Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 109.00 Crs. of MM Yarns Pvt Ltd
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (31 May 2021) |
Present | ||
Fund Based | 83.92 | 99.00 | Long Term |
BWR BBB
/Stable Reaffirmation |
BWR BBB
/Stable Reaffirmation |
Non Fund Based | 10.00 | 10.00 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
Grand Total | 93.92 | 109.00 | (Rupees One Hundred Nine Crores Only) |
BWR has reaffirmed the rating on the bank facility of MM Yarn Pvt Ltd at 'BWR BBB/Stable/BWR A3+'.
The rating also reflects its extensive experience of promoters, above average financial risk profile and improved in account receivables. The rating is constrained by competition in textile industry and volatile operating margin due to volatile raw material prices.
The outlook is retained at “Stable” since BWR expects that the business risk profile of MMYL will be maintained over the medium term. The outlook may be revised to Positive in case of a sustained increase in scale of operations and higher than envisaged improvement in profitability resulting in strengthening of financial risk profile. The outlook may be revised to negative in case of decline in sales and profitability on a sustained basis, deterioration in the capital structure due to expected large debt-financed capital expenditure, further stretch in the conversion cycle and weakening of the financial risk profile of the Company.
KEY RATING DRIVERSCredit Strengths:
MMYL’s promoters have vast experience in the textile industry through rated entity and other entities. Their experience will benefit MMYL over the medium term with maintaining relationships with customers and suppliers. Promoters have taken strategic decisions to improving MMYL performance which are backward integration, setting up refineries and windmill. BWR believes MMYL will improve in the medium term with its promoters' prompt and efficient decisions in day to day operation.
Sustained improvement in debtors days has improved is working capital cycle from gross current asset of 102 days in fiscal 2017 to 83 days in fiscal 2021. Inventory days are high due to the nature of business for stocking of raw materials during its competitive price. This has also also reduced its reliance on bank lines which are moderately utilised.
MMYL’s financial risk profile is above average supported by moderate net worth, capital structure and comfortable debt protection metrics. With steady accretion to reserve tangible net worth has improved from Rs 63.5 crores in fiscal 2017 to Rs 88.5 crores in fiscal 2021. Capital structure is moderately leveraged with total outside liabilities to tangible net worth being less than 1 times since fiscal 2020. Further, debt protection metrics is very comfortable with interest coverage of 7 times in fiscal 2021. With steady accretion and unexpected increase in reliance on outside borrowings financial risk profile will remain average for the medium term.
Textile industry is highly competitive due to the presence of large organised and unorganised players. Due to low capital intensive industry and low entry barriers have increased the competition in industry. Due to this, players are forced to sell their products at a thin margin.
MMYL’s operating margin is volatile due to volatile raw material prices and MMYL’s ability to pass on its price increase to its customers. Raw material cost contributes more than 80% of its operating cost and hence any major shift in price will affect MMYL operating profitability. However, in fiscal 2021 the company experienced improvement in margin due to increase in spread between cotton and yarn prices.
BWR has essentially relied upon the audited financials from FY20 to FY21, and projected financials till FY23, the information/clarification provided by the MMYPL’s management and the information available in the public domain.
RATING SENSITIVITIES
Upward factor
Improvement in revenue by 25-30%, with sustained in operating margin
Improvement in debt protection metrics
Downward factor
Weakening of NCA vs repayment obligation below 1.5 times
Decline in operating profitability due to project risk
MMYL has adequate liquidity supported by moderate utilisation of its bank lines below 60-70% leading to sufficient cushion to meet its exigencies. Net cash accruals are expected to be sufficient against its repayment obligation with a cushion of 1.5-1.7 times in fiscal 2022 and fiscal 2023. Need based fund support from promoters strengthens its liquidity. Current ratio is moderate at 2.2 times as on March 31, 2020. Moderately managed working capital due to faster realisation of debtors leading to positive cash flow from operations. BWR expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements. BWR believes internal accrual, cash and cash equivalent, and un-utilised bank limit are expected to be sufficient to meet debt obligation and incremental working capital requirement.
ABOUT THE ENTITYMM Yarns Pvt Ltd (‘MMYPL’ or ‘the Company’) was incorporated on 02.06.2014 as a private limited company with its registered office in Jasdan, Rajkot. The company is engaged in the business of spinning of cotton with its manufacturing facility located in Jasdan, Rajkot.
The unit has a total installed capacity of 51000 spindles and utilisation is 95% as on 31st March 2021. The plant comprises a waste management system that ensures minimum wastage thereby enhancing the production efficiency. The new Ginning unit has provided additional production capacity of 75000 bales for FY20 and thereafter, the capacity will be 1,80,000 bales of cotton. Company commenced its refinery unit and generated nearly Rs 2.5 cr in March 2021. Further company is installing a windmill with 2.5 MV capacity.
The day to day operations are managed by Mr. Brijesh Patel, Managing Director of MMYPL. He has more than a decade of experience in textile business and is also a shareholder in Dhruv Cotton Processing Pvt Ltd.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Provisional) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 361.53 | 319.90 |
EBITDA | Rs.Crs. | 29.81 | 24.03 |
PAT | Rs.Crs. | 9.85 | 4.89 |
Tangible Net Worth | Rs.Crs. | 88.50 | 78.65 |
Total Debt/Tangible Net Worth | Times | 0.90 | 0.92 |
Current Ratio | Times | 0.94 | 2.20 |
NA
ANY OTHER INFORMATIONNA
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)Facilities | Current Rating (2021) | 2021 (History) | 2020 | 2019 | 2018 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 99.00 |
BWR BBB/Stable
(Reaffirmation) |
31May2021 |
BWR BBB/Stable
(Reaffirmation) |
NA |
NA
|
20Feb2020 |
BWR BBB/Stable
(Reaffirmation) |
02May2019 |
BWR BBB/Stable
(Upgrade) |
NA |
NA
|
05Apr2021 |
BWR BBB/Stable; INC
(Reaffirmation and migrated to INC) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
Non Fund Based | ST | 10.00 |
BWR A3+
(Reaffirmation) |
31May2021 |
BWR A3+
(Reaffirmation) |
NA |
NA
|
20Feb2020 |
BWR A3+
() |
02May2019 |
BWR A3+
() |
NA |
NA
|
05Apr2021 |
BWR A3+;INC
() |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
Grand Total | 109.00 | (Rupees One Hundred Nine Crores 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.
Analytical Contacts | |
---|---|
Avinash Nagesh Poojari Ratings Analyst avinash.np@brickworkratings.com |
Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@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 | Cash CreditSanctioned | 5.00 | _ | 5.00 | ||
2 | Term LoanSanctioned | 15.40 | _ | 15.40 | ||
3 | Bank GuaranteeSanctioned | _ | 5.00 | 5.00 | ||
4 | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 3.83 | _ | 3.83 | ||
5 | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 4.70 | _ | 4.70 | ||
6 | Cash CreditSanctioned | 5.00 | _ | 5.00 | ||
7 | Term LoanSanctioned | 24.46 | _ | 24.46 | ||
8 | Bank GuaranteeSanctioned | _ | 5.00 | 5.00 | ||
9 | Cash CreditSanctioned | 10.00 | _ | 10.00 | ||
10 | Term LoanSanctioned | 24.06 | _ | 24.06 | ||
11 | Emergency Credit Line Guarantee Scheme (ECLGS)Sanctioned | 6.55 | _ | 6.55 | ||
Total | 99.00 | 10.00 | 109.00 | |||
TOTAL (Rupees One Hundred Nine Crores Only) |
Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars |
---|---|---|---|---|---|
NA | 0 | NA |
Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
---|---|---|---|
NA | NA |
The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.
About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
Disclaimer
Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.
BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).
BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.
The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.
BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.
BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.
Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.
BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.
This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.
BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.