  • High pressure on cash flow due to decline in milk prices

About the Federation

Set up in 1973, GCMMF is India’s largest marketing organisation and exporter of dairy products. It procures milk from over 34.94 lakh member farmers. It has 18,554 active village dairy cooperative societies, and is the apex marketing federation of 18 district cooperative milk unions in Gujarat. The federation markets and distributes products of its member unions under the Amul and Sagar brands. GCMMF’s sales infrastructure, comprising numerous stock points, is supported by a network of more than 10,000 distributors and 10 lakh retailers across India.

RevenueRs cr2925927072
Profit after taxRs cr4947
PAT margin%0.170.17
Adjusted debt/adjusted NetworthTimes3.932.38
Interest coverageTimes6.488.81

Status of non-cooperation with previous CRA

Not Applicable

Any other information

Not Applicable

Annexure – Details of instrument(s)

ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs cr.) Rating Assigned with Outlook
NACash CreditNANANA35.9CRISIL AAA/Stable
NACash Credit*NANANA160.0CRISIL AAA/Stable
NACash Credit#NANANA93.0CRISIL AAA/Stable
NAWorking Capital Demand Loan@NANANA100.0CRISIL AAA/Stable
NAWorking Capital Demand Loan^NANANA50.0CRISIL AAA/Stable
NAWorking Capital Demand LoanNANANA50.0CRISIL AAA/Stable
NAInland/Import Letter of Credit**NANANA50.0CRISIL A1+
NAShort term bank facilityNANANA30.0CRISIL A1+

*Interchangeable with short-term advance limit
**Interchangeable with Inland Guarantees
#Interchangeable with working capital demand loan
@Interchangeable with Cash Credit
^Interchangeable with Packing Credit