Simran International Export (I) Pvt. Ltd

Brickwork Ratings assigns the long-term rating and reaffirms the short-term rating for the bank loan facilities of Rs. 20.71 Crs of Simran International Export (I) Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (21 Jan 2020)	Present
Fund Based	0.00	3.61	Long Term		BWR BB - /Stable Assignment
	17.00	13.00	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
	(5.00)	(3.50)
	(1.00)	(1.00)
	(0.00)	(13.00)
Non Fund Based	5.10	4.10	Short Term	BWR A4 Reaffirmed	BWR A4 Reaffirmation
Grand Total	22.10	20.71	(Rupees Twenty Crores and Seventy One lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

The Rating Outlook is Stable because BWR expects that the 'Simran International Export (I) Private Limited’ financial 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 DRIVERS

Credit Strengths:

Extensive experience and established operations :
The management of the company is experienced and well qualified. The CEO of the company, Mr. Rajan Arora is an MBA with experience of 25 years in the industry. Mrs. Manjeet Kaur is also a BSC graduate and has 25 years of experience in the same business. Their long presence in the industry has helped the company to establish a strong relationship with several garment companies in USA, Europe UK and Australia.
Established relationship with reputed clients :
SIEIPL has an established long-term relationship with multinational apparel companies. The Company's clientele includes Tommy Hilfiger, Lucky Opco, Gerry Weber, General Pants, Witchery Fashion, etc. The Company has worked over the years with top global brand leaders like Mango, Massimo Dutti, H&M, French Connection, etc.
Improved profitability and Net worth :
The operating profit margin and net profit margin of the company improved from 4.52% and -1.91% in FY 19 to 5.33% and 0.95% in FY 20 respectively due decrease in the expenses. The tangible net worth of the company stands at Rs. 7.44 Crs in FY 20 due to retention of profits. The analyzed TNW has also increased from Rs. 8.84 Crs in FY 9 to Rs. 10.34 Crs in FY 19 due to unsecured loans from directors.
Average debt protection metrics :
The debt protection metrics are satisfactory as ISCR & DSCR stand at 2.11x and 0.90x in FY20 against 1.09x & 1.39x in FY 19 which shows the adequacy of the company to meet its interest and debt obligations in time. It is expected to further increase to 2.36x and 1.40x respectively as per projections of FY 21.

Credit Risks:

Decreasing scale of operations :
Revenue of the company declined by 7.9% in FY 20 i.e. from Rs. 58.95 Crs in FY 19 to Rs. 54.29 Crs in FY 20 due to an overall economic slowdown in the market during the year. The company earns 90% of its revenue from the export business. The revenue of the company further declined to Rs. 45 Crs for FY 21 as per the management of the company due to the pandemic as the business operations were affected due to disruption in supply chains, lockdown in foreign countries, migration of labourers, etc. Moreover, due to the second phase of covid in foreign countries, further affected the sales of the company in the last quarter of the year. However, the company is expecting to achieve approximately Rs. 60 Crs of revenue for FY 22.
Stretched Gearing :
The gearing of the company is high as Total Debt/TNW and TOL/TNW increased from 2.77x & 3.22x in FY 19 to 3.09x & 3.85x in FY 20 due to an increase in total debt and net worth maintained at the same level. The gearing is expected to further increase as per projections. However, the analyzed total debt/TNW stands at 1.94x for FY 20.
Highly competitive and fragmented industry :
The industry is characterized by high fragmentation and low entry barriers. The Company faces competition from several small organised and unorganised players in the domestic as well as international markets, which limits its pricing power with customers. Indian exporters face higher trade barriers compared to countries like Bangladesh, Vietnam, etc. in key markets such as the United States (US) and the European Union (EU).
High Customer Concentration Risk :
The company is also having a high customer concentration risk as it is majorly dependent upon some of its buyers like Tommy Hilfiger and Luck Opco which are US-based companies. The company is generating approximately 50% of its revenue from these two companies which increase its customer concentration risk. Moreover, the company is focusing to again start its business with the 'Mango' brand from which it will generate its major portion of revenue.

ANALYTICAL APPROACH - Standalone

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 company to further increase its scale of operations by improving its revenue, profitability margins, and financial risk profile, maintaining its debt obligations, and efficiently managing its working capital will be the key rating sensitivities.

Positive: The ratings may be upgraded if revenue, profitability, liquidity, gearing, and overall credit profile show substantial improvement.

Negative: The rating may be downgraded in case there is a significant deterioration in the business and financial risk profile of the company from its current level.

LIQUIDITY INDICATORS - Stretched

The cash and cash equivalent of the company stands at Rs. 0.57 Cr in FY 20. The net cash accruals stood at Rs. -0.44 Cr in FY 20 against CPLTD of Rs. 0.99 Crs showing non-availability of funds to meet its debt obligations. However, net cash accruals are projected to be Rs. 1.99 Crs in FY 21 against CPLTD of Rs. 0.96 Crs showing the adequacy of the company to meet its debt obligations in time. The average % utilization of working capital limits is approximately 80% by the company. The current ratio stands at 1.26x in FY 20 which is near the industry average.

ABOUT THE ENTITY

Simran International Export (India) Pvt. Ltd. is a manufacturer of premium leather garments in India. The foundation of the leather business was laid in 1972 and the garment operations were commenced in 1996 as an initiative of the current CEO of the company, Mr. Rajan Arora.

The company focuses on designing, developing, marketing, manufacturing, and distributing premium quality leather garments for men & women. Headquartered in Delhi, the company has manufacturing facilities spanning an area of 25000 Sqmt in locations Gurgaon and Bhiwadi and a tannery unit in Jaipur.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	54.29	58.95
EBITDA	Rs.Crs.	2.89	2.66
PAT	Rs.Crs.	0.51	-1.13
Tangible Net Worth	Rs.Crs.	7.44	6.92
Total Debt/Tangible Net Worth	Times	3.09	2.77
Current Ratio	Times	1.26	1.12

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

CRISIL B+/A4 (stable) under issuer non cooperation for Rs. 40 Crs as on 18 June 2020

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	3.61	BWR BB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Fund Based	ST	13.00	BWR A4 (Reaffirmation)	21Jan2020	BWR A4 (Reaffirmed)	18Jan2019	BWR A4 (Assigned)	NA	NA
FB SubLimit	ST	(3.50)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(1.00)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(13.00)	BWR A4 (Reaffirmation)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	4.10	BWR A4 (Reaffirmation)	21Jan2020	BWR A4 (Reaffirmed)	18Jan2019	BWR A4 (Assigned)	NA	NA
Grand Total		20.71	(Rupees Twenty Crores and Seventy One lakhs Only)

RNR on 20.01.2020 and 22.01.2021.

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Muskan Agrawal Rating Analyst muskan.a@brickworkratings.com	Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Simran International Export (I) Pvt. Ltd

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	FDB/FBE - Sanctioned	_	13.00	13.00
Sub-Limit (FDB/ FBE covered under BL/AWB/HAWB) - Sanctioned		(13.00)
Sub-Limit (PC/ PCFC) - Sanctioned		(3.50)
Sub-Limit (PC/PCFC (Stock on job work)) - Sanctioned		(1.00)
2	Bank Guarantee - Sanctioned	_	0.10	0.10
3	ILC/FLC - Sanctioned	_	4.00	4.00
4	Covid -19 Emergency Line Credit - Sanctioned	1.01	_	1.01
5	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	2.60	_	2.60
Total		3.61	17.10	20.71
TOTAL (Rupees Twenty Crores and Seventy One lakhs Only)

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate (%)	Maturity Date	ISIN Particulars
NA		0.00	0		NA

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
NA	0	NA	NA

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