Mother Dairy, Dhara, Safal: Indigenous brands saving grace as IL&FS fallout hits credit rating

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Updated: September 20, 2019 6:35:36 PM

While Mother Dairy’s bank credit rating has been hit as a result of the IL&FS debt default, Delhi NCR’s largest milk vendor’s indigenous food brands Dhara and Safal have come as the support behind the firm’s new credit rating.

Plastic waste, recycle plastic, ban plastic, single use plastic ban, environmental issue, resuable plastic, Mother dairy stores, Plastic Waste Collection, Plastic Waste RecyclingCARE Ratings has downgraded Mother Dairy’s credit ratings owing to IL&FS default.

While Mother Dairy’s bank credit rating has been hit as a result of the IL&FS debt default, Delhi NCR’s largest milk vendor’s indigenous brands ‘Mother Dairy’ (dairy brand), ‘Dhara’ (edible oil) and ‘Safal’ (horticulture) have come as the support behind the firm’s new credit rating. Mother Dairy Fruit & Vegetable Pvt Ltd (MDFVPL), a unit of National Dairy Development Board, lost its ‘AAA’ credit rating by CARE on account of erosion in the value of its investments in IL&FS securities. CARE Ratings has now assigned ‘AA+’ to Mother Dairy’s fund-based bank facilities, with ‘stable’ outlook.

“The ratings for the facilities of MDFVPL continue to draw strength from the established brand presence through extensive marketing and distribution network, well-established procurement system and increasing value-added dairy product business,” CARE Ratings said in a statement, adding that Mother Dairy’s brands ‘Mother Dairy’, ‘Dhara’ and ‘Safal’ are well established in dairy, edible oil and horticultural segments respectively.

Further, Mother Dairy is the dominant milk distribution player in the Delhi-NCR region, giving it a competitive advantage. With over 1,500 exclusive outlets and 14,000 retail outlets in India, the company has a strong distribution channel, CARE Ratings said.

IL&FS fallout

The IL&FS crisis, which unravelled, last year caused a liquidity crunch in the financial services market and also claimed a victim in Mother Dairy, along with several other entities which held its securities. “The impact of IL&FS is visible on many companies as it had defaulted on their investment. Mother Dairy has also gone to NCLAT for recovery. In addition, CARE has re-affirmed the highest rating of A1+ for short term borrowings for us,” a spokesperson for Mother Dairy Fruit & Vegetable Pvt Ltd told Financial Express Online.

Mother Dairy had reportedly invested over Rs 190 crore in IL&FS. Days after, IL&FS’s loan repayments were defaulted and Mother Dairy incurred a PAT loss of over Rs 90 crore. Astonishingly, this led to a 35% erosion in Mother Dairy’s net worth, according to the CARE Ratings note.

Mother Dairy spokesperson maintained that the current ratings by CARE affirm a high degree of safety regarding timely servicing of financial obligations with a stable outlook and very low credit risk profile. Meanwhile, the dairy industry is highly susceptible to global Skimmed Milk Prices (SMP) and volatility of milk prices in general, constraining the credit ratings for dairy companies.

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