RATING RATIONALE
19Jun2020
Pskarun Tex Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.21.80 Crs. of Pskarun Tex Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||||
|---|---|---|---|---|---|---|---|
| Fund Based | |||||||
| Term Loan Sanctioned | 10.80 | Long Term | BWR | ||||
| Overdraft against Book Debts (ODBD) | 11.00 | ||||||
| Sub Total | 21.80 | ||||||
| Grand Total | 21.80 | (Rupees Twenty One Crores and Eighty lakhs Only) | |||||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
BWR believes that Pskarun Tex Pvt. Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERSBWR has essentially relied upon the audited financial statements of Pskarun Tex Pvt. Ltd. of FY19 and projected financial statements of FY20,FY21, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the director/s, long standing relationship with its suppliers and customers and comfortable debt protection metrics. However, the rating is constrained by low networth, high competition from other established players in the market and overall slowdown in the Textile industry.
Credit Strengths:
-
Experienced Promoters :
The Managing director of the company Mr. P Kandasamy is having more than 3 decades of business experience in the textile industry, which has enabled the company to establish itself in the domestic market. Other Directors Mr. PSK Arun and Mrs. R K Lakshmi also have a decade experience in the same line of business.
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Comfortable debt protection metrics :
The DSCR and ISCR are significantly high at 15.03 and 19.62 times in FY19, as the repayment for the term loan begins only from October 2020. It is reflected in FY20 (projections) where the DSCR and ISCR are comfortable at 2.87 and 4.35 times respectively.
Credit Risks:
-
Slowdown in the overall Textile Industry :
The company operates in a highly competitive market and unorganized market. Also contributing to the credit risk is the slowdown faced by the Textile industry coupled with Covid19-led lockdown. It has severely impacted the overall industry. The demand for this sector is expected to be reduced over the medium term, with limitations in discretionary spending by the public in general.
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Moderate capital structure :
The net worth of the company (including subordinated unsecured loans) for FY19 stood at Rs.6.57 Crs, which is at low level. The gearing is at 1.49 times (analysed). It is expected to increase further to 2.13 times in FY20 due to the increase in the debt component.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Positive: The ratings would be upgraded in case of increased scale of operations, profitability and liquidity profile.
Negative: The ratings would be downgraded if there is deterioration in the gearing levels and debt protection metrics.
LIQUIDITY INDICATORS -
The liquidity of the company seems moderate with the current ratio at 1.17 times in FY19 and the working capital limits is utilised more than 90% in the last 3 months. The debt protection metrics are significantly high in FY19 as the repayment of the term loan commences from October 2020. However, it remains comfortable in FY20 (projection) with DSCR and ISCR at 2.87 times and 4.35 times. The company has opted to seek moratorium on interest payments for the month of April 2020 onwards til August 2020 (under the COVID-19 regulatory package announced by the RBI) to further enhance its liquidity position.
ABOUT THE ENTITYPskarun Tex Pvt. Ltd. was established in March 2018. It is a family run business. The promoters owned four other partnership firms to carry out the dyeing and weaving process. In 2018, those firms were merged to form a private limited company called Pskarun Tex Pvt. Ltd. to carry out the process of dyeing, weaving and knitting under one roof. The company is located in Pallipalayam, Namakkal District, Tamil Nadu. The directors of the company are Mr. P S Kandasamy, Mr. P S Arun Kandasamy and Mrs. Lakshmi Kandasamy. It is primarily engaged in weaving of lungi through power looms, dyeing of yarns and manufacturing of fabrics through knitting. It currently has around 400 looms for the weaving division, yarn dyeing with a capacity of 18000 kgs per day and production capacity through knitting around 1500 Kg/day. The manufacturing unit is located at Pallipalayam, Tamil Nadu. Mr. P S Kandasamy, the Managing Director, has to his credit around four decades of experience in this business.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 77.27 | Not Available |
| EBITDA | Rs.Crs. | 2.69 | Not Available |
| PAT | Rs.Crs. | 1.62 | Not Available |
| Tangible Net Worth | Rs.Crs. | 4.62 | Not Available |
| Total Debt/Tangible Net Worth | Times | 2.54 | Not Available |
| Current Ratio | Times | 1.17 | Not Available |
NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY ANY OTHER INFORMATION RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended) COMPLEXITY LEVELS OF THE INSTRUMENTS -
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Priyanka RS Ratings Analyst Board : +91 044 24663326 priyanka.rs@brickworkratings.com |
R Varadarajan Associate Director - Ratings Board : +91 044 24663326 varadarajan.r@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Term LoanSanctioned | 10.80 | _ | 10.80 |
| 2 | Overdraft against Book Debts (ODBD) | 11.00 | _ | 11.00 |
| Total | 21.80 | |||
| TOTAL (Rupees Twenty One Crores and Eighty lakhs Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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