RATING RATIONALE

31Jan2025

Ajay Knitwears & Fabrics Pvt. Ltd.

Brickwork Ratings upgrades the long-term rating for the Bank Loan Facilities of Rs. 27.62 Crs. of Ajay Knitwears & Fabrics Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (20 Sep 2024)	Present
Fund Based	19.05	27.62	Long Term	BWR B/Stable Continues to be in ISSUER NOT COOPERATING* category/Downgraded	BWR BB - /Stable removal from ISSUER NOT COOPERATING* category/Upgraded
Grand Total	19.05	27.62	(Rupees Twenty Seven Crores and Sixty Two 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

Brickwork Ratings has upgraded the long-term rating to "BWR BB-/Stable" from "BWR B/Stable" and removed the rating from Issuer Not Cooperating* category for the bank loan facilities of Ajay Knitwears & Fabrics Pvt. Ltd.

The Rating has factored, inter alia, the experienced management and Moderate Financial Risk Profile. However, the rating is constrained by Competition in the Industry and Vulnerability of Operating Margins to fluctuations in raw material prices. Going forward, the ability of the company to Improve their operational scale, profitability, strengthen liquidity and credit profile would be the key rating sensitivities.

The rating outlook has been assigned as "Stable" as BWR believes that Ajay Knitwears & Fabrics 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 revenue and profitability margins show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.

KEY RATING DRIVERS

Credit Strengths:

Extensive Experience of Promoters :
The company is managed by Mr. Jangi Lal Jain (Director), a graduate with over 40 years of experience in the garment business. Mr. Vinay Jain and Mr. Ajay Jain, both directors, have more than 26 years of experience in the garment industry. Mr. Vineet Jain, a Chemical Engineer, also has over 26 years of experience in the garment business. The directors of the company have a significant amount of experience in the garment industry.
Moderate Financial Risk Profile :
There is consistent growth in the top line margins of the company from last three years. Revenue of the company has increased from Rs. 83.17 Cr. in FY2023 to Rs 94.01 Cr. in FY2024. OPBDIT of the company has marginally decreased from Rs. 4.29 Cr. in FY2023 to Rs. 3.97 Cr. in FY2024. However, was sufficient enough to cover the interest expenses of Rs. 2.33 Cr. in FY2023 and Rs. 2.59 Cr. in FY2024. PAT remains flat during the years and in FY2024 stood at Rs. 0.68 Cr. Tangible Net Worth (TNW) of the company is increasing YoY and in FY2024 it stood at Rs. 8.81 Cr. Total Debt/TNW has slightly increased from 3.11 times in FY2023 to 3.15 times in FY2024. Current Ratio is flat during the years and in FY2024 stood at 1.43 times.
Long existence of the Company and satisfactory business history :
The company has 26 years of market presence in the garment industry, and its long history has provided stability and strong brand recognition. Operationally, the company’s financial performance has shown consistent growth in recent years. Moreover, the company’s management has a clear vision for future growth, focusing on expanding its market presence.

Credit Risks:

Competition in the Industry :
The Indian textile industry is highly fragmented and is being dominated by the unorganized sector and small and medium industries. The changing government policies at the state and central government levels are posing major challenges to the textile industry.
Vulnerability of Operating Margins to fluctuations in raw material prices :
Increase in raw material prices has affected the business in recent years, resulting in lower operating margins. If this trend continues, it may further impact the business, potentially leading to a continued decrease in operating margins or prompting the company to raise the prices of its products.
Geographical concentration :
In FY2024, all of the company's sales were made within the country, with the majority of sales concentrated in one particular state. This geographical dependence has resulted in a lack of revenue diversification, making the company more vulnerable to regional economic fluctuations.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided).

RATING SENSITIVITIES

Going forward, the ability of the company to Improve their operational scale, profitability, strengthen liquidity and credit profile would be the key rating sensitivities.

Positive: The rating may be upgraded if revenues increase significantly by approximately 15%, accompanied by sustained profitability and a strengthened liquidity profile.
Negative: The ratings could be downgraded if there is a decline in the business and financial risk profile, specifically due to a ~10% decrease in revenue and a ~20% reduction in profitability margins.

LIQUIDITY INDICATORS - Stretched

The Company's liquidity position is stretched, owing to below reasons:

The company does not have any subsidiary/associate company.
Tangible Net Worth (TNW) of the company is increasing YoY due to addition of retained earnings and in FY2024 it stood at Rs. 8.81 Cr.
The cash and bank balance of the company as of 31st March 2024 was Rs. 2.06 Cr.
The company has utilized 92.10% of their OD limit in the last 3 months.
The company's conversion cycles is 111 days in FY2024 and the current ratio stands at 1.43 times for FY2024.
The company's net cash accruals were Rs. 1.00 Cr. in FY2024, compared to the CPLTD of Rs. 1.62 Cr., indicating that the net cash accruals were not sufficient to cover the CPLTD in FY2024. According to the projected financials for FY2025 and FY2026, the company is expected to cover the CPLTD of Rs. 1.53 Cr. and Rs. 1.51 Cr., with expected net cash accruals of Rs. 1.97 Cr. and Rs. 2.09 Cr., respectively.
ISCR and DSCR of the company stands at 1.46 times and 0.96 times in FY2024.

The company's financial performance has improved compared to previous years, and the liquidity indicators for FY2024 show that the company has adequately covered its interest expenses with sufficient OPBDIT. However, the net cash accruals in FY2024 were not sufficient to cover the CPLTD expenses. Nevertheless, as per the projections, the company is expected to cover the CPLTD with sufficient net cash accruals in FY2025 and FY2026. Hence, due to high utilization of OD limit and low ISCR and DSCR in FY2024. BWR consider liquidity to be stretched.

ABOUT THE ENTITY

Macro Economic Indicator	Sector	Industry	Basic Industry
Consumer Discretionary	Textiles	Textiles & Apparels	Garments & Apparels

Ajay Knitwears & Fabrics Private Limited was established in 1999, the company is engaged in Knitting and garment unit and has its manufacturing unit located at Rahon Road, Ludhiana. Ajay Knitwears & Fabrics Private Limited are manufacturers and exporters of knitted Fabrics and Garments. The company has different range of garments which include basic polo, round neck t-shirts, Striped Tshirts, Knitted Sportswear, Sweat Shirts etc. The company has installed capacity of 7 Tonnes per day for Knitted Fabric and 3500 pieces per day of Garments.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21 - 22 (Audited)	FY 22 - 23 (Audited)	FY 23 - 24 (Audited)
Operating Revenue	Rs.Crs.	69.75	83.17	94.01
EBITDA	Rs.Crs.	3.40	4.29	3.97
PAT	Rs.Crs.	0.61	0.66	0.68
Tangible Net Worth	Rs.Crs.	7.78	8.14	8.81
Total Debt / Tangible Net Worth	Times	2.83	3.11	3.15
Current Ratio	Times	1.44	1.45	1.43

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

ANY OTHER INFORMATION

None

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

Facilities	Current Rating (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	27.62	BWR BB-/Stable (removal from ISSUER NOT COOPERATING* category/Upgraded)	20Sep2024	BWR BStable (Continues to be in ISSUER NOT COOPERATING* category/Downgraded)	22Sep2023	BWR B+Stable (ISSUER NOT COOPERATING* /Downgrade)	04Jul2022	BWR BB-Stable (Assignment)
Grand Total		27.62	(Rupees Twenty Seven Crores and Sixty Two lakhs Only)

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Mohammed Farzan Rating Analyst mohammed.f@brickworkratings.com	Nagaraj K Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ajay Knitwears & Fabrics Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Indian Bank	Term Loan - Sanctioned	1.00	_	1.00	Simple##
2	Indian Bank	Term Loan - Sanctioned	1.00	_	1.00	Simple##
3	Indian Bank	GECL - Out-standing	0.62	_	0.62	Simple##
4	Indian Bank	OCC/ODBD - Sanctioned	25.00	_	25.00	Simple##
5	South Indian Bank	Term Loan - Out-standing	_	_	0.00	Simple##
6	South Indian Bank	Cash Credit - Sanctioned	_	_	0.00	Simple##
7	South Indian Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	_	_	0.00	Simple##
8	South Indian Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	_	_	0.00	Simple##
Total			27.62	0.00	27.62
TOTAL (Rupees Twenty Seven Crores and Sixty Two lakhs Only)

## 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.

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate (%)	Maturity Date	ISIN Particulars	Complexity of the Instrument
Nil	Nil	Nil	Nil	Nil	Nil	Nil

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Nil	Nil	Nil	Nil

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