RATING RATIONALE
28Jun2021
Manomay Tex India Ltd(Formerly Manomay Tex India Pvt Ltd)
Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 118.47 Crs. of Manomay Tex India Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (31 Jul 2020) |
Present | ||
| Fund Based | 81.88 | 104.97 | Long Term |
BWR BBB (Stable)
Reaffirmation |
BWR BBB
/Stable Reaffirmation |
| (25.00) | (25.00) | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
|
| (20.50) | (10.50) | ||||
| Non Fund Based | 10.50 | 13.50 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
| Grand Total | 92.38 | 118.47 | (Rupees One Hundred Eighteen Crores and Forty Seven lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
Reaffirmation in the ratings of Manomay Tex India Ltd. ( MTIL or the company) factors in experience of the promoters, higher than expected revenues during FY21, increase in exports and the proposed capex for upgradation in plant and machinery and expansion in production capacities. The rating is, however, constrained by thin profit margins, higher than expected gearing ratios and increased competition and fragmentation in the industry.
Overall financial risk profile of the company is moderate with higher than expected gearing ratios and comfortable debt coverage indicators and adequate liquidity in the company. Overall gearing in the company deteriorated marginally during FY21 due to additional Covid-19 borrowings utilized to meet short term liquidity requirements. Despite lower debt coverage metrics, the company chose not to avail the 6M loan moratorium and serviced the term loan instalments from liquidity generated through business operations and other cash inflows.
During the current financial year, the company has undertaken to upgrade the production lines and improve the installed capacities at total capex of Rs.32 crs to be funded through bank loan of Rs.24 crs, fresh USL of Rs.5.50 crs and internal accruals of Rs.2.50 crs. Term debt of Rs.24 crs is already sanctioned and the promoters propose to infuse USL of Rs.5.50 crs along with the progress of the project during the year. During FY23, the company proposes to enhance the working capital by additional Rs.9.50 crs to meet growing working capital requirements after the undertaken capacity expansion.
Going forward, the gearing is likely to remain at elevated levels owing to fresh borrowings and is expected to improve from FY23 owing to reduction in the existing term debt and retention of profits in business as the company does not propose any additional short/long term debt, other than discussed above, in the medium term. Profit margins are expected to improve to pre-covid levels along with pick up in revenues and production capacity utilisation. Overall liquidity and debt coverage ratios are expected to remain comfortable during FY22 and FY23. Promoters of the company have indicated to infuse additional funds to meet the shortfall, if any.
Outlook: Stable
BWR believes the Manomay Tex Pvt Ltd.’s business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.
Credit Strengths:
-
Experienced Promoters :
The company has on board a mix of promoter-directors and independent directors who have experience in the textile industry. Shri Kailash Chandra Laddha, promoter of the company, has experience of more than 3 decades in the textile manufacturing sector.
-
Growth in Scale of Operations :
Revenues of the company have grown at a CAGR of 18% approx. during FY19 and FY20. Although, the revenues dipped during FY21 due to covid-led business disruptions, the same are almost 43% higher than projections for the year and expects revenues of Rs.425 crs during FY22.
-
Export Diversification :
The company has been swiftly improving its export contribution from 42% in FY19 to 52% in FY21 to mitigate low domestic demand and expects substantial revenues from exports going forward. Presently, the company exports denim fabric to markets in Latin America, Egypt, Colombia, Turkey, Mexico, Arab Countries etc. Increase in exports is the result of extensive marketing efforts undertaken by the company.
-
Expansion of production capacity :
Despite challenging economic circumstances during H1FY21 resulting in lower revenues and capacity utilisation, operations of the company rebounded sharply to close FY21 with capacity utilisation of approx. 85% during H2FY21. Due to the expected rise in demand for products in the overseas markets, the company has undertaken to enhance the production capacity by ~33%.
-
Thin profitability margins :
Operating profit margin and net profit margin during FY21 are 5.49% and 0.86% respectively against 6.29% and 1.67% respectively during FY20. Volatile input cotton prices and downside risks to capacity utilisation may adversely impact operating margins.
-
Overall gearing :
Overall gearing of the company, viz. Total Debt/TNW and TOL/TNW ratios, deteriorated marginally from 1.49x and 2.18x respectively in FY20 to 1.53x and 2.26x respectively in FY21 due to additional Covid emergency line of funding of ~Rs.18 crs to meet covid-led disruptions. During FY22, overall gearing is expected to decline along the projected lines due to additional loans of Rs.24 crs to meet expansion capex.
-
Highly fragmented and competitive nature of textile industry and external factors: :
Textile industry is characterised by high fragmentation and competition due to the presence of a large number of small and unorganised players. During the last few months, the apparel export sector has been hit by the lingering effects of (i) demonetisation (ii) GST implementation and delayed refunds of input tax credits (iii) reduction in applicable duty drawbacks (iv) favorable manufacturing and export environment in low labour cost countries in Asia viz. Bangladesh, Vietnam, Cambodia etc.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below.
RATING SENSITIVITIES
Upward: Substantial improvement in scale of operations, operating margins, and debt coverage indicators would support upward rating action.
Downward: Decline in revenues, operating margins, debt coverage indicators and overall liquidity in the company would attract adverse rating action.
LIQUIDITY INDICATORS - Adequate
Liquidity in the company is adequate with sufficient cash accruals and improved NWC during FY21. The company generated cash accruals of Rs.9.73 crs against term debt obligations of Rs.8.64 crs and NWC improved from Rs.38.41 crs in FY20 to Rs.55.96 crs during the year. The company availed COVID emergency line of funding of approx. Rs.18 crs from its lenders to meet liquidity requirements and finally did not avail the 6M moratorium benefits. The company is expected to generate adequate cash accruals to meet debt obligations and NWC is expected to improve further during FY22 and FY23. Promoters of the company are expected to infuse USL of Rs.5.50 crs during FY22 to meet capex requirements and the company proposes to enhance the WC limits by Rs.9.50 crs during FY23. Promoters of the company have indicated to infuse additional funds to meet the shortfall, if any. However, elongated cash conversion cycle at 62 days (P.Y 33 days) owing to higher receivables and inventory holding is a key concern and would be closely monitored.
Manomay Tex India Ltd. (Formerly, Manomay Tex India Private Limited), incorporated on 13th April 2009 with its current registered office at 32, Heera Panna Market, Pur Road, Bhilwara, Rajasthan is engaged in manufacturing and sale of different varieties of primarily denim fabrics. Company was converted to a public limited Company with effect from January 6, 2017. Kailash Chandra Laddha, Mahesh Chandra Laddha, Yogesh Laddha (MD), Kamlesh Laddha, Basant Porwal, Pallavi Laddha, Sriniwas Bhattad and Dilip Porwal are the directors in the company. The Company has two manufacturing units located at Chittorgarh (Rajasthan) and Ichalkaranji (Maharashtra) with an annual production capacity of 360 Lakh Mtrs of fabrics, mainly Denim.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 321.25 | 405.45 |
| EBITDA | Rs.Crs. | 17.62 | 25.49 |
| PAT | Rs.Crs. | 2.75 | 6.78 |
| Tangible Net Worth | Rs.Crs. | 61.42 | 58.67 |
| Total Debt/Tangible Net Worth | Times | 1.53 | 1.49 |
| Current Ratio | Times | 1.55 | 1.39 |
The terms of sanction include standard covenants normally stipulated for such facilities.
NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY
NIL
ANY OTHER INFORMATIONNIL
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 | 104.97 |
BWR BBB/Stable
(Reaffirmation) |
31Jul2020 |
BWR BBB (Stable)
(Reaffirmation) |
30Jul2019 |
BWR BBB (Stable)
(Reaffirmation) |
05Jul2018 |
BWR BBB (Stable)
(Upgrade) |
| NA |
NA
|
07Feb2020 |
BWR BBB (Positive)
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
||
| FB SubLimit | ST | (25.00) |
BWR A3+
(Reaffirmation) |
31Jul2020 |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
| (10.50) |
BWR A3+
(Reaffirmation) |
07Feb2020 |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 13.50 |
BWR A3+
(Reaffirmation) |
31Jul2020 |
BWR A3+
(Reaffirmation) |
30Jul2019 |
BWR A3+
(Reaffirmation) |
05Jul2018 |
BWR A3+
(Upgrade) |
| NA |
NA
|
07Feb2020 |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
||
| Grand Total | 118.47 | (Rupees One Hundred Eighteen Crores and Forty Seven 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.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Saurabh Agarwal Assistant Manager - Ratings Board : +91 11 2341 2232 saurabh.a@brickworkratings.com |
Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|---|
| 1 | HDFC Bank | Cash CreditSanctioned | 10.00 | _ | 10.00 |
| 2 | HDFC Bank | Derivative LimitSanctioned | _ | 1.00 | 1.00 |
| 3 | Punjab National Bank | Cash CreditSanctioned | 10.50 | _ | 10.50 |
| Sub-Limit (PC/PCFC/FBP) Sanctioned | (10.50) | ||||
| 4 | Punjab National Bank | Term LoanSanctioned | 2.74 | _ | 2.74 |
| 5 | Punjab National Bank | Term LoanSanctioned | 6.21 | _ | 6.21 |
| 6 | Punjab National Bank | Term LoanSanctioned | 1.73 | _ | 1.73 |
| 7 | Punjab National Bank | CECLSanctioned | 1.56 | _ | 1.56 |
| 8 | Punjab National Bank | GECLSanctioned | 6.27 | _ | 6.27 |
| 9 | Punjab National Bank | Letter of CreditSanctioned | _ | 2.50 | 2.50 |
| 10 | Punjab National Bank | Derivative LimitSanctioned | _ | 1.50 | 1.50 |
| 11 | State Bank Of India (SBI) | Cash CreditSanctioned | 25.00 | _ | 25.00 |
| Sub-Limit (PC/PCFC/FBP) Sanctioned | (25.00) | ||||
| 12 | State Bank Of India (SBI) | Term LoanSanctioned | 3.15 | _ | 3.15 |
| 13 | State Bank Of India (SBI) | Term LoanSanctioned | 4.64 | _ | 4.64 |
| 14 | State Bank Of India (SBI) | CECLSanctioned | 1.81 | _ | 1.81 |
| 15 | State Bank Of India (SBI) | Term LoanSanctioned | 24.00 | _ | 24.00 |
| 16 | State Bank Of India (SBI) | GECLSanctioned | 7.36 | _ | 7.36 |
| 17 | State Bank Of India (SBI) | Letter of CreditSanctioned | _ | 5.00 | 5.00 |
| 18 | State Bank Of India (SBI) | Derivative LimitSanctioned | _ | 3.50 | 3.50 |
| Total | 104.97 | 13.50 | 118.47 | ||
| TOTAL (Rupees One Hundred Eighteen Crores and Forty Seven lakhs Only) | |||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| N.A | 0 |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NIL |
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