CRISIL has assigned its highest ratings of ‘AAA/Stable/P1+’ to the various bank facilities of Gujarat Cooperative Milk Marketing Federation (GCMMF). The ratings are underpinned by GCMMF’s dominant position in the domestic dairy industry, and strong financial risk profile. These strengths are partially offset by the federation’s exposure to policy-level, environmental and epidemic-related factors that influence the agro-related sectors.

GCMMF has superior brand equity, a wide product portfolio, well-spread distribution network, and an aggressive marketing strategy. GCMMF has established the brand ‘Amul,’ as the leading dairy products brand in India. GCMMF’s has an exceptional distribution network and its products are geographically well diversified. GCMMF has always been proactive in maintaining its leadership position in the dairy products segment, by launching new products, research and development (R&D) initiatives, and innovative sales strategies to enhance customer satisfaction. GCMMF has grown at a healthy compounded annual growth rate (CAGR) of 17 per cent over the past four years, owing to its superior market position. Moreover, GCMMF has a robust financial risk profile, supported by a steady growth in accruals, a favourable capital structure, excellent debt-protection measures and strong liquidity. The federation’s gearing was also low at 0.13 times, as on March 31, 2008. Owing to its near debt-free status, GCMMF’s debt protection measures are excellent: it had interest coverage and net cash accrual to debt ratios of more than 32 times and 2 times, respectively, in 2007-08 (refers to financial year, April 1 to March 31).

GCMMF is exposed to risks generic to the dairy industry. The prices of raw materials in the dairy industry are sensitive to the impact of government policies and environmental conditions. The manufacturers are also vulnerable to risks of failure in milk-production due to other external factors, such as cattle diseases. Although, GCMMF’s sales have, hitherto, never been affected by such factors, the risk remains as materialists sources most of its milk from a single state, Gujarat. However, the federation does have the flexibility to source supplies from other state, which would address most supply shortage eventualities.

Outlook:Stable
CRISIL believes that GCMMF will maintain its exceptional business profile. Therefore, GCMMF is likely to sustain its favourable financial risk profile, despite intense competition in the fast-moving consumer goods (FMCG) industry. The outlook may be revised to ‘Negative’ if the federation is exposed to disruptions in the supply of raw materials due to adverse environmental conditions.

About GCMMF
Established in 1973, GCMMF is India’s largest dairy products marketing organisation. It procures milk from 2.7 million farmers who are its members. It is the apex marketing federation for 13 district-cooperative milk unions. The federation includes 12,792 village dairy co-operative societies of Gujarat. The products of its member unions are marketed and distributed under the brand name ‘Amul’. GCMMF is the largest exporter of dairy products. It has a significant presence in the Gulf, South Asian Association for Regional Cooperation (SAARC) region, USA, Singapore, Hong Kong, Philippines, Cambodia, Japan, Vietnam, China, Australia and Africa. As on March 31, 2008, GCMMF had an absolute net worth of Rs.1200 Million. The federation reported a profit after tax (PAT) of ~ Rs.150 Million on revenues of Rs. 52.64 Billion for 2007-08.

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